Luxury home sales go through the roof

Los Angeles: Even the rich love a deal. California homes priced at $1 million (Dh3.67 million) or more experienced a sales boom in 2010, the first increase in five years, even as overall home sales in the state declined, a real estate information service reported.

The reason: High-end home shoppers went bargain hunting as certain parts of the economy improved but luxury home prices remained depressed.

Last year, 22,529 homes sold statewide for $1 million-plus, a 21 per cent increase from 2009, according to DataQuick Information Systems in San Diego. In contrast, the total number of California homes sold last year dropped 9 per cent.

"Prestige home buyers respond to a different set of motivations than the rest of us. Their decisions are less dependent on jobs, prices and interest rates, and more on how their portfolio is doing," DataQuick President John Walsh said.

"When the financial world was full of uncertainty a couple of years back, and the jumbo-loan market dried up, luxury sales plummeted. As the economy started its top-down recovery, some wealthy buyers went looking for a bargain," he said.

Savvy shoppers trying to time the market swooped in before discounted prices could turn the corner. "Certainly, we're pretty sure we're at the bottom" for home prices, said economist Christopher Thornberg, principal with Beacon Economics in Los Angeles.

Mortgage market

Even if prices fall further, he said, "if you are borrowing, buying today makes a lot of sense because interest rates are just incredibly low".

Two other reasons for the $1-million-and-up market increase are the return of the jumbo mortgage market in 2010 and a comeback in the stock market, which saw huge losses in 2009, Thornberg said.

"A lot of folks who were reeling from equity losses bounced back."

Cash purchases also inched upward among $1-million buyers last year to 29.4 per cent of sales, up from 28.9 per cent in 2009 and the highest for any year since 1994. But even cash purchases can be motivated by low interest rates. "A lot of cash offers are done on the basis of the person trying to get a leg up and then they turn around and refinance," Thornburg said.