BOSTON (TheStreet) -- When the historic Ames-Webster House in Boston went on the market last year, the best offer realtor Joanna Dresser received was for less than half the property's asking price.
"We didn't get any realistic offers," Dresser says. "No one seemed to understand what a property like this was really worth."
The Ames-Webster House in Boston has 50 rooms and 28 fireplaces.
The sellers didn't accept any of the offers they received for the 26,000-square-foot mansion. Instead, Dresser set the property's asking price at more than $20 million and hopes her patience will pay off as the luxury home market begins to emerge from a two-year downturn.
Low interest rates and easy-to-obtain jumbo mortgages caused the prices of luxury homes to spike in 2007. When the market collapsed and banks tightened lending, wealthy sellers struggled to find buyers for their multimillion-dollar homes. As the housing market gradually recovers, realtors specializing in high-end properties are starting to see buyers return and offers that are closer to sellers' asking prices.
"Since October, we've been seeing sales increase in all of the price ranges, although the upper end share remains below norms, even with large percentage gains," says Walter Molony, a spokesman for the National Association of Realtors. The trade group expects existing-home sales to increase this year and in 2011.
The luxury market still has a long way to go. Among homes sold in March, 1% had prices of more than $750,000. The first-time homebuyer tax credits that recently expired helped boost sales of homes at lower prices.
Stewart Young, a realtor at the luxury real estate firm
who represents properties along Cape Cod and in Greater Boston, says the weak market forced wealthy sellers to make difficult decisions. One client tried to sell a Cape Cod property for $11 million, even after Young recommended a price of $6 million to $7 million. The property spent years on the market until the owner divided it and sold the parcels in pieces at lower prices.
One of the biggest obstacles to buying these properties was financing. Interest rates on so-called jumbo loans, which are used to cover home prices that exceed limits for conventional loans, soared as the real estate market declined and the loans were more difficult to get. Molony expects these loans, which are typically for more than $417,000, to become easier to obtain after June.
"Interest rates have already narrowed between jumbos and conventional loans," he says.
Lanse Robb, another LandVest realtor, says wealthy buyers have been taking advantage of low mortgage rates to buy luxury properties at deep discounts, allowing them to redeploy their cash elsewhere.
While sales have fallen at LandVest in recent years, high-end market prices are holding fairly steady and people are looking to sell some impressive homes, Young says. Even though the economy remains fragile, Young says properties such as the Ames-Webster House offer special features that help them withstand weak markets.
The Ames-Webster House is one of the largest homes in Boston's affluent Back Bay neighborhood. The house boasts 50 rooms, 28 fireplaces, a mosaic-tile entryway, a great hall with carved oak paneling and a stained glass skylight atop a four-story staircase. The mansion was built in 1872 and served as the home of the prominent Ames and Webster families.
"We are finding buyers that realize it's a special time to acquire these generational properties," he says.
-- Reported by Theresa McCabe in Boston.