Demand for homes in the $500,000 and up price bracket ebbed over the past year, but builders didn't slow production. Now at least a year's supply of expensive homes are on the market.

To move those unsold homes, sellers are looking at cutting prices, taking homes off the market or simply waiting.

"They'll either have to be negotiable on price or take considerably longer to sell," said Ross Rhudy, general manager of Ammons Pittman GMAC Real Estate, one of the Triangle's larger residential brokerages.

While the choices are unappetizing for builders and home owners, buyers are benefiting.

David Knox, a transplant from South Carolina, was shopping for a new home in the $400,000 price range. But after a builder reduced a $575,000 house by $40,000, the Charleston resident decided he could afford a more expensive home.

"It was higher than what I originally wanted, but I felt it was good value," said Knox, whose new home in Apex's Branston neighborhood had sat unsold for more than six months.

How much is the market out of kilter?

In Wake County, where Triangle home sales are concentrated, there are 201 homes priced between $700,000 to $800,000 on the market. Last year, 189 homes in that price range were sold, according to Triangle Multiple Listing Service data.

Higher brackets have similar imbalances. There are now 116 homes listed at between $1 million and $1.5 million. Last year, 97 homes in that price range sold. In the $1.5 million to $3 million range, there are 86 homes now listed. Last year, only 37 homes in that bracket sold.

The situation isn't much better in Johnston, Durham and Orange counties.

In more affordable Johnston County, 97 homes are listed between $350,000 and $400,000 -- 49 percent more than sold in all of 2007. No homes sold for more than a million in that county last year. Now there are four homes listed at more than $1 million.

The more expensive brackets that have a year or more of inventory are not a majority of the market, but they are still significant.

The 1,004 homes listed in Wake County for more than $600,000 make up 15.6 percent of the county's total TMLS listings. The 300 homes listed in Johnston at more than $300,000 are 20 percent of that county's listings.

Concessions ahead

Before the housing slump hit the Triangle a year ago, there was only about a six-month supply of upper-end inventory, brokers said. Markets are considered to be evenly balanced between supply and demand when inventories are at that level. When inventory goes higher, the market teeters toward buyers, and brokers and experts say price reductions may be inevitable.

"It's the only way to get that inventory moving again," said Wayne Gaddy, co-owner of Chandler Gaddy Realty in Raleigh. "One thing for sure is if all those homes are sitting vacant, the resales will either be pulled off the market or reduced in price, and the new homes will have to be lowered if nobody is buying them. The banks will start applying more pressure."

In general, the Triangle has not seen too many cuts in home prices. Average home prices have continued to rise even though total sales declined 7.8 percent in 2007.

But in Wake County, average prices declined in December for the first time in at least 17 years, a 2.4 percent drop to $252,981.

Thomas Lawler, former senior vice president for risk policy at Fannie Mae and now a housing consultant, expects prices to come down about 2 percent.

"When you see months supply move from 6 to 11 or 12 months, usually within a couple of months you see price cutting or concessions," Lawler said.

So far the glut is mostly confined to upper-end homes. Lower priced houses still have about a six month inventory across the Triangle.

Custom builders, who dominate the upper price brackets, have slowed production but they didn't start soon enough, Lawler said.

Psychological hurdle

Glen Astolfi, senior loan officer and co-owner of DNJ Mortgage of Raleigh, one of the area's larger mortgage brokers, said requests for jumbo loans are down 50 percent from a year ago. Jumbo loans have a 6.5 percent interest rate now, about 1 percent higher than conventional 30-year loans for amounts below $417,000.

On a $500,000 loan, that 1 percent raises buyers' monthly payments by $321 to $3,160.

"The guy in that bracket could probably come up with another $321 but people hear about these rates and just aren't as enthusiastic about looking for homes in the upper price range," Astolfi said. "It's as much a psychological thing as much as reality."