Is the luxury Denver real estate market slowing down? That’s the story told by our local Realtor Association. January sales of homes priced over $1.5 million in the Denver Metro area dropped by almost half from the previous month. But let’s not jump to conclusions. One month of sales does not make a trend. There are more factors involved here.
December sales in the luxury market were the highest ever recorded in Denver. The entire year of 2015 was strong in all price ranges including the luxury market. And there are other factors that could influence the low January number.
Denver luxury real estate market sales were the best ever in the previous month of December with 55 sales in the Denver metro area. Prior to December the high sales record was in May of last year with 48 sales above $1.5m. January sales retreated 40% from the number of December closings. The fact is that sales of homes priced above $1.5 million in the whole Denver market dropped to only 31 the following month of January.
Now, that still a healthy number of monthly sales for high-end homes. But it is slightly below the monthly average for all of last year. Compared to Denver luxury sales of only 11 in January 2015, sales still looked fabulous last month.
Seasonally Slow Luxury Home Sales
January is usually one of the slowest months for home sales to close. That’s because people have been shopping for homes in the November-December holiday time frame in order to be able to close in January. That’s the slowest time of the year for showings. So January is one of our slowest closing months usually. Not too much can be inferred from the lower number of January luxury sales.
There’s no question that the Denver real estate market overall was a very good in 2015. It was a sellers market in almost every price category throughout the Denver market. And there’s no reason to suspect that 2016 will be any different based on one slow month in the high end segment. However, luxury homes were slower to sell than the overall market and less likely to receive competitive offers last year. Let’s take a look at the various market segments in the Denver luxury real estate market.
Luxury Denver Real Estate Market
The general rule of thumb was that the closer the home was located to the the city center, the more likely it was to sell quickly and at a premium price. Homes in the Denver Country Club often sold without being listed in the MLS. Brokers I know there would list a property with the understanding it would not be put in the MLS. Marketing would be done by word of mouth between luxury home Realtors as we do in our weekly Kentwood sales meetings. The same was true for some homes in Cherry Creek, Belcaro, Hilltop and Crestmoor. And, it often worked.
Cherry Hills Village and Greenwood Village
Going out from City Center, Cherry Hills real estate had relatively good sales in December and all of last year also. Cherry Hills is the closest Denver suburb on the south side of town. Commutes to downtown are only 20-25 minutes non-rush-hour. It’s right next door Greenwood Village where the Denver Tech Center is located. This advantageous location plus the upscale ambiance makes it desirable.
This next chart shows both Cherry Hills and Greenwood Village real estate statistics together because some potential buyers look in both suburbs because they adjacent to each other and parts of Greenwood Village shares the Cherry Creek School system with Cherry Hills.
The luxury Denver real estate market just below $1.5 million still is very active. Last weekend, we sold a home in my Kentwood office in 2 days. It was priced at $1.4m and received multiple offers. It sold in 2 days at full price. So, let’s not conclude that prices are going to slow in that market segment anytime soon. After all, Spring usually sees the most home sales and escalating prices.
Douglas county begins about 15 miles south of Downtown Denver and is considered to have the further-out suburbs. Luxury real estate in Douglas county county includes homes in BackCountry, Highwoods in Highlands Ranch, Heritage Hills and Heritage Estates in Lone Tree, Castle Pines Village and The Timbers and Pradera. There luxury home sales are slow. But, they are always slower because they are further from the city center.
Unlike other areas of the Denver luxury real estate market , Castle Pines Village actually has a good selection of homes for sale. Buyers can choose good homes and not feel pressured that the home might sell out from under them overnight. I was showing homes there last weekend in the $2m range. The buyer found more possible homes there than in Cherry Hills Village.
Months Of Inventory Is The Key
Buyers should know how many months of inventory is currently on the market. That is how many months would it take for the market to absorb the current number of homes for sale at the current sales pace. It’s called the absorption rate and it shows just how strong prices are and how motivated Sellers are likely to be when negotiating price. A healthy market is 3 to 6 months of inventory. More than that is a “Buyers Market” and less than that is a “Sellers Market”. With 30 months of inventory, the luxury market is Castle Pines Village is clearly a Buyers Market.
To be fair, the same home that sells for $2m in Castle Pines Village, sells for almost $4m in Cherry Hills. Buyers who want the best home for the money are attracted to Castle Pines. They often realize that the trade off might be a longer commute to work and entertainment.
These last two graphs raise interesting questions. Is this the beginning of a trend for the luxury Denver real estate market? After all, inventories generally build in February anticipating the Spring Rush of buyers. Cherry Hills and Downtown Denver both have much lower months of inventory. But inventories are rising even closer to city center. If that trend continues, the luxury real estate market may not be as robust as it has been. Please use the form below to ask me any questions.