Price drops for big-name architect homes

The "price-reduced" Richard Neutra-designed Kaufmann house in Palm Springs wasn't actually on the market before. It was sold through a much-ballyhooed Christie's auction for $19.1 million in May but the deal fell through. Now it's listed for $12,975,000.

The owners bought the landmark home for about $1.5 million in 1993 and spent mega-bucks -- some $11 million -- bringing the place back to its former glory and purchasing additional land to increase the site to more than 2.5 acres.

Dramatic price drops of more expensive homes may be lagging the rest of the market but, last time I checked, all boats were still rising and falling with the same tide. And classic homes by Modernist architects are experiencing similar fates -- languishing for sale at reduced prices -- in other parts of the country.

Listing agent Crosby Doe is philosophical about the pricing of the sleek 1946 desert house commissioned by Pittsburgh department store magnate Edgar J. Kaufmann.

"Markets have their ups and downs," said Crosby Doe, the sellers' agent. "In the 1980s, the price of Picassos suddenly fell, and headlines pronounced the end of high-priced art. It turned out to be a very good time to invest."

Yes, and an attractive listing price will sometimes produce a bidding war. My calculator shows the price difference between the listing and auction prices at about 32%.

-- Lauren Beale

Thoughts? Comments?

Photo: The Palm Springs home has five bedrooms and six bathrooms in 3,162 square feet. Credit: Scott Mayoral

Comments

[Drew]

There is certainly more room for price cuts on a $12 million "trophy" property than on a $450k bungalow.

But a 30% price drop on one is $3.6 million, while on the other it's $135,000.

And there's often much more room to negotiate downward on the super-expensive properties, as in many cases they were purchased 10-20 years ago for a small fraction of what hey are listed for today.

[Todd in WeHo]

Overpriced is overpriced regardless of location, architect or any other factor.

[Andrew]

How do you spend 11 Million on restoring a mid century home????

So it was bought for 1.5 M 11 M put into it and a mortgage was carried for 15 years. Ouch!!!

[wayne]

Forty percent correction should be bottom, if even lower there's no floor to future pricing.

[Sing Expat]

@Wayne: Why is a forty percent correction the bottom? What staggering, amazing analysis led you to this conclusion? Or have you simply decided that your house will fall to the price you paid for it and no lower, and that difference is forty percent?

The bottom of housing will be determined by what people can afford and what banks will lend. Since affordability is declining and banks are not lending, I would surmise that prices are going to drop sharply. What the percentage will be is not important .

The median house price in the US is about 193K right now. Median household income is about 48k and dropping. Household debt levels are at record highs. Household savings are at record lows. Unemployment is rising sharply. Housing inventories are still up at record levels.

The longterm median price to income ratio is about 2.8-3. Given the recession we are in and the factors listed above, it makes perfect sense to have the ratio head below 2.5, perhaps as low as 2.3. So I expect the median price of US homes to descend to about $110k.

The peak was somewhere about $225, so that represents an overall decline of over 50%. Whee!

Thank God for a 50% decline. Then people will be able afford their homes.

[Frank]

13 million and you still sweat your hoo hah off.
No bargain there!

[jeffsd]

Mid Centruty post and beam construction was meant to be an elegant, affordable construct for the middle class - much the same as the more complex Craftsman homes.

So how can one spend 11 million to update a nicely designed basic post and beam home?

[Joske]

anybody in the USA ever heard the kid-story about the 3 little piggies? you know, 1 has a house in grass, the next in wood and the last one in stone ... each time I watch these storm/tornadoes etc and the US is whining, I wonder about that ... we Europeans tell this story to our kids ... when you see those wooden houses in little pieces all over the place it's hard to believe those are actually new houses ... here's the deal; since you guys 'won' WWII by killing about 2.000.000 innocent civilians with not 1, but 2 atomic bombs ... you guys think that you have reached nirvana and are untouchable ... I guess the last few months you're finally learning that's in fact not the case ... stop whining and stop wasting ! GROW UP !!

[Steven]

This market that involves the upper end in real estate usually doesn't feel the market pinch.The market has NOT
bottomed out so expect more price reductions.The correction has not seen it's leveling point and as long as the rest of the market has more than a year supply it won't stop dropping.Glad I got out in 04 what a crash it has been.
Steven

[el guapo]

Honestly, how can you appraise a home when it gets to that level? Cool house - but $8M, 12M, $15M? I would have no idea. Guess it won't matter, unless I win the lottery.

[David]

If that Neutra-designed $12,975,000 house were in Phoenix or Vegas, it would be much less. But you still pay a hefty premium for the Palm Springs cachet!

[stan derrin]

Only the super rich can afford these overpriced homes.HAs anybody seen what has happened to the fortunes of the rich in the last 2 months?The russian stock market down 75%,china down 65%,usa down 40%.All these billionaires who made billions in a snap have just lost all that new found wealth in just the last 2 months.Sheldon Adelson,owner of sands casino is not a billionaire anymore.He was worth 30 billion just last year.The rise and fall of the super rich is going to be felt in the upper end of all markets like art,real estate etc.Easy come, easy go.The emperor wears no clothes.Perception is reality.The perception now is grim and soon the reality will be equally grim.

[Raving Dave]

Joskie,

My, my. A little bitter aren't we?

I'm not quite sure what the American housing market has to to with the United States ending World War II but...

When you're telling your children that bedtime story about how the Three Little European Pigs' houses were being blown away by the Big Bad Nazi and Japanese Wolves I'm sure you won't forget to mention it was we Americans who saved their bacon. And yours.

Don't you just hate it when Americans remind you of that?

All My Best,

Raving Dave
Los Angeles

[Steven]

Rave dave .....Thank you !!!!!!! Joskie

You are in need of a serious history lesson.
The need to over simplify is done to make up for the lack
of facts as well as to cover up the need for Intelligence
to reign in some common sense.Your ability to blog here is a testament to our Freedom which by the way we gave you .My father is one of the last surviving WWII
war HEROS .Just think if he felt the way you do now back then.

[Brady Westwater]

I can not imagine how 11 million could have been spent on a house that size even with the extra land and landscaping unless much of that was spend on period furnishings. And even then.... it's a hard number to imagine. I suspect that figure has been exaggerated to justify the asking price.

[Drew]

Most of the $11 million was probably sent on acquiring the additional lots -- not on renovating the house itself.

[pharmoz]

Dear Joske
There is always 2 ways to look at a half filled glass!
Some Europeans let 6,000,0000 Jews perish and god knows how many in Russia and the rest of Europe.
The cleansing had to stop!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
And as long as there are crazy fanatics in this world you can talk about bad Americans with there wooden houses
but who will save your behind when those crazy people attack? I'll bet not your European friends!