Million-dollar home showings rise

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If you had the money, would you buy a million dollar home today? Vote at the bottom of this blog.

Steve Blank is listing this home in Park Hill for $1.6 million. The price has been slashed by $350,000.

Peter Niederman, in addition to being the CEO of Kentwood Real Estate, is a student of the housing market, who loves to pour over data to discern the tea leaves of the Denver housing market.

Recently, an in-house statistic caught his eye, when he was looking over the June data for Kentwood, including offices in Cherry Creek, the DTC, and Kentwood City Properties in downtown Denver. (Kentwood is a part-owner in Kentwood City Properties.)

“While our overall showings for all price points were down 10.1 percent in June, compared with June 2009, our million dollar-plus showings were up 8.2 percent,” Niederman said.

That is the metric that is extremely important. Indeed, in some ways he thinks that takes the temperature of the the market better than the Case-Shiller report released today, because that tracks where the housing market has been, but showings show where the market is headed, Niederman said. (To read about today’s report, please visit Denver No. 8 on Case-Shiller.)

“I like the Case Shilller report and I am happy that they compile it, but it looks backwards, and I’m interested in looking forward,” Niederman said. “Traffic through homes is a leading indicator and one we are following closely.”

Carol Ihli, co-managing broker at Kentwood, pulled data to show that they had 422 showings of homes priced at least $1 million in June, compared with 390 in June 2009. Kentwood also had 38 percent of the listings in Cherry Hills Village, home to some of the most expensive homes in the metro area in June, according to their internal data. Earlier reports also showed that the sale of 7-figure homes in June also out-paced the closings of luxury homes in June 2009.

Buyers smell bargains for 7-figure homes

Of course, the reason that interest is picking up in those lofty prices is not because well-heeled buyers can’t snap up expensive homes fast enough at any price in tony neighborhoods such as Cherry Hills, Country Club, Hilltop and Castle Pines Village, as they did during the boom days from about 2004 to early 2007.

Quite the contrary.

“I think sellers are much more likely to be realistic of what they can sell their homes for in today’s market,” Niederman said. “I think last year, they were holding on to unrealistic prices, while now they are willing to meet the market.” (For a look at what the most expensive home sold last year is now selling for, read Former Janus manager faces million dollar loss on his home.)

Rates at record lows

In addition, there is far more money available for so-called jumbo loans – that is, mortgages above $417,000 – and at much lower rates. A Wells Fargo banker last week addressed Kentwood brokers and said that jumbo rates now are available at 5 percent for qualified buyers, compared with 6.125 percent a year earlier.

On a million-dollar mortgage, that translates to a savings in principal and interest of about $720 a month. If a person owned the homes for seven years, which in the past was considered the typical holding period for a home, that saves a buyer more than $60,000 a year.

“That provides a real incentive for someone to buy,” Niederman said. “And that is $60,000 that is tax free. If you were thinking of buying a home in the next year or two, and you can afford it, it probably makes sense to buy now to take advantage of depressed home prices and low rates.”

Fuller Sotheby’s International Realty, which like Kentwood, sells a lot of expensive homes, is seeing a similar trend.

In June, Fuller had 469 showings of homes priced at $1 million or above, 14.1 percent