The million-dollar home in greater Memphis, which went from rare to commonplace in less than ten years, has become a shopper's bazaar for wealthy bargain hunters.
The weak economy, the stock market crash, high interest rates on jumbo mortgages, and the building boom that came to an end last year have produced a glut of homes and falling prices in the high-end market.
The million-dollar home was a rarity in Shelby County ten years ago when Memphis magazine found just 30 of them prior to the 2000 county property reappraisal. By 2007, however, the Dow Jones Industrial Average had risen to 14,000, and Memphians were feeling rich and splurging on media rooms, indoor basketball courts, and other luxury amenities. The Shelby County Assessor's Office took note. In the 2004 reappraisal, there were 649 million-dollar homes. The 2008 reappraisal is complete, but the assessor's office delayed releasing its data on houses appraised for $750,000 or more until they can be rechecked, said spokesman Patrick Lafferty.
With the Dow trading below 8,000 in April, the local impact of the Stanford Financial debacle, and FedEx laying off 500 salaried employees in Memphis, it is now, needless to say, a different story.
In early April, there were 149 listings over $1 million, including such offerings as a boxcar-shaped house on the blufftop (listed at $1.25 million); a historic home on Belvedere in Midtown that listed at $1.3 million and sold for $950,000; and basketball legend Jerry West's former house in Southwind, which has been on the market for more than two years at an asking price of $3.95 million.
There were 26 closings in the previous six months. Most sellers got at least 10 percent less than their asking price. A house on North Pisgah listed for $2.2 million went for $1.6 million; a house on Gwynne listed at $1.45 million sold for $912,000; and a home on Shady Grove listed at $1.3 million sold for $1.1 million. No house has sold for more than $2 million during that time, although there are 22 such listings on the market.
Relatively speaking, there are some deals out there. A starter mansion next to a golf course for you? Over in Southwind, on Tournament Drive you can buy a 5,500-square-foot home with eight bathrooms for $1,299,000. It's a mere shack compared to West's former digs with 14,630 square feet and seven baths. But it's nearly twice the price of some homes that sold recently in Southwind for $700,000 or less, according to sales reports.
"No question, now is a good time to buy a big house if you are in the market," said Dick Leike of Crye-Leike Realtors. "Only seven sales this year closed for over $1 million. Last year there were only 30 for the whole year. We got up to 60 in 2006."
One factor Leike points to is the difficulty of getting financing for so-called jumbo mortgages of more than $417,000. Since the banking crisis, jumbo mortgages carry an extra 2 or 3 percent interest rate compared to so-called conforming financing at rates as low as 4 percent.
"That's part of the whammy that high-priced properties are taking now," he said.
Is there any upside or downside in pricing a house above $1 million?
"It's better to price it just under that," says real estate agent Linda Sowell. "They are going to sell for what they are going to sell for anyway. They are just going to sell quicker if they are priced under that."
She said she is starting to see some movement in the high-end market, with sellers "doing things they would not have ordinarily done," including taking houses in trade.
Leike pegs his hopes on a spring revival.
"It's not like nothing is selling," he said, noting his firm's nearly 600 sales this year. "People just need to be inspired. A lot of them probably should have put their money in real estate instead of some of these other things."