Hanging on through difficult economic times means different things to different people. For many families, the phrase means curtailing any non-essential spending, and buckling down to find a way to pay the monthly mortgage or rent.

To some builders, hanging on denotes a way to simply break even, whether that may mean deeply discounting all remaining inventory to keep any losses at a minimum. To others, it may represent taking on a second job, in a totally different line of work, simply to feed and clothe loved ones.

To a few well-capitalized luxury properties and resorts, hanging on for developers and builders means simply waiting for qualified investors to return to the market, maintaining the status quo, with no price reductions or significant financial incentives. Take for example The Grand Del Mar. It lies in a coastal canyon on 380 acres in north San Diego and is the county’s newest luxury resort property. It features 249 guestrooms (a night in the Manchester presidential suite will cost you $3,500) and eight villas offering 80 fractional ownership opportunities starting at $450,000 for a one-tenth ownership plus an annual fee of $10,500, which includes a membership to the Tom Fazio-designed golf course on the property. The units contain 4,543 to 5,089 square feet and are beautifully appointed and accessorized with anything you could possibly need.

But do not ask for a discount or make an offer less than the listing amount. According to the developer, sales thresholds will be reached, regardless of the timeframe. The eight villas in Phase One have 80 possible ownership fractionals and only two 2 have sold in 2009. Four fractional shares sold in 2008. The villas opened in 2007 and spokespersons for the company say that about 40% of the units have been purchased.

Manchester Financial Group, the San Diego-based company that acquires, develops, and manages high-profile properties throughout the U.S., is the primary developer of the Villasat The Grand Del Mar. The company employs approximately 3,000 people nationally and controls $2 billion in assets in 11 states. The company’s controversial purchase and redevelopment of the venerable Shore Lodge in McCall, Idaho, was widely criticized before reopening as the Whitetail Club & Resort. The massive Manchester influence includes a towering Hyatt Hotel on San Diego Bay along with national investments in technology, telecommunications, banking, broadcasting, and medical device instrumentation.

Not all developers can hang on like Manchester Financial and wait for the uber-rich second-, third-, or fourth-home buyer or investor who pays cash. Sales of luxury homes, generally defined as the top 10% of a multiple listing association’s residential sales in the past 12 months and never less than $500,000, have been down since the last quarter of 2008, according to the Institute for Luxury Home Marketing. The National Association of REALTORS® reported that the percentage of $750,000 homes sold in 2007 was approximately 4.2% of total homes sold. In 2009, that percentage was down to 2.2.

In a capsule, many luxury investors and buyers are feeling less wealthy, according to the Institute’s Laurie Moore-Moore. Many are in an economic crunch while others are on the sidelines waiting for bargains. Financial portfolios have shrunk. Conspicuous consumption (McMansions) is out and quiet luxury is in. While the stock market has showed an impressive run-up lately, it remains to be seen if the upward trend will be sustained. That’s why real estate continues to be an attractive investment for many folks. Just not at these California prices we’ve been talking about. Generally speaking, Texas continues to offer very affordable real estate investments.

But back to the national picture. According to the 2009 National Association of REALTORS® Profile of Home Buyers and Sellers, vacation homes (including the upper-end luxury bracket) accounted for 9% of all sales while investment homes were 21% of transactions. There are 8.1 million vacation homes and 40.5 million investment units in the U.S. compared with 75.5 million owner-occupied homes.

The survey found the sweet-spot age target for vacation home sales were the 39.2 million people in the U.S. ages 50 to 59 – a group that dominated sales in the first part of this decade. Two other groups, however, are expected to control the second-home market in the coming decade: An additional 44.8 million people are currently in the primary buying demographic of 40 to 49 years old, and another 40.7 million are 30 to 39.
 
I wonder which group will step up and start buying those $450,000 fractionals to rent out to their friends?