Where are the luxury buyers?

Flickr photo by D'Arcy Norman.

For a period of time after the onset of the credit crisis in 2007, it appeared the high end of the residential home market had sidestepped the disaster that had befallen the rest of the housing industry. The general thinking was: moneyed folk, despite the collapse of all types of investments, had the assets to hang in there through the tough times and were not forced to sell.

While that may be true, recent numbers by a host of organizations are showing even the priciest home markets are getting smacked about. Indeed, if you have a spare $1 million to $2 million in your wallet, this could be a good time to buy.

The most recent data from the National Association of Realtors demonstrates the overall problem. According to NAR, the national share of home sales above $750,000 has fallen from 4.4 percent in 2007 to approximately 2.3 percent in 2009, and the months' supply of inventory has risen from 18.7 months to 41.1 months during the same period.

To see what's going on, I checked in with a couple of longtime brokers in two of the priciest home markets on either coast: the Hamptons/East Long Island region west of New York City, and Santa Barbara, Calif.

The Hamptons/East Long Island market is kind of an aberration even for pricey locations around the United States in that it boasts not just a high-end category, but a super-high-end range as well. High-end homes run between $5 million and $15 million, whereas the super-high-end is reserved for homes above $15 million and these days climbs to $40 million.

In July, Bloomberg, citing appraiser Miller Samuel Inc. and Prudential Douglas Elliman, reported that only 37 residences (condos and homes) above $2.36 million have sold this year in the Hamptons area and inventory has jumped 46 percent. It concluded it would take four years to sell the 584 homes in current inventory.

I checked in with Paul Brennan, the regional manager for Prudential Douglas Elliman's Bridgehampton, Long Island, office, who is a veteran of 30 years selling real estate in the area.

The market in eastern Long Island stopped after mid-year 2007, says Brennan, "but I've seen this before. The market goes up, stops; goes up, stops; goes up, stops. Have prices declined? Only if you fall into one of the three "D" categories: death, divorce or debt. If you have to sell, then you are going to have to sell at what the market will currently bear, and it will be less than what it has been."

Otherwise, Brennan adds, "The wealthy people that we deal with don't sell."

Apparently, there are plenty of homeowners in the Hamptons-East Long Island area who have dropped into the "three-D" category, more for debt than death and divorce, because Brennan says prices are down.

This is particularly telling in the super-high-end category, where nothing is moving. "Super-high-end homes used to sell at a rate of one every two months," he says. "There have been no sales in that category."

Brennan guesses the last home to sell in this range happened at the end of 2008. ...CONTINUED

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