Even the rich aren’t immune to the pressures of the housing market.
Prices for homes priced at $1 million or more have fallen a 20 percent this year, according to RealtyTrac. The average sale price for top-tier real estate has fallen to just over $2 million, from $2.5 million in 2011.
Those prices cuts stand in stark contrast to the broader housing market, which is seeing early signs of price stability and even price increases for the first time in years.
All that price-chopping at the top, however, has sparked a wave of sales as buyers scoop up deals and sellers accept the new reality of lower prices.
The number of transactions for homes priced at $1 million or more has jumped 18 percent this year, one of the strongest increases since 2008, according to Realtytrac.
Brokers for luxury real estate are already calling 2012 the “The Year of Capitulation” for wealthy sellers.
“I think sellers are now resigned to today’s prices and what’s actually selling,” said Paul Boomsma of the Luxury Portfolio, a marketing group for luxury homes. “ People who are serious about selling are ready to make a deal now, where maybe they weren’t a year ago.”
There are several factors behind the price drops. The high end of the market didn’t fall as much or as early as the broader market, since there weren’t as many distressed sellers that were forced to sell. Those wealthier sellers have hung on to their properties, waiting for prices to approach 2008 levels.
Now that they see that the prices of 2008 aren’t likely to return anytime soon, many are deciding to drop their prices just to get a deal. The increase in sales has itself spurred sales, as wealthy sellers see a larger number homes in their neighborhoods trading at lower prices.
“There is now a critical mass of data so sellers can say, ‘Well, this is the new reality,’” Boomsma said.
Of course, bargains are all relative in the mega-mansion market. And homes priced at $1 million or more represent a tiny slice of the overall market, with high concentrations in New York and California.
Yet some mega-mansions have seen price cuts of 30 percent or more in recent months.
A private beachfront-compound in Carpinteria Calif., has sliced $7.2 million from its price tag and is now being offered for $14.9 million, according to Luxury Portfolio. The property includes a six-bedroom main house, guest villa, tennis court, swimming pool, spa and 95 feet of beach frontage.
A historic estate in the horse country of Bedford, N.Y. has been reduced by $3.5 million. The estate was built for the Harriman family in the early 1900s and features an equestrian center and 100 acres of gardens, ponds and rolling hills. The new sale price: $26.5 million.
South Florida has seen a huge boost in luxury home sales driven by buyers from Latin America. But prices are falling there as well. An oceanfront palace in Delray Beach, with 15,000 square feet of living space, has been reduced by $4.4 million and is now available for $19.5 million.
“These sellers are capitulating,” said Daren Blumquist, vice president of RealtyTrac. “They are pricing to get these properties sold.”
Blumquist said many sellers may also be motivated to do a deal this year in anticipation of possible tax changes in 2012. If the Bush tax cuts expire, capital gains rates could rise from 15 percent to more than 20 percent. That added tax bill can grow to the millions of dollars when selling a mega-mansion.
“Election years bring uncertainty, so they might want to close a deal now,” he said.
-By CNBC's Robert Frank
Follow Robert Frank on Twitter: @robtfrank
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