Four years ago when run-of-the-mill tract houses sold quickly for $300,000 or more in Stanislaus County, million- dollar home sales weren't rare.
Real estate was booming, and custom home builders erected giant homes on expansive lots. They often adorned the houses with top-rate features, from granite counters and Sub-Zero freezers to wine rooms and spa-like master baths.
That was before the housing crash.
Things are different now, even at the upper end of the residential market.
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Not a single million-dollar home has sold this year in Stanislaus County. Compare that with 2005, when more than 40 houses sold in the county for a million or more.
The luxury home slump isn't just a local phenomenon. High-priced houses are languishing on the market across the country.
The National Association of Realtors reported that only 2.3 percent of homes sold in January, February and March were priced at more than $750,000. During those months in 2007, 4.4 percent of homes sold were priced above that level.
"The high end is the worst-performing sector of the residential real estate market, unquestionably," said Bernard Baumohl, chief global economist of the Princeton, N.J.-based Economic Outlook Group.
That's bad news for the 20 or so million-dollar homes for sale in and around Modesto. Even though many of those houses cost more to build than their current asking price, few buyers are vying for them.
"You can ask whatever you want. That has nothing to do with a home's value. Value is what people are willing to pay for it," said Lorraine Cardoza, an agent with PMZ Real Estate. She has a million-dollar home listed on Modesto's Wycliffe Drive, but it hasn't attracted much interest. "With the economy such as it is, we're not seeing those kind of buyers out there in droves."
Accentuate the positive
Some sellers remain optimistic their custom home will catch a well-heeled buyer's eye.
George Sabokrooh, for example, is confident that his $1.75 million home on Del Rio's River Nine Drive is the finest house on the market.
"Every detail we worked on in this house," Sabokrooh explained. The five-bedroom, 4½-bath home has 4,879 square feet on a bluff overlooking the Stanislaus River. The single-story home with four fireplaces, gourmet kitchen, pool and spa was completed last year.
"This house cost us more than $2 million to build," said Sabokrooh, who owns Modesto Exotic Flowers with his wife, Zahra. "We built it to be in perfect shape."
Now the couple wants to sell.
"It's a huge house. It's too big for us," Zahra Sabokrooh said.
But there's lots of competition.
At the current sales pace, the Realtors association figures there's a 40-month supply of U.S. houses on the market priced at $750,000 or more. By contrast nationally, there's less than a 10-month supply for all homes.
Stanislaus County's housing market is even hotter for lower-cost houses. There's less than a two-month supply of all homes in the county.
But considering not one million-dollar home has sold this year, high-end sellers must be patient or willing to unload their big homes at a big loss.
"Often it takes more than one year to sell a million-dollar home," warned James Harner, an agent with Century 21 M&M and Associates in Modesto.
Harner recently sold a 4,500-square-foot Oakdale home, built last year, that had been priced about $1.25 million. But the builder lost the home to foreclosure before he could sell it. After taking possession, the bank slashed the price to $700,000, which helped Harner sell it.
That's the kind of bargain some wealthy buyers wait for.
"Most people in that market may not need to buy overnight," Harner said. "They have time to get the right home."
With high-end homes, each one is unique and may appeal to a different type of buyer.
Example: Harner has a $1.99 million home listed on Modesto's Norwegian Avenue that features an intricate series of seven koi ponds, which weave around the 1.2 acres, 3,382-square-foot home, pool and courtyards. The fish will be sold with the house.
"There are a lot of properties out there (vying for million-dollar buyers)," said Duane Burrows of Coldwell Banker Vinson Chase. He's the agent for the Sabokrooh home on River Nine. To help such homes sell, he advises owners to "price it right, have it in super shape and always ready for people to look at."
Even that may not be enough.
The recession and collateral damage in the stock market have knocked many luxury buyers out of the market. Falling home prices coupled with new appraisal rules have scuttled many deals. Lenders have jacked up interest rates and down payment levels for high-priced mortgages.
Since the credit crunch began in the fall of 2007, few investors have been willing to buy mortgage-backed securities because of soaring default rates.
The government's Fannie Mae and Freddie Mac are virtually the only mortgage buyers left, but they cannot purchase loans exceeding $417,000 for homes in Stanislaus, San Joaquin or Merced counties.
That means any lender who makes a mortgage exceeding that amount, known as a jumbo loan, must keep the loan on its books. To compensate for that risk, lenders charge higher interest rates. The average rate for a 30-year, fixed-rate jumbo loan was 6.91 percent last week, according to a survey by Bankrate.com. A conventional 30-year, fixed-rate home loan was 5.7 percent.
That higher rate, for example, means a borrower with a 30-year $750,000 loan would pay almost $600 more a month than at the lower rate.
At the same time, banks are requiring down payments of 20 percent to 30 percent, even if the borrower has a golden credit history.
"It's not easy to get jumbo loans now," Cardoza confirmed. "And appraisals are tough because there's no comparable sales from which to draw information (which lenders require to substantiate that a home's price is fair)."
Industrywide, jumbo loans made up about 5 percent of the market in the first quarter of this year, compared with almost 15 percent in the first quarter of 2007, according to Inside Mortgage Finance.
The Associated Press contributed to this story.
Bee staff writer J.N. Sbranti can be reached at email@example.com or 578-2196.