Going, going, going High-end homes: Difficult re-sales underscore real estate is not a liquid investment.


FOR MUCH OF the 1970s and 1980s, American homeowners witnessed such a hefty appreciation in their property values it was easy to think the sky was the limit. That's why the 1990s have brought a rude awakening for those who overbought and speculated that inflation would keep residential real estate prices rising.

Several recent news articles have highlighted the difficulties some Marylanders are having in unloading high-end residences. One Anne Arundel County family's dilemma was particularly striking: Having built a dream mansion, they could not find a buyer at the $1.5 million asking price. In the end, they put the house on the auction block -- without any reserve -- and ended up selling it for $800,000.

"I just lost a half a million dollars," said the seller, his face ashen.

Few owners would want to sell their nest egg in an absolute auction. The risks are too great. But many sellers, after seeing their properties languish on the market, are willing to adjust their expectations -- and the asking price.

"People built up lots of expectations in the '80s, in terms of what their properties should bring," says Paul Cooper of Alex Cooper Auctioneers Inc. in Towson. "If they can't sell and they need money, it's a matter of who is desperate enough."

While tales of high-end properties have been highlighted in recent months, owners in all price categories are re-learning something they may have forgotten in the go-go days of the early 1980s: real estate is not a liquid asset.

With historically low interest rates, the real estate industry should be booming. Instead, sales tend to be sluggish and buyers skittish.

"Even with low interest rates, people are struggling with whether they will have a job or not," says Realtor James C. Crockett. "Wall Street and the stock market may be doing good, but it's not filtering down."

Supply and demand have always ruled the real estate market. If there is an imbalance, it is due to inflated prices and expectations in the past. A correction is now taking place. A seller's distress may be a buyer's delight. Pub Date: 3/06/96

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