The California million dollar home market has taken a drastic fall since the peak in 2005:

In 2005 over 54,000 homes sold for $1 million or more.  Last year that number fell to 22,000.  A large part of the correction is attributable to the closing off of the jumbo loan market.  California always has a large number of cash purchases as demonstrated by the fact that wildly expensive homes are still selling.  Yet the fact that million dollar home sales are down 60 percent from the peak reached six years ago is a testament to how out of sync prices became with actual earning potential in the state.

I follow the high priced market closely because changes do not come all that quickly.  People have more creative ways and funds to delay a sale that is not conducive to their bottom line.  This luxury is largely lacking for those in lower income neighborhoods where many live one paycheck away from financial ruin.  Beverly Hills is now starting to see more short sales creep into its inventory.  A short sale occurs when the lender agrees to allow the borrower to sell the home for a price that would be lower than the balance of the mortgage.  A lender would not agree to this unless it felt that prices would move lower and is trying to exit now.

321 SOUTH CRESCENT DRIVE, Beverly Hills, CA 90212

Listed    03/17/11

Beds      5

Full Baths             3

Partial Baths       0

Property Type   SFR

Sq. Ft.   2,292

$/Sq. Ft.               $729

Lot Size 6,050 Sq. Ft.

Year Built             1926

This is a nice home in Beverly Hills.  5 bedrooms and 3 full baths that sits on 2,292 square feet.  The home was listed as a short sale in March of this year.  We should look at the sales history here and the current list price:

$1,670,000 would not cover the original outlay if we are to expect a five to six percent commission for the sale.  Interesting that this home sold in 2005 when California hit a historical high in regards to million dollar homes sales near the current sales price.  Now almost six years later this home is being listed for sale at a loss.  The ability to flip homes quickly has slowed dramatically and buyers now have to document ability to pay for the purchase.  Here is what the numbers would look like on this home purchase:

The monthly payment with a 20 percent down structure would require $10,739 per month.  Being conservative you need to have an income that is approximately $30,000 per month to purchase this 2,200 square foot short sale.  Will this home sell at this price?  Only time will tell but with home prices double dipping many buyers with this income potential will be closely following the trends.  If Beverly Hills is having a hard time in their housing market just imagine how it is in other places.

Bel Air is a prime location in Southern California where the wealthy enjoy the amenities of beautiful homes and luxury estates.  Yet not all homes in the region are selling at a brisk pace.  The market for higher priced homes is obviously thinner simply because there are fewer people able to purchase a million dollar home.  More importantly you have to have an adequate income to service the payments on the home.  The above home is facing a challenging market in Bel Air:

1333 STRADELLA RD, Bel Air – Holmby Hills, CA 90077Listed

Beds      3

Full Baths            2

Partial Baths      1

Property Type   SFR

Sq. Ft.   2,660

$/Sq. Ft.               $462

Lot Size                13,780 Sq. Ft.

Year Built            1973

A very nice property no doubt.  Yet the pricing history signifies a slower market:

I find it fascinating that homes in these very prime markets are having a tougher sell today.  It’ll be interesting to see what this 3 bedroom home in Bel Air eventually sells for.