One of the most interesting phenomena in the real estate market correction currently underway is that of relative weakness at the top. In recent history (the last decade or two) the conventional wisdom has been that the rich are always rich, so the part of the market best protected against price attrition will always be the upper end. Not so. Of course no-one could have anticipated that the financial crisis would leave so many Wall Streeters shaken to the core of their faith, but even so, we have noted a few interesting facts:
* most buyers at the upper end of the market do not need to buy. They usually already live somewhere quite comfortable. So if they don’t feel compelled, they don’t act.
* prices probably expanded most at the upper end of the market. So there is more room for contraction.
* Financial professionals have always mistrusted real estate. Even in the giddiest markets they have been warning sternly about the oncoming crisis. Now that a contraction is here, many want to wait for the “bottom” to save every last dollar they can.
For these and no doubt other reasons, we are seeing a greater loss in value for ultra luxury apartments (probably closer to 20% over the past 6 months to a year) than we see in small apartments (more like 10% to 12% over the last six months to a year.) That said, waiting for the bottom is always a dangerous game. You can only see it in hindsight. In this market buyers should be making offers based on analysis, not asking price. Feel free to e-mail me if you want my opinion on what the components of that analysis are.