We would all love to live like a movie star at some point: to have panoramic views of Los Angeles, 12 car garages, guest houses and a backyard that even Angelina Jolie herself wouldn’t mind wasting away the day in. It’s true that the vast majority of us will never be able to afford such things. However, for those whose current finances put them just out of reach of such luxury the dream might be nearer than you think.

A recent L.A. Times article (“Luxury Home Prices Are Still Heading Down” Tuesday, December 14th , 2010) revealed that while median home prices in the majority of southern California zip codes are, albeit slowly, rebounding after bottoming out in 2008, the 20 most exclusive have continued to drop. Moreover, many multi-million dollar properties have been sitting on the market for months with little or no attention from buyers.

While San Diego homeowners in places like Del Mar, La Jolla and Rancho Santa Fe watch the value of their multi-million dollar estates plummet, Real Estate agents too are watching commissions dwindle while these trophy sales are being replaced largely by sub-million dollar properties.

So where is everyone? Why not pay less for more? As pointed out by the article, there are a few problems. For one, many owners of these estates refuse to believe that the value of their property is that low and therefore refuse to sell for want of not looking like they are desperate or financially strapped. However, there is a much larger issue—namely that buyers themselves are staying away from the properties on news that that luxury market still has not bottomed out. The last thing a buyer of a 4 million dollar home wants to see is the value of their property decrease within the first month of moving in. Truly depressing.

So what does this mean for you? How should you play this situation? For one, keep a close eye on your zip codes of interest. When they begin to rebound (which many say will happen within a year or two), that might be a good indication that luxury home prices have bottomed out and are beginning to recover.

But as with any investment, realize you are taking a risk and that this maneuver could backfire. Keep in mind, however, that all these zip codes have one asset that will keep prices from bottoming out too badly: location, location, location!

This is filed under Home Buying.


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