‘Smart Money’ Moving Back into Luxury Market

The Colorado housing market continued to rebound in 2010 from its recessionary lows, although strong economic headwinds and the end of the federal homebuyer tax credit combined to slow the pace of recovery in the latter months of the year.

Both home sales and the median sale price of all housing – single family and condominiums – rose steadily throughout the first half of the year as buyers took advantage of bargain home prices.  As summer turned to fall, sales began to ease but the median sale price continued to climb in most parts of the Denver Metro region.

According to Metrolist*, home prices in the six county Denver Metro area **rallied from about $202,000 as of October 31, 2009 versus $212,000 as of October 31, 2010, resulting in a 4.9% increase in home prices for the region.  Sold listings year over year showed a reasonable decline with 2009 figures reporting 3,715 listings sold versus a total 2,658 listings sold as of October 31, 2010, resulting in a 39% decrease in sold listings.  The dramatic decline in sold listings has much to do with the mid-year expiration of the federal first time home buyer tax credit as well as a stabilization of home prices.

Year over year (October 31, 2009 vs. October 31, 2010) the average days on market went from 49 to 54, respectively, resulting in a 10% increase.

An encouraging sign for the local housing market is that the upper end of the market has steadily been gaining momentum this year, though there has been an ease in recent weeks. Luxury homebuyers, including a number of relocating buyers, are becoming much more active and are occasionally buying the homes with all-cash offers.  One point of distinction for Coldwell Banker Residential Brokerage, too, is that we were once again recognized as the luxury home leader.  According to Metrolist, Coldwell Banker Residential Brokerage is the leading real estate broker*** in home sales $500,000 and above, accounting for 11.2% of all home sales in this arena.  The nearest competitor earned just 7.8% or a commanding 43.5% difference.

What’s causing the high-end to rally? Local agents say that there has been incredible pent-up demand among the moneyed class looking to buy. They’ve been out there scouting the market for quite some time but holding off until the time was right. Now that prices on luxury homes have come down sharply to levels unseen for more than a decade, they’re making the move. There is greater confidence among high-end buyers who believe that the market has hit bottom and prices will only rise from here.

Luxury buyers can hardly be blamed for thinking the market is offering more relative bargains than the Nordstrom’s half-yearly sale.  The luxury sector of local markets in Colorado have stabilized and rebounded off their recessionary lows.  Coldwell Banker Residential Brokerage’s latest luxury housing reports show:

  • A total of 36 homes sold for more than $1 million in the Denver Metro area in September, down from 46 a year ago and 71 last month.
  • However, the median sale price did climb more than 14% from August to reach $1,422,500 in September.
  • The median price was off 2.9% from a year ago.
  • The most expensive sale in the Denver Metro area in September was a six-bedroom, seven-bath 10,473 square foot home in Cherry Hills Village that sold for $7 million.
  • Denver boasted the most million-dollar sales with 11, followed by Boulder with 5, Greenwood Village with four and Cherry Hills village with three.

In the past, luxury homebuyers – the so-called smart money – are often the first to declare a market bottom and jump back in because they have the cash and the means to do so once they are convinced the time is right. These buyers are astute observers of real estate trends and financial markets, and are often the first to see turnarounds in the macro economy.  Their confidence in the market often leads overall consumer confidence.

It will be interesting to see if the rest of the market follows suit again this time.  While the economy here in the Denver Metro area and across the country certainly has been sluggish and unemployment levels remain stubbornly high, it is encouraging to see solid improvement in the upper end of the real estate market. Only time will tell if it catches on to the rest of the market.

Now, let’s take a look at local real estate:

Boulder: Buyer showings and listing activity has increased in the Boulder office and is a reflection of the current marketplace.  The closings are up due mainly to the end of the month time frame that this period resides in, however, active taking backups and pendings while lower than the previous two week period are actually at a high level for this time in the month of November.  The office and the local market appear to be lining up for a strong November closing and listing month when compared to previous Novembers.

Colorado Springs: Showings have shown a steady decline over the past few weeks.  Listings have also slowed down about 20% over the past two weeks, with under contracts holding steady probably as a result of the continued low interest rates.  With rates dropping back to historic lows (4%) it is a good time to check with your Coldwell Banker Realtor about buying or refinancing your current loan.

Denver Central: Activity is steady in all categories compared to the last four weeks. Clients are inquiring about lease options.  There have been some desperate sellers as well as some shaky buyers.

Devonshire: The warm weather has helped to bring out buyers again.  It’s been a slow few weeks, but now seems to be an activity time again.  The elections are over and that, together with the low interest rates, has created a burst of activity in showings & at open houses.  Most open houses last weekend had much better attendance than in the last few weeks.  Buyers still seem to be waiting for that “perfect deal” while sellers are not willing to move too much off of their list price.  Sellers right now are frustrated because even if their homes seem to be priced right, some of them are not being shown.  It’s a challenging market to say the least, but signs are out there that things will be steady in 2011.

Evergreen: Listing inventory has begun to decline as many unsuccessful sellers are withdrawing their homes from the market during the holidays.  Many will go back on the market in the spring of 2011 in hopes of having better success with improving market conditions.  Showoing activity is declining due to seasonal variations although good weather in the fall has kept many buyers out looking.  Several listings have gone under contract in the first part of November including two homes in the $900,000 price range.  Consistant with prior years, the number of showings typically decreases in the 4th quarter although the quality of showings improves as buyers still in the market are serious and motivated.

