Luxury home prices are particularly vulnerable to market swings. Currently, these market swings…fewer buyers, fewer foreign buyers and investors, rising mortgage interest rates, a stronger US dollar against foreign currencies…are affecting luxury home prices big time. Let’s take a look.

According to Redfin, sellers of luxury residential real estate cut their sales prices for a combined total of $1B in some 500 listings thus far in 2018. This $1B in combined price cuts is double the levels of combined price cuts among luxury properties in 2016.

“Prices were growing too fast for what buyers were willing to pay,” said Redfin’s senior economist Taylor Marr.

Examples of luxury price slashing:

  • sellers of a 10-bedroom mansion in Miami’s Star Island lowered its asking price from $65M to $48M

    Miami Star Island Mansion
  • sellers of an apartment in the Sherry Netherlands building cut their asking price from $86 to $68M
  • sellers of the Ziff family estate in Manalapan lowered the listing price from $165M to $138M – this price cut follows a previous cut from $195M – the combined price cuts for this one property represents a slashing of $57M over this past year
  • sellers of a spec house known as “Opus” in Beverly Hills was listed for $100M in 8/17 and was cut a month later to $85M – house remains unsold
  • Johnny Carson’s home in Malibu was cut from $81M to $65M before it found a buyer

And even the list price of Warren Buffet’s Laguna Beach home was cut from $11M to $7.9M to now…Best Offer. (You needn’t worry about Buffett losing money on this property. He originally bought it for $150,000.)

Shawn Elliot, a broker for the Manalapan family estate, said, “There are no comparables for many of these homes. New prices often reflect prices offered by the most recent potential buyer.”

Price cuts within luxury real estate are sometimes seen as harbingers for future values across all market tiers but Redfin’s chief economist, Taylor Mann, thinks, “It’s too early to tell where (the market) is headed…Prices could abruptly adjust without a sever correction but the size of these cuts suggests that many luxury listings haven’t yet found their sales prices.”