Gary Bauer
Highlights:
- January luxury home sales rise 18%.
- Total luxury sales volume for single-family homes hit $56.77 million.
- Low inventory poses a challenge.
Denver-area home buyers snapped up 39 luxury, single-family homes in January for $57.8 million, an 18 percent jump from the $47.3 million buyers paid for 33 homes costing at least $1 million in January 2012, according to a report released today by independent broker Gary Bauer.
“Bottom line: It was a great month,” Bauer said.
The report, based on Metrolist data, also shows there are 511 homes in that lofty price range for sale in the metro area, almost a 21 percent drop from the 644 available a year earlier. Bauer is the current chairman of Metrolist, but he issued his report as an individual broker and not as part of his leadership role in Metrolist, which is the largest Multiple Listing Service, or MLS, in Colorado.
Bauer analyzed sales in the 11-county area of Adams, Arapahoe, Boulder, Broomfield, Clear Creek, Denver, Douglas, Elbert, Gilpin, Jefferson and Park counties for his report.
An earlier report by Kentwood Real Estate, which does not include Boulder or some outlying counties, showed a similar trend.
Both reports showed that the most expensive home sold last month was a 7,042-square-foot home near the Denver Botanic Gardens with seven bedrooms and eight bathrooms. It sold for $4.1 million.
The average sold price for a home last month was $1.43 million and the median price was $1.25 million. The average price per square foot was $325.
Thirty of the luxury home sales were evenly divided between Boulder, Denver and Douglas counties, while seven were in Arapahoe and two were in Jefferson. Bauer’s report also showed that only two luxury condos sold last month, one in Denver and the other in Boulder, for a total of $2.24 million. Five luxury condos sold in January 2012.
The biggest issue facing the luxury market, is the same as for the overall market: the lack of inventory.
“The inventory has dropped dramatically, both for the overall market and the luxury market,” Bauer said. “The inventory for the whole market is down.”
Indeed, the overall market fell even more, showing a year-over-year drop of 32 percent in the available supply.
“The big concern is that while we still have buyers out there, their choice of homes is steadily declining,” Bauer said.” In the end, that is very positive for the seller, but not so much for the buyer. As long as demand stays strong, prices are going to continue to go up.”
Bauer said it is hard to predict how high prices might go, “but I would say it will be in the double digits,” on a year-over-year basis.
The number of luxury home sales did drop in January by 30 percent from the 56 closings in December, bucking a typical seasonal trend.
However, December was an unusually strong month for sales, as many consumers were in a rush to close on the sale of their homes before the end of 2012, fearing there might be changes in how capital gains were calculated in 2013.
Also, many buyers wanted to lock in historically low interest rates.
Indeed, mortgage rates, while still low, have risen to an average of about 3.5 percent for a 30-year, fixed-rate loan for a buyer with excellent credit, from about 3.25 percent in December, Bauer said.
A rule of thumb, he said, is every quarter of a percent rise in rates, cuts the buying power of a consumer by about $10,000, he said.
“So if you could qualify for a $100,000 loan at 3.25 percent, you would only qualify for a $90,000 loan at 3.5 percent,” Bauer said.
Rising interest rates may spur some prospective buyers to get off the fence, for fear they will go even higher, Bauer said.
Of course, people who can afford homes that cost at least seven figures, typically are less affected by rising interest rates than most consumers, he noted. Many well-heeled buyers will pay cash for a home and put a mortgage on it a later date.
Bauer said buyers of high-priced homes increasingly are feeling they are still getting a good deal, which is helping to fuel the demand.
Of course, with the dwindling inventory, it is increasingly difficult for even qualified, motivated buyers to find the home of their dreams.
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Jan will be the last month in YoY unit sales increases for $1m+ in 2013. Every month the rest of the year will be lower than the same month in 2012. Lack of inventory.
I did a search for $1,000,000+ SFRs on the MLS, found 896 active, 132 under contract, and 357 sold. It seems that to me that there is adequate inventory in that price range for y/y increases. What are you basing your prediction on?
that is 357 sold in the last six months
@JohnD-
My prediction is based on fewer destresed properties to choose from . At the margin, many of these homes sold due to the perception of a good deal. Many of the homes were selling at 40-50% lower than the peak. As the owners/banks that had to sell slow, fewer of theses deal are out there. I don’t see people risking 1m+ on a home, unless it’s a deal. Many saw friends loose $400-500k. Buyers perceptions have changed. Gary’s report is showing 511 homes. I’m sure when you pull up the entire MLS, many of the home(over 350) are out of the Denver metro area(boulder, niwot, breakinridge, summit county).
We shall see……..
Also, I’m not saying sales will fall off a cliff. Just that fewer will sell than last year.
@Gary
Ditch the tie. You look like an old man.
As a broker working in the $1M price range I somewhat agree with Jason. People are still scarred a bit and bring up value a heck of a lot more than they used too. Then again….people also see home values returning to where they were and if you didn’t have to sell then you’re in an ok position, and actually some are able to sell for more now due to inventory than when they purchased. I also see people wanting what they ‘want’ still.