The national inventory for luxury homes is increasing, even as prices in the top tier are weakening. Inventory is up 20% in the first five months of 2009, and average days on market (DOM) has increased 14% to 185 days, according to The Institute for Luxury Home Marketing's National Luxury Market Report.

The median price for homes in the study was $1.2 million, with 41% of luxury listings showing a price reduction in the prior 90 days.

Several factors have combined to weaken the sector, such as the credit crunch, job losses, shrinking investment portfolios, stringent loan requirements, and a number of individuals who stretched themselves to buy expensive homes using inappropriate loans.