After lowering the $4.2 million asking price of their Lake Bluff estate three times and by more than $1 million, Mike and Marti Palmer flirted with the idea of trading the still-unsold custom home for something smaller.
They own 70 percent equity in the 9,700-square-foot home perched on a wooded ravine near Lake Michigan, and are by no means “distressed sellers.” But they have been forced to think creatively about how to market the 15-room English-style manse — now going for $3 million — amid a recession that has hit the upper bracket especially hard.
“Unfortunately, we put it up just before everything tanked,” said Mike Palmer, a financial consultant who is pragmatic about the competition. “Everything is on the table.”
Real estate agents say they have never seen prices drop so precipitously when dealing with opulent, often empty high-end homes along the North Shore that cost a small fortune to maintain and keep secure. Though homes in the $400,000 to $700,000 range have weathered the financial storm better than expected, the glut of eye-popping mega-mansions has owners competing for the attention of a select few.
“It is a phenomenon we’ve never seen in our lifetime,” said real estate agent Jason Hartong with Rubloff Residential Properties, who has seen some multimillion-dollar price tags cut nearly in half.
Nationally, the scenario is much the same. The pool of people wealthy enough to afford such luxury already represented a small sliver of the marketplace. Home transactions priced at $750,000 or more made up 4 percent to 5 percent of transactions before the recession, said Lawrence Yun, chief economist of the National Association of Realtors.
Today, only 2 percent of housing transactions are taking place in the same upper-end price range, Yun said.
“Many of the wealthier people have their wealth tied to the stock market,” he said. “Given that the stock market is down 30 1/8percent3/8 to 40 percent—even with the recent run-up—that has eaten into their financial resources.”
At the same time, lenders are hesitant to approve so-called “jumbo loans” that are necessary for some buyers to finance a million-dollar-plus property, said Terese Penza, president and CEO of the North Shore-Barrington Association of Realtors.
Developers, many now in bankruptcy, were caught by surprise, as well. Vacant and unfinished homes dot the Chicago suburbs, with for sale signs that tout the “New Price.”
For instance, a custom-built stone home in Winnetka priced at $5.5 million in November 2007 is going for $3.3 million.
It’s enough to make builder Farhad Nikamal sick, as he describes the loving attention he paid to detail in planning the two-story reception hall with marble flooring, a Brazilian cherry staircase, hand-carved travertine marble fireplaces and a 1920s French chandelier.
“This has cost me almost $3.9 million,” said Nikamal, leading a tour through the house, protected with wrought-iron gates and a security system. He believes that many potential buyers are bargain-shopping and have been brutal in taking advantage of the poor economy. “People should understand, right now, this is beyond a bargain,” Nikamal said.
He is considering raffling off the 6-bedroom, 8-bathroom luxury home, which sits across the street from Lake Michigan. “You are not going to see this again,” he said, shaking his head.
Less than a mile away in Glencoe, a renter occupies a 15-room white-brick monolith. The home, owned by a developer and constructed in 2007, has dropped to $2.8 million from the original asking price of $4.3 million.
Like many other properties in its price range, it features a wine cellar and bar, exercise room with access to a sauna, heated marble bathroom floors and stainless-steel appliances.
“It’s been tough to keep deals together,” said Matthew Schneider, a real estate agent with Coldwell Banker, who slipped off his shoes before walking through the pristine house. “Buyers are really out for the best deal. There are definitely people taking advantage of the situation.”
The sluggish sales remind real estate agents of the last severe downturn in the 1980s, when inflation and interest rates that hit 16 percent contributed to a weak housing market.
Julie Morse with Griffith, Grant & Lackie Realtors views some leveling down of prices as a healthy adjustment after years of an upward spiral. “There has been a softness in the market coming up on two years,” she said.
The number of North Shore homes sold for $1 million or more dropped to 572 last year — down 39 percent from the 935 homes sold in 2005 — a peak year — according to statistics provided by the North Shore-Barrington Association of Realtors. As of June this year, only 154 homes in that category have sold.
Another affluent community, Barrington, has seen 17 homes priced at $1 million or more sell through June this year compared with the 55 sold during the same period in 2005, the data show.
Those dismal figures could be welcome news for Sheldon Good & Co., a Chicago-based auction house that deals in upper-bracket home sales.
“As the market becomes more challenging, the sellers are more attracted to the auction,” said Michael Fine, executive vice president.
High-end, custom-built homes already are difficult to price because they can’t be easily compared with neighboring homes, he said. During a recession, other factors make it even tougher for sellers to figure out what the market will bear.
Over the last month, he said, he has fielded inquiries from home sellers on the North Shore and in the western suburbs, as well as from such vacation communities as Door County, Wis.
“I would expect we would do double or triple the numbers we have done the last few years,” Fine said.
As they try to sell their home in Lake Bluff, the Palmers are offering an added incentive — setting aside $20,000 for a buyer to help with the property taxes. The annual tax bill is now a whopping $60,000, but they believe that when the property is reappraised the taxes will be lowered, if appealed.
With only one of their four children still living with them, they are eager to downsize and move on with their lives. Meanwhile, they’re trying to be creative but realistic.
“Everyone is in the same boat,” said Marti Palmer, who has been looking at other homes. “You can’t buy if you can’t sell, so we’re open to ideas.”
(c) 2009, Chicago Tribune. Source: McClatchy-Tribune Information Services.