Things were looking up for luxury home sales during the tax credit boomlet last year. However, the credit wasn’t the primary reason; after all, $4000 isn’t a compelling incentive to well-heeled move up buyers in the million dollar plus housing bracket.

Rather, a plentiful inventory, good deals driven by price reductions, an improving outlook for appreciation and the beginning of the overall economic recovery made the difference. When sales of existing homes dropped 25.5 percent year-over-year last July, data by Altos Research for the Institute of Luxury Home Marketing showed that summer sales of million dollar plus homes significantly outperformed sales in other price ranges.

Since late summer, though, high end demand has died down and mini-mansions once again sit empty. Inventory is seasonally low but on a national basis average days on market is up to 173 from 120 in September, though still well below the 225 to 250 days averages of the first quarter. Average prices have fallen and an index created for ILHM by Altos currently puts demand at a stinky 13, far below the 30 break point between a buyer’s and seller’s market.

According to a new survey by the Institute for Private Investors’ Family Performance of 72 families, more than 80 percent of whom have assets of $50 million or more, right now wealthy investors would rather put their money elsewhere. Some 64 percent plan to park their cash abroad, in long-only global stocks. The next biggest winners were hedge funds or fund-of-funds. Roughly 38 percent said they planned to increase their allocations to hedge funds. Coming in third was U.S. stocks (at 35 percent), followed by commodities (33 percent). Real-estate investments came in last at 30 percent.

One reason is value. Economists across the board predict a double dip for housing in 2011 and many wealthy buyers are willing to wait for better deals when prices fall another 5 to 10 percent. Distress sales, the primary factor pushing down prices, once were rare in high value neighborhoods. Now they are a mini-industry and many luxury foreclosures in markets like Florida and Las Vegas are still in the shadow inventory and won’t sold for months or even years.

“The shadow inventory of luxury real estate is significant and it is significant because many individuals who own these luxury homes have been in denial about how much prices have fallen, especially in second home markets,” George Graham, CEO of Concierge Auctions, a preferred auction provider to Sotheby’s International Realty recently told AOL News.

“We feel that the correction of luxury property is taking longer,” Graham said, “and will continue to take longer than regular homes because the luxury market started its price correction later.”

Another factor is financing. Jumbo mortgages, which by definition exceed the $417,000 to $719,750 loan limits for Fannie Mae and Freddie Mac, are financed privately, and thus cost more. Jumbo loan borrowers currently pay a premium of about 60 basis points more than a conforming 30-year fixed mortgage-the smallest spread since mid-2007. In 2008, the spread reached 190 basis points.

Keith Gumbinger, vice president of HSH.com, recently told the New York Times that “like conforming loans, jumbo prices have recently visited (and exited) record-low territory, and absent a new fiscal catastrophe, probably won’t revisit them anytime soon.” He expects rates for mortgages of all kinds, including jumbos, will most likely be higher in 2011 due to “an improving economy, coupled with some concerns about future inflation (not to mention the still-palpable risks of investing in residential mortgages).”

However, not all is gloomy at the upper price brackets. Potential luxury home buyers dodged a big bullet when Washington agreed to extend the tax cut last month and advocates the ILHM’s Laurie Moore-Moore see a promising year ahead.

“The affluent are revaluating where to invest. Many are putting their money into residential real estate. My best guess is that the luxury housing market will lead the housing recovery. Markets will have to work through existing inventory including luxury short sales and foreclosures, so the rate of recovery will vary across metro areas, but look for the number of high end home sales to rise slightly in 2011, even though prices will remain generally depressed. This assumes that we don’t have another economic meltdown. Real recovery may be a couple of years ahead,” she said.