TEXT OF STORY
Bill Radke: You know, the housing slump has not just affected the average American. Eddie Murphy has been trying to sell his New Jersey mansion for five years, and he’s knocked $15 million off the price tag. Poor Nicholas Cage tried to sell his Bel Air home for $35 million, couldn’t find a buyer, put it up for auction starting at $10 million and got no bids. Cash Peters explains luxury homeowners have had a hard time admitting their dream home could possibly be worth less than they think it is.
Cash Peters: Really, it’s textbook stuff, panic selling 101: As the market plunges, ordinary people who want to get rid of their house lower the price and take what they can.
Bernice Gershon: Well, they have to. They don’t have any money. They’ll lose the house anyway, so they do panic and take the loss.
Exactly. A lot of rich people, on the other hand, because they’re well-padded I guess, refuse to lower their price. Bernice Gershon is, like, the empress of Beverly Hills real estate, and she’ll tell you, wealthy sellers can drive you nuts.
Gershon: They don’t always listen. They have minds of their own and they just hang on and hang on and hang on and there’s nothing you can do to change them.
Yeah, great. Meanwhile the price plummets and the house is worth way, way less than they paid for it. So is it because they’re stinking rich, or reckless, or just plain . . .
[Sound of a cuckoo clock]
Well, you know. Chris Thornberg’s a financial analyst:
Chris Thornberg: Frankly, no one’s ever accused the Hollywood elite of being financial experts on this sort of stuff.
Peters: Are they dim really when it comes to finance and property?
Thornberg: Two words: Nicholas Cage.
OK, point taken. But there’s another factor, too:
Thornberg: Americans are loathe to acknowledge losses. The disposition of the asset brings home the pain of the pain of loss, if you will.
OK, so who are we talking exactly? Lynne Beavers is realtor to the stars in L.A. Which celebrities are still stubbornly and illogically hanging onto their homes, Lynne?
Lynne Beavers: Well, a lot of them. But a lot of them who are smart and have smart business managers are selling these places.
Peters: Name one.
Beavers: Oh I can’t really name one.
Peters: Oh come on, I insist you do.
Beavers: I don’t want to.
Rats. What is it with people and professional ethics? Anyway, according to Chris Thornberg, if you’re already under water currently, than sitting tight — which is what got you in trouble in the first place — and millions in the hole, why not?
Thornberg: Prices today are low, and they will bounce back over the course of the next few years, and in that case it’s probably an asset worth holding on to. Let’s paraphrase Tolstoy. “Every homeowner with equity is basically the same, and every underwater homeowner is miserable in their own distinct way,” if you will.
Peters: Tolstoy wrote that?
Thornberg: Hahahaha, I think something like that, right?
Well, whatever you say. In Los . . .
[Sound of a cuckoo clock]
. . . I know, but what can you do? In Los Angeles, I’m Cash Peters for Marketplace.
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