What goes down must come up. And so it is with home sales in the luxury price range of $1 million and above for the Denver Metro area. The Denver luxury home market has been gaining momentum through 2010 as evidenced by recent sales figures and reports.
During July 2010, 56 Denver Metro homes in the seven-figure price range closed for a 9.8% increase from the 51 homes closed during July 2009. In addition, average days on market for a sold property declined 10.2% from 204 days to 184 days. Figures such as these are buoying future expectations the market has bottomed out, prices are firming and a gradual rebound has begun.
In addition to the July home sales figures, the year-to-date luxury home sales statistics also confirm an improving market. Through July, there were year-to-date 348 sales at $1,000,000 and above for the metro area. The same time period in 2009 had only 277 sales. This represents an impressive 24.2% increase for 2010. These figures are based on data supplied by the Denver Multiple Listing Service for all homes selling in the Denver Metro area at or above $1,000,000.
It is not just the closed transactions which are increasing. Real estate companies and agents working in the luxury home market across Denver are noting an increase in the quantity and quality of upper-tier showings. Today’s showing traffic is a leading indicator of tomorrow’s sales activity.
Two factors creating the increase in activity are record low interest rates and increasing availability of jumbo loans. Conventional loans, which are loans at or below $417,000, are fluctuating in the high 4% range. Jumbo loans, those loans above $417,000, are in the low 5% category. Both loans are at record lows which dramatically increase the affordability of a property. For example, on a jumbo loan of $700,000 at 5.25%, the principle and interest payment is $3,865.42. At the recent rate of 7.25%, that same loan had a monthly payment of $4,775.23 or $909.81 higher. With an average homeowner occupancy of seven years in a home before moving again, today’s rates would save a homeowner $76,423.87.
In addition to the decline in interest rates, prices have also followed the same downward trend. While depreciation has varied significantly between tony subdivisions and different price bands, the decline has been present for the past three years and can be calculated on an individual subdivision basis. However, a July 27, 2010 report by the closely watched Standard & Poor’s/Case-Shiller Home Price Indexes showed a 3.6% increase in Denver home prices from one year ago and a 28.2% increase from January 2000 to June 30, 2010 for all homes.
As a return on investment, Denver real estate has far out performed other investment options between January 1, 2000 and January 1, 2010. Another Case-Shiller report showed the average home in Denver for the decade increased 27.5% in value. At the same time, the Dow Jones Industrial Average declined 9.9%, Standard & Poor’s lost 19.1% while the NASDAQ dropped a staggering 46.4%.
On the Colorado foreclosure front, foreclosure filings continued their downward trend for the third consecutive quarter. The 10,233 new foreclosure filings during the second quarter 2010 represent a 15.7% decline from 12,135 filings in the second quarter 2009. Also, it is an 8.1% drop from the 11,136 filings in the first quarter 2010. The 2010 second quarter tally represents a decline of 18% from the peak of filings which was hit in the third quarter 2009 with 12,468 filings. Finally, the second quarter 2010 foreclosure filings are the lowest level in the past five quarters.
As the luxury home market continues to rebound and gain strength, the best values are beginning to disappear. Home buyers could be missing the opportunity of a lifetime with high inventory, low interest rates and prices at levels not seen since March 2004. Home prices and interest rates will likely begin to rise as the economy recovers. Ten percent appreciation on a $400,000 home is $40,000. The same appreciation on a $1,000,000 property is $100,000. The buyer looking to move up should consider taking action before rising prices and interest rates exclude them from their dream home which is available today.
Dotson Skaggs, of The Kentwood Company, lives and sells homes in the Pradera community in Douglas County. As a Top 10 Producer with the Denver Board of Realtors, Dotson has sold over 1,300 homes valued at $400,000+ in his 26 years of business. Contact Dotson on the form below.