Buyers snapped up $622.4 million in luxury homes in the Denver area during the first nine months of this year, 13.9 percent more than the $546.4 million in the first three quarters of 2009, shows a report released today by independent broker Gary Bauer.
Through September, 399 single-family homes sold for $1 million or more, 14.3 percent more than seven-figure homes commanded last year. Last month, the $7 million former home of former Broncos coach Mike Shanahan accounted for 11 percent of the total volume.
The sales volume of expensive homes is a good sign not only for that small segment of the market, but an indicator that those who can write big checks are confident in the direction of the economy, said Patrick Finney, a broker with 8z Real Estate, a sponsor of this site.
Smart money buying
“There are a lot of sophisticated buyers in that luxury market,” Finney said. “If they are buying, that means they are seeing the market upside, as opposed to a continued downside. I think this is going to trickle-down, if you will. Now, the first-time home buying market is the first-time home buying market. But this interest in the high-end is a very positive sign.”
Of course, one of the driving forces is that people selling high-end homes are willing to deal.
“I think a lot of people are seeing there are deals out there to be had,” he said.
However, he said it is significant that dollar volume and the increased sales are close to each other, at 13.4 percent and 14.3 percent, respectively. “If the numbers were up 3 percent or 4 percent, I would not think that is very significant,” Finney said. “But it is very significant to be above 10 percent. I think that compared to 2009, definitely we are off the trough and have bottomed out. This is really good news.”
Lifestyle driving force
On the other hand, he said that buyers in all price ranges are no longer expecting to make a killing. That is a sea change from a few years ago.
“Even three or four years ago, the main objective for a lot of buyers was to hold the home for less than five years – in a lot of cases only one or two years – and make a profit,” Finney said. “Now, I think people are really looking at long-term hold and are buying much more for truly lifestyle reasons. They are not as short-sighted, or myopic as they had been in the past. I think that is really positive news.”
Bauer noted that is still less action in the upper-end market than in most years.
Most sellers not taking huge haircuts
“The $1 million-market is coming back, but we are still not seeing the sales level we had traditionally seen,” said Bauer, who used data from Metrolist for his report. He also noted that homes in this price range will always be a small percentage of the market.
And he said while some people are finding huge deals – of 50 percent or more from the original asking price – he said the statistics don’t seem to support that is the norm. “I think it is more of a case of both sellers and buyers are being more realistic about the prices.”
Not that sellers aren’t cutting prices. Bauer’s data shows that the in September, the average sales price of a home that sold was 23.45 percent lower than the original asking price. However, homes in that price range, on average, sold for almost 90 percent of their last listing price.
However, there did appear to be a bigger than usual seasonal drop in million-plus homes in September from August.
The sales volume dropped 26.6 percent from $86.09 million in September from August, compared to 2009, when the sales volume dropped by 18.9 percent.
Developers not putting all homes in MLS
Dee Chirafisi, a co-owner of Kentwood City Properties, was surprised there was such a big month-to-month drop. Indeed, the sales volume may have been higher because some developers are not putting their high-end sales in the MLS, and thus aren’t being counted.
Overall, September wasn’t as strong as August, she said if you look at the entire year, the dollar volume increases reflects what she is seeing at her office.
“You have to get past this craziness,” Chirafisi said. “You can have one big month, and the next one falls off a bit. What is important is the longer-term trend.”
So far, October is looking strong for the high-end market, she said.
“We had $16 million homes under contract last week, which was our biggest single week for closings in four years,” Chirafisi said. “Now, of course, we still have to turn those under contracts into closings. Still, that is very encouraging. One home at 1350 Lawrence is under contract, and it has probably been for sale for two years.”
Chirafisi noted that mortgage rates, already at historic lows, dropped even more on Monday.
The low rates and sellers cutting their prices, have given prospective buyers a real incentive to actually close, she said. Chirafisi and other brokers have been noting that a larger percentage of their homes placed under contract are closing than they have historically.
“Sellers want to lock in these interest rates,” Chirafisi said. “They not only don’t want to lose the house, they don’t want to lose the interest rates. I think October is going to be a good month and I think we are going to see a strong finish to this year.”
