With the push of a button, 36-foot-long glass walls retracted from a luxury condo overlooking Lake Coeur d’Alene. Mike DeLong, sales director for The Terraces, stepped out onto a deck outfitted with its own kitchen.
The furnished unit – featuring custom sofas and original art – costs nearly $6 million.
While other Coeur d’Alene condo developers are auctioning off properties and selling at deep discounts, the Hagadone Corp. continues to bank on the luxury market.
“The market will recover,” DeLong said. His boss, tourism magnate Duane Hagadone, “would rather wait a little longer to sell the units than to discount them,” he said.
The 30-unit Terraces development opened two years ago. Eight condos remain unsold, with prices ranging from $3.5 million to $5.9 million. At the upper end are units furnished by architect Guy Dreier, whose work on Hagadone’s Palm Desert, Calif., home was featured on the cover of April’s Robb Report. The magazine touts itself as a Consumer Reports-type guide for the ultrarich on topics such as yachts, private aircraft, fashion and fine jewelry.
DeLong still gives about five tours a week at The Terraces. But many prospective buyers have simply dropped out of the market, he acknowledged.
“If they have to sell another house, or borrow a lot of money, they aren’t looking right now,” DeLong said.
Sales of luxury homes – those priced at $750,000 or more – outperformed other parts of the real-estate market until late 2008, according to national statistics.
“The luxury market really has been the last to go into a slowdown,” said Laurie Moore-Moore, founder and CEO of the Institute for Luxury Home Marketing in Dallas. But when it went, it fizzled out quickly.
At the moment, sales of luxury homes “are pretty much dead in the water,” said Walter Molony, a spokesman for the National Association of Realtors.
Nationally, there’s a 41-month inventory of unsold luxury homes. That means if current market conditions persist, it would take 3 ½ years to find buyers for all of the luxury properties for sale. Sellers are competing with banks trying to unload repossessed properties.
Foreclosure rates on jumbo mortgages are twice as high as foreclosure rates on conventional loans, Moore-Moore said. Jumbo mortgages are loans for $729,500 or greater.
“It’s not a pretty picture in today’s luxury market, and that probably won’t improve until the end of 2010,” Moore-Moore said. “A complicating factor is the decline in the number of high-net-worth individuals.”
In 2008, the number of people with portfolios valued at $1 million or more dropped by 15 percent. That’s a global statistic but probably mirrors what happened in the U.S., Moore-Moore said.
“There are fewer wealthy people, and their portfolios are worth less,” she said. “The people who could afford to buy have stepped to the sidelines to watch and wait.”
Despite gloomy national trends, Discovery Land Co. sold more than $27 million worth of real estate at Gozzer Ranch on Lake Coeur d’Alene this year, Discovery spokeswoman Erin Dixon said.
Sales at the private golf resort are ahead of the same period for 2008, she said. Discovery opened a 28-unit condo building at Arrow Point on the lake this week. The units run from $1.7 million to $4.5 million. Six condos have sold, and nine more units have sales contracts, Dixon said.
“We’re not in a holding mode,” she said.
Hagadone Corp.’s DeLong said he shows The Terraces to a smaller – but more serious – group of prospective buyers.
About six months ago, the company added the option of units furnished by Dreier as a sales incentive.
Units at The Terraces typically take three to four months to furnish and decorate, DeLong said. So if a couple bought an empty unit in June, they’d miss summer at the lake.
“This way, they can move in the day after the papers are signed,” DeLong said.