The Wall Street Journal has a great article noting that there are plenty of high-end homes on the market. There are plenty of loans available up to $700,000, since banks sell these loans to Fannie and Freddie. However, as soon as prices rise above $1 million, the cost of a mortgage soars and the availability of mortgages plummets. Essentially, the federal government is running the mortgage market and the social re-engineering of America is underway.
The WSJ article talks about how the top 10% of households account for 23% of consumer spending. Since high-end home values continue to plummet, this doesn’t bode well consumer spending. In fact, this may be one of the few economic recoveries where consumers act as an anchor on the economy.