The collapse of the subprime lending market killed the low-priced end of the housing market. Now the ruination on Wall Street threatens to kill the top of the market. Makes sense, right? Stock-market wealth is heavily concentrated in the hands of the richest Americans. When it declines, it hurts their spending power the most. (Poor people are watching Wall Street’s meltdown with semi-detached bemusement.)
Since the heart attack in stocks occurred mostly in just the past two weeks it’s too soon to see its effect in the official statistics. But the ever-resourceful Frank Borges LLosa, a Realtor in northern Virginia, has pulled together some recent sales data that seem to corroborate what we’re talking about here. Can’t read too much into stats for one small region over one small period, but he says the number of $1 million-plus homes under contract in the D.C. area fell by half from late September to early October.
That explains Frank’s message on the slice of toasted bread: LUXURY HOMES ARE TOAST. (Frank is not one for subtlety.) As he writes: “Who is going to unload their stocks down 25-45% to buy a house?”
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.