So Many Million-Dollar Mansions, So Little Interest
By Daniela Deane
Washington Post Staff Writer
Saturday, November 16, 2002; Page A01
Mitch Berliner put his six-bedroom
house in Bethesda on the market for
about $1.5 million seven weeks ago,
thinking that with its new redwood
deck and kitchen it would sell
quickly. But only three people have
even looked at it.
"People have to come to your house
before you can sell it," said Berliner,
who wants to scale down to a smaller
place in the city. He's baffled by the
lack of interest in his house and at
first blamed it on the D.C. area
sniper, then the cold weather.
"I have every bell and whistle anyone
could ever want," he said.
The reason hardly anyone is showing
up, real estate agents say, is that
there's a glut of mansions -- houses
priced at $1 million and above -- for
sale in the region. And while the
number of expensive houses has
grown, the pool of buyers willing to
spend that kind of money has shrunk.
Not long ago, buyers flush with cash
from the stock market and the
technology boom were getting into
bidding wars over big houses with
granite kitchen counters and huge
master baths. But now Wall Street
losses and a slumping economy have
pushed those buyers to the sidelines.
"The million-dollar buyer is
hibernating," said Jane Fairweather,
an agent with Coldwell Banker
Residential Properties. "There's
nobody out there at that price range
anymore."
The trend is worrisome to real estate
analysts and economists because it
could be a harbinger of weakness in
the larger housing market, which has
been one of the key props holding up
the national economy. Many buyers
and sellers of high-end properties are
acting as if a crash is imminent,
agents say. Sellers are rushing to put
their houses on the market, anxious to
take advantage of high prices. At the
same time, buyers have become more
cautious.
"It's slowed down so much in the last
month that it's made us hesitant," said
Ann Williams, who is shopping for a
trade-up house priced as high as $1.5
million. "We're leery that the market
will correct itself and we'll be stuck in
a hole with a property not worth what
we paid for it."
The increase in the number of
upper-bracket homes for sale in the
past two years has been dramatic. In
Northern Virginia alone, more than
200 houses selling for $1 million or
more have gone on the market in the
past three months, and barely 10
percent of them have sold. At the
height of the boom two years ago,
only 57 such homes were listed and
nearly two-thirds of them would have
been sold by now.
Of course, a million bucks doesn't
buy what it used to, so there are a lot
more houses priced at a million or
more now than there were a few years ago. A house that cost $600,000 four
years ago could now be priced at $1 million in some neighborhoods.
Williams said some sellers seem overly greedy, trying to make a killing on homes
that wouldn't be worth the high price in any market. "In my mind, a million-dollar
home should be a fantastic house," she said. "But in some neighborhoods it's a
fixer-upper."
The changing psychology of the high-end buyer is causing prices to drop and the
average number of days houses remain on the market to increase. "It's a
stalemate," said Marc Fleisher of Long & Foster Real Estate Inc., who is the
firm's top-selling agent in dollar terms for the region. "Sellers haven't accepted any
potential change, while buyers are waiting for that change."
According to Bill Moody, an agent with Sotheby's Washington Fine Properties
LLC, buyers these days have a lot more choice. "What was four million is now
three, what was three is now two, and what was two is now 1.5," he said.
"There's twice as many houses for sale and half as many people."
Agent Fairweather said of her current pricing strategy: "I'm not looking at the last
sale in the neighborhood and then putting on appreciation like I did at the height of
the market. I use the last sale as the top number now. It's the beginning of a
market adjustment."
Home builders seem to be having a better time of it, largely because inventory has
been kept down by the difficulty of finding land in desirable neighborhoods. Most
of the million-dollar houses on the market are resale houses -- but given the cash,
a buyer in this price range prefers a house that has never been lived in.
"We've seen a change in the last two or three months," said Cory DeSpain, vice
president of luxury home builder Toll Brothers Inc. "We don't have that insanity
anymore. The buyers who are out there now are very measured, very calculating,
very thoughtful about their purchases. But they're still buying."
George Sagatov, a custom builder in Virginia whose houses are priced at $3
million and above, said business is still good, but the mansion slowdown is clearly
visible -- even for builders -- at prices between $1.5 million and $2.5 million.
"I wouldn't want to be a builder in that price range," Sagatov said. "Prospects have
pretty much dried up there."
In the District and suburban Maryland, the situation is similar to that in Northern
Virginia, although the change is not as severe. Sixty-seven houses priced at $1
million or more went on the market in the past three months in the District and 18
have sold, a 27 percent sales rate. Two years ago in those same three months, 50
houses were listed and 29 were sold, a 58 percent sales rate.
In Montgomery and Prince George's counties, 103 houses selling at $1 million or
more were listed and 19 sold during the past three months, an 18 percent sales
rate. Two years ago, the rate was more than double that -- 45 percent, with 97
listings and 44 sales.
Overall, in the region's market for homes under $750,000, good houses priced
fairly are still selling, agents say, although there may be just a single offer rather
than the frenzied bidding wars of recent years. And condominiums are still sought
after, especially those priced below $250,000. So far there's no slowdown in sales
of high-end condominiums in the District, those priced at $650,000 and above.
Helping the overall market are relatively low mortgage rates.
It may be impossible to know what course the overall housing market will take
until spring, the most active buying and selling season. The sniper attacks almost
certainly caused autumn business to slow. And soon the Thanksgiving, Hanukkah
and Christmas holidays will also put a damper on activity.
All of this has contributed to the lack of urgency felt by the high-end home
shopper. "I don't feel in a panic to buy at all," said Jackie Winston, who has been
looking for a "big, gorgeous, spacious home to entertain in" priced between $2.5
million and $3 million. "Almost everything I've seen has been overpriced. I'm
assuming prices will go down."
If she sees a house she loves, she'll buy it, as would most shoppers at her price
range -- but not at the price the sellers are asking.
"I'm not going to pay full price," Winston said. "Definitely no, no, no."
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