Like the rest of the market we study, luxury home prices appear to have stabilized and actually improved somewhat in the second quarter of this year. In fact, sales these homes priced above $460,000 increased 13%. Some Realtors attribute this increase to Denver relocation buyers as well as “move-up” buyers.
Why does $460,000 define luxury home sales?
It’s the top 10% of all home sales in the metro Denver area. Of course, we could have picked the top 5% of home sales that are those above $600,000. Or, some might choose to define it as the top 1% of all home sales that were those above $1.125m in Denver suburbs like Cherry Hills, Colorado.
There have been many comments in the national press about how more and more luxury home sales are distressed. Short sales and foreclosures are rising nationally among “the rich”. That doesn’t seem to be the case in the Denver metro market.
The number of REO (bank owned foreclosures) sales peaked in the first quarter of 2009, and has declined since then. The number of short sales has been climbing steadily since their debut in third quarter of 2008. For the first time, there were more luxury home short sales than foreclosure sales in the second quarter 2010. If you look at the number of distress sales including both short sales and foreclosures relative to the total number of total sales, you see that the distress ratio is pretty consistently between 10 – 15% of the market.
Prices for luxury homes fell from $250 per square foot (2008) to $230 per square foot during most of 2009. However, they did recently increase by 3% in the second quarter 2010. The big question is “Does that signal a bottom or just the effects of tax credits that have expired. We will have to wait at least one more quarter to answer that.
While “regular” sales of luxury homes are around $239 per square foot, distressed sales sell at about a 20% discount. Bank foreclosure homes sold for $196 per square foot on the average and short sales sold for $201 per square foot.