As I was driving across the Valley this morning I heard an interesting report on KJZZ about experts’ forecasts for the area’s luxury home market -- meaning homes priced above $1 million.  “Most of the home foreclosures that have propelled Arizona into an economic crisis have hit the lower end of the housing market. But as the recession deepens, thousands of homes worth more than a million dollars sit unsold in the greater Phoenix area,” KJZZ’s Dennis Lambert reported.

According to KJZZ reporter Peter O’Dowd, experts say that the next wave of foreclosures will crest through the Valley’s richest neighborhoods this summer.  In March, there were 3,200 homes priced above $1 million for sale in the Phoenix area.  On average, 20 such homes are sold each month.  At the current rate, it would take 6-7 years to sell all the luxury homes.  That won’t happen, of course, because prices will fall and buyers will swoop in to take advantage of the great deals.

Prices may have bottomed out at the low- and mid-range home prices, as investors and other buyers have swept up relatively inexpensive homes.  March was the busiest home sales month since 2005.  The luxury market will follow the same pattern: prices will fall until buyers swoop in, and eventually demand will once again be in line with supply and prices will begin rising.

Luxury home builders who have vacant homes for sale will also likely begin to make drastic price reductions on their homes.  Carrying a vacant luxury home might cost a builder $10,000 or $20,000 a month in interest -- an expense few builders can afford these days.  As builders lower prices, that increases the downward pressure overall on prices in the luxury market. 

For now, buyers with a million bucks or more to spend can largely call the shots; many are waiting for prices to fall farther before making their purchase.  Certainly for buyers interested in this market, there are many great opportunities to be found.

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