More Declines Expected

"The reason the low end stopped falling is because thegovernment stepped in with affordable loans," said ScottSimon, managing director at Pacific Investment ManagementCo., a Newport Beach-based investment firm that runs theworld's largest bond fund. "There is no political will tobail out a million-dollar house." Luxury home prices probably will drop another 5 percentbefore reaching a bottom in September 2010, according to SamKhater, senior economist at First American. Those declines may lead to losses on jumbo mortgages thatdwarf the "haircut," or discount to full value, that bankstake on short sales or foreclosures of moderately pricedhomes, said Rodriguez, the agent with JM Group in Miami. "When the bank takes a loss on a $3 million property it'sa lot bigger than the loss on a home with a $150,000mortgage," Rodriquez said.