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Commentary: Toad Hall madness fades, but sadness ...

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The most notable downsizing of the American home has been in its price. The luxury end usually escapes the worst of housing downturns, but not this time. For those seeking a reprieve from teardown mania, this is not a bad development. I refer to the trend whereby bungalows, Cape Cods and other assorted gracious homes are flattened and replaced by monster mansions. Perhaps the forces of sanity can regroup.

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Prices on many super-deluxe properties have been slashed from their 2007 levels. In Walla Walla, Wash., a 15,000-square-foot spread, listed for $13 million, sold recently for only $3.5 million. In Jackson Hole, Wyo., the asking price on a log palazzo has been cut from $14.5 million to $9.9 million (and 99 cents?).

How about a 10,000-square-foot oceanfront pleasure palace in Vero Beach, Fla., with its own gym, barbershop and waterfall? Owners Richard and Amanda Peacock are also selling other treasures, including six sports cars, leopard-skin chairs and an elephant head.

"It's time to simplify," Richard told The Wall Street Journal.

The Peacocks did unload a scarlet Ferrari and the head. But they're staying in the house for now because they can't afford to let it go it for $5.5 million, which was the top bid at auction.

High-end property values have been historically shielded by their owners' cushion of wealth. Unfortunately for the fortunes, the Dow meltdown has badly hurt the deep pockets. Some are losing their mansions to the bank. In 2008, only 279 homes worth $3 million or more went into foreclosure. In the first three months of this year, 1,214 did.

This is part of what experts are calling the third wave of the real-estate crisis. The first wave was speculators fleeing when prices began to fall. The second was homeowners hit hard when their interest rates "reset" from their very low introductory rates. Many of these adjustable-rate mortgages were subprime.

The third wave has hit prime mortgages held by the cream of the borrowers. Many of these homeowners had suffered a job loss or collapse in business income.

Some may have simply woken up one day, looked around at their annexes, sunken baths and media rooms, and asked themselves, "Why are we doing this?" (The Peacocks say they want a cabin in the Blue Ridge Mountains.)

For we who mourn the homes that the giants replaced, the sadness lingers. The builders of bigness may be moving on, but they've left their pyramids behind. Charming rows of bungalows in Seattle and Denver still sit in the shadows of bulky villas shoehorned on small lots.

Even "properties of distinction" were made to disappear. In Rancho Mirage, Calif., a 5,000 square-foot masterpiece designed by architect Richard Neutra was demolished for something grander.

Bizarrely, the teardown craze hit neighborhoods whose value lay precisely in their small-scale charm. Along the Atlantic and Gulf coasts, weathered beach cottages were leveled for grandiose dachas on the dunes.

Chateaus were plopped down on intimate village streetscapes. Why do that in places beloved for their neighborly settings? Nothing's stopping people from erecting their Toad Halls out in the cow pastures.

It seems some folks are utterly unaware or indifferent to the prevailing culture. They want to live in a Cinderella's Castle that looks down on the villagers.

And historic designations don't always stop the craziness. In Aspen, Colo., huge back additions tower over the "preserved" fronts of tiny miners' shacks.

I don't know what this financial crisis will do for taste, but the talk of downsizing among the swells is cause for optimism. One can only hope that the next Gilded Age obsesses on diamonds, rather than on real estate.

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