From the Hamptons to Seattle's lakefront mansions, sellers of luxury homes are betting their upscale customers won't be scared away by the market's plunge.
"I don't like to see those kinds of gyrations because I think it puts fear into people," said Jack L. Hangen, who owns Agawam Realty in Southampton, Long Island, but he says, "I don't think it's going to affect our market that much."
Many even saw a silver lining to last Monday's 554-point drop in the Dow Jones industrial average.
Joel H. Rassman, chief financial officer of Toll Brothers Inc., Huntingdon Valley, Pa., said if investors earn less in the stock market, they may reason: "Aren't I better off putting money in housing-something that you can enjoy today?"
He said Toll Brothers, the nation's largest luxury home builder, has benefited from this psychology for six months. Fearing that stocks were priced too high and likely to fall, many buyers have moved money from stocks to luxury homes, Mr. Rassman said.
"It comes down to where you feel your money is the most secure," said Patti Smith, an associate broker with Windermere Real Estate, in the Seattle suburb of Bellevue.
She was waiting last Wednesday to hear whether a couple of buyers had decided to invest in more Microsoft stock or in homes on Seattle's Lake Washington, where Microsoft chairman Bill Gates lives.
Thanks to the bull stock market, luxury homes have been a hot commodity for a couple of years.
The National Association of Realtors said that homes costing $500,000 or more accounted for nearly 2% of sales last year, up from 1.68% in 1994. Agents around the country report it's a seller's market in the million-plus price range.
In California, Asian buyers are a big factor in the luxury market-and not surprisingly, last week's turmoil in the U.S. and Pacific Rim markets had at least a passing impact.
Helaine Young, a Realtor with D.B.L., a Beverly Hills realty company, said she "just sold a house for $3 million to an Asian buyer."
But the buyer took a "major loss" in the Asian markets, and asked for a one-month extension to come up with $1 million to add to the million already in escrow, Ms. Young said. She said she was confident the deal would close.
After the stock market crash of October 1987, luxury homes continued to do well -at least in some parts of the country.
Mr. Rassman of Toll Brothers said "customers were hesitant to buy new houses" for two or three weeks after the crash. But foot traffic-buyers looking at model houses-and deposits were normal within a month, he said.
It helped that the market's turmoil came during the industry's slowest season that time, Mr. Rassman added. "By January, when selling season starts, everybody has forgotten what happened in October."
In Southampton, Mr. Hangen recalled, home sales dried up, but the rental business boomed as owners rented out their estates to pay for upkeep.
Ms. Young, who sold O.J. Simpson his Brentwood estate and Elizabeth Taylor her Bel Air mansion, is a bona fide high-end Realtor-and she's very bullish.
"The real estate market is the strongest it's been in 40 years," she said. "When the (stock) market goes back up, they'll pull out and buy real estate."