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Luxury home sales soar in Denver area

Luxury home sales in the Denver area more than doubled in October compared with October 2011, according to a report released today by Kentwood Real Estate.

The report shows that 50 homes in the seven-county region priced at $1 million or more traded hands last month, 117.4 percent more than the 23 in October 2011.

The closed sales volume of homes soared by 124.2 percent to $73.5 million from $32.8 million, according to the report, which used Metrolist data to track sales in the counties of Adams, Arapahoe, Broomfield, Denver, Douglas and Jefferson.

“The report reflects what I am seeing the market,” said John Fitzpatrick, a Kentwood broker, who has been selling real estate in the Denver area since 1972.

“Luxury home sales are starting to move up the food chain,” Fitzpatrick said. “There is a kind of a feeding frenzy for homes up to $1.5 million. When you get beyond that, the air gets a little thinner.”

The Kentwood report shows that the average price of a luxury home that closed last month was $1.47 million, 3.1 percent higher than $1.42 million in October 2011.

“You kind of think that the guy who sells a home for $1.5 million and stays in this time zone, is going to buy a $3 million home to replace it, in some cases,” Fitzpatrick said. “That hasn’t happened yet, but that is the way the luxury home market will recover. People will move up.”

Homes also sold considerably faster in October than they had a year earlier.

It took an average of 106 days on market to sell a luxury home last month, a 55.6 percent drop from the 239 days a year earlier.

In the first eight months of the year, buyers paid $643.6 million for single-family, luxury homes, 29.9 percent more than the $495.6 million during the same period last year. The number of luxury sales, year-to-date, jumped by 27.4 percent to 419 from 329.

Sales in October also picked up from September, bucking the typical seasonal trend of declining on a month-to-month basis in the fall. The 50 luxury home sales last month represented a 22 percent increase from the 41 in September, while the dollar volume was up 0.9 percent on a month-over-month basis.

Fitzpatrick said a lot of the luxury home sales action in the suburbs has taken place in Cherry Hills Village, the equivalent of “beachfront property,” for the metro are.

“It’s going to take a little longer for that to roll over to Castle Pines, but it will get there,” Fitzpatrick said.

Consumer confidence among the well-heeled is “coming around” as well as a feeling that the bottom has been passed and from a purely economic standpoint they would have been better off buying in 2009 and 2010, are among the reasons the luxury market is showing so much activity, he said.

“I think there is a little bit of pent-up demand,” Fitzpatrick said.

In one interesting trend, he said that there currently are 19 homes under construction in Cherry Hills Village.

“They are all for users,” he said. “There is not a single spec home among them.”

They are building custom homes at a time when there are 561 single-family homes price at $1 million or above with 185, or one-third of them, under contract, according to Kentwood’s analysis.

Many of those are priced at well-below replacement price, which begs the question why someone build a home when they could surely cut a better deal with a resale luxury home?

“Some people are not using the practical side of their brains,” Fitzpatrick said. “Some people are saying: I want to and I can, so I’m going to. They want to make their own statement and maybe make their own mistake. We all know one or two people like those.”

Have a story idea or real estate tip? Contact John Rebchook at JRCHOOK@gmail.com. InsideRealEstateNews.com is sponsored by Universal Lending, Land Title Guarantee and 8z Real Estate. To read more articles by John Rebchook, subscribe to the Colorado Real Estate Journal.