Latest Victim of the Housing Market: McMansions

CLAREMONT, Calif., Feb. 7, 2008— -- In 2005, Ahmad Hamadanian and his wife, Mitra, bought a new 5,600-square-foot home in Stone Canyon Preserve, a luxury development in Claremont, Calif. They paid more than $1 million for the stucco mansion with five bedrooms and 5½ baths. In a few years, they figured, they could sell the house and make a bundle of cash in the rising real estate market.

"We thought it would be all right," Ahmad said.

Derisively nicknamed "McMansions," these mass-produced luxury homes fueled the real estate boom. With 4,000 to 6,000 square feet of living space and price tags of at least $1 million, buyers were all but guaranteed their homes would appreciate by hundreds of thousands of dollars as soon as they signed on the dotted line.

Today, after sinking hundreds of thousands of additional dollars into landscaping, granite counters and high-end appliances, the Hamadanians have listed the house for $1,995,000. It's been on the market for six months, and they have yet to receive an offer.Hamadanian owns an Italian restaurant and his wife is a doctor, but with their house nearly 100 percent financed and monthly loan payments of $6,500, they're worried.

"After five years, our mortgage is going to jump high, like maybe twice as much," Mitra Hamadanian said.

People once had to place their names on a waiting list to buy a luxury home, but now owners trying to sell compete with new homes offered at lower prices, bank-owned properties and so-called "short sales," in which a home sells for less than the value of the mortgage.

Compounding the problem, buyers have disappeared because the subprime and 100 percent loans that made so much growth possible are gone.

"The people who qualified for the kinds of loans that bought these houses no longer qualify," said Char Constantino, a broker with Century 21.

Not only do those people no longer qualify, but many who did take risky financing are losing their homes. Foreclosures in Los Angeles were up 381 percent in the last quarter of 2007 from the same period the previous year.