Larimer County: Oh the weather outside is frightful……..Well, Winter has arrived with the first accumulation of snow & with it, a somewhat chilly activity outlook.  That being said, from what’s been seen at the national level, the FED is apparently going to continue with plans for another infusion of cash to the system whereby interest rates will remain at unbelievably low levels. The increased buying power for folks looking to purchase has NEVER been better.  Prices in the mid-range seem to have stabilized & aren’t likely to drop substantially & are proving to be great values & popular sale items.  The high-end market has reached a level where mostly cash offers seem more common as the jumbo interest rates have come down substantially.  With prices of some million-dollar homes at more than 50% of what they were valued just a couple of years ago, there has been more robust activity in that arena than we’ve seen in quite a while.  Showings have dropped from the Summer highs – but remain steady as we creep toward Thanksgiving & have put the mid-term elections behind us.  For those still sitting on the fence – now is the time to take advantage; including Sellers looking to trade up.

Longmont: Buyers for upper end homes ($550,000+) are in the market to purchase.  Homes that are listed at a good value are experiencing multiple offers which means some Buyers must continue the process of looking.  Most Buyers are looking for great deals and are cautiously optimistic about this market.  Now is the time to find that move-up home.  Our inventory is holding steady.  Refinancing is very attractive right now.  Time to call your Realtor to ask about refinancing. You will need to know an idea of the current value of your property, and finding out about the feasibility of any remodel or looking at buying that dream home.

Parker: After a very strong September the activity has slowed down in October.  In Parker, sales decreased by 15% compared to October of last year and the inventory increased at the same rate from 689 to 810 homes. November however, looks strong again and we should exceed the number of sales from last month by a wide margin.  Our short sale and REO specialists report that it still requires additional time to close.

Southeast Metro: The market is buzzing with ready, willing & able buyers and the low, low interest rates make it a perfect time to buy.  The SE Metro office scheduled over 500 showings for our listings last week and we have over 90 properties scheduled to close in November.  This month our office successfully closed a Penthouse Condominium at a sales price of $1.4 million.  Houses priced in the $300,000 to $500,000 price range are seeing steady traffic & successful closings.  Properties priced below $200,000 are slow to move.  The luxury market is also experiencing steady traffic but longer days on the market.  It has never been more important for homes to be in excellent condition and priced at the current market value.

Southwest Metro: Showings have increased over the last three weeks.  We’ve had good results with our open houses as well as floor calls.  We’re also seeing an increase in our listing and buyers are starting to not only look but are becoming serious buyers.  The activity on our listings especially in the $350,000 to $500,000 price range has been very good.  There is a sense that sellers and buyers are ready to move forward and list their homes, get them sold and find something new.  Interest rates are great and at an all time low.  Buyers are finally coming to the realization that thus us the time to purchase.  There also seems to be an increase in the number of investors wanting to start buying homes.  Some are for fix & flip and some to use as rental properties.  This increased activity with sellers, buyers and investors is a very positive movement in the right direction.

Denver West: Activity has picked up.  Attendance at open houses is up substantially.  The $250,000 price range & below, open houses are flooded.  Buyers are seemingly getting off the fence, although some trepidation still exists at the higher price point.  On the other hand, we’ve placed several higher priced homes on the market and the activity has increased in the million dollar market.

Conifer: We’ve had two new listings for the month to date in November although inventory is declining as unsuccessful sellers are withdrawing their homes for the holidays.  Showing activity has held up well through October into early November primarily due to good weather although the quantity of showings is expected to decrease as we move into the holiday season.

Loveland: Beautiful fall weather has kept the Buyers looking.  Showings are stabilizing at the current level.  Good news, showings in the $400,000+ price range have increased.  Lenders are extremely busy with refinancing business, appraisers are busy with the same business.  Short sales continue to be a large part of the business in Loveland.  Listings seem to be holding steady….Sellers are pricing properties more competitively.

*Based on information from Metrolist and Information & Real Estate Services, LLC for the period LTM October 31, 2009 through October 31, 2010.  Specific comparison dates are October 31, 2009 versus October 31, 2010.  Data represents homes priced $0 to $99,999,999.  Due to MLS reporting methods and allowable reporting policy, this data is only informational and may not be completely accurate.  Therefore, Coldwell Banker Residential Brokerage does not guarantee the data accuracy.  Data maintained by the MLSs may not reflect all real estate activity in the market.  Owned and Operated by NRT LLC.

**Six county Denver Metro area includes: Adams, Arapahoe, Boulder, Denver, Douglas and Jefferson.

***Based on information from Metrolist and Information & Real Estate Services, LLC for the period 1/1/10 through 10/31/10.  Data represents homes priced $500,000 to $99,999,999.  Due to MLS reporting methods and allowable reporting policy, this data is only informational and may not be completely accurate.  Therefore, Coldwell Banker Residential Brokerage does not guarantee the data accuracy.  Data maintained by the MLSs may not reflect all real estate activity in the market.  Owned and operated by NRT LLC.