In April, Texas billionaire Kelcy Warren bought a 3,500-acre trophy property, the Boot Jack Ranch near Pagosa Springs, Colo. The retreat has about 77,000 square feet of living space, seven lakes and miles of pastures. The sale, worth $46.5 million, was the biggest U.S. residential transaction so far this year. What sweetened the deal was the discount: Warren, who made a fortune in the pipeline business, got the property for 53% of the original asking price — $88 million, which had already been reduced last year to $68 million.

The Boot Jack Ranch was an "exceptional purchase," says listing agent Bill Fandel, managing broker at Peaks Real Estate Sotheby's International Realty. Sellers are generally more flexible now and buyers looking to acquire signature properties have an incredible opportunity to negotiate in the second-home market, he says.

The price of properties in countryside, coastal and ski-resort locations, often used as second homes, fell by more than 12% in 2009, international property broker Knight Frank reported in March. Prices have stabilized, but the market remains favorable for buyers, who have started spending again as the economy experienced a shaky recovery in the first quarter.

"If the value is there and the seller can accommodate the buyer's interests, we'll see continued increases in activity across the top-tier market," Fandel says.

‘My business is exploding’
The trend in the luxury market reflects the overall improvement in vacation home sales in the U.S., which rose last year by 7.9%, according to data from the National Association of Realtors Across all price segments, three out of every 10 vacation-home buyers in 2009 paid cash, the NAR reported. In the $5 million-plus segment, most purchases are made in cash because credit has contracted, Fandel says.

As buyers start to purchase higher-priced properties, the median transaction price has been increasing. In this year's first quarter, Sotheby's International Realty reported an average year-over-year price increase of 25%.

"My business is exploding," says Joyce Rey, executive director of Coldwell Banker Previews International in Beverly Hills, Calif. Rey, who has some of the country's most expensive residential listings, such as the $125 million Fleur de Lys and the $75 million Hummingbird Nest Ranch, recently put $37 million in escrow for three properties in one week — a record in her career.

Rey says interest has been coming from American and foreign business executives, entertainment moguls and celebrities. Still, in this price range, there is a limited buyer pool, and properties can take years to sell, even in a strong economy.

Buyers are starting to come back and the confidence level is up, but they seem to be taking a more modest approach to lifestyle decisions, says Shari Chase, founder of Chase International, a leading agency in Lake Tahoe. Chase says trophy properties such as Tranquility — her $100 million listing — will still sell, but she says she expects wealthy buyers to own fewer luxury homes than they did during the boom.

‘It's still a buyer’s market’
How much did prices drop? Emerald Cay, a private island in the Bahamas, is now listed at $48.5 million, down from $75 million. The Albemarle House in Charlottesville, Va., owned by Patricia Kluge, former wife of media baron John Kluge, has been discounted to $48 million from $100 million. Those are exceptionally dramatic examples. Most reductions were smaller.

"There are a lot of good deals to be had," says Susan Breitenbach, senior vice president and associate broker for the Corcoran Group. "It's still a buyer’s market and that's what driving it. That's why people are buying now."

Good deals are not always obvious. Some sellers are ready to negotiate even if they do not reduce the listing price, especially with cash buyers who can complete transactions quickly, Fandel says. Others who are willing to hold onto their homes do not place them on multiple-listing services and only quietly market the property, says Paul Grover, a broker of waterfront properties in Cape Cod, Mass.

As confidence gradually returns, ready buyers will need to evaluate which market properties reflect good value. Fandel says many high-priced properties developed during the boom years lack the location, views and workmanship that help houses hold value. "If you have the fortitude to act in these environments, you are generally rewarded when the cycle turns around," Fandel says.

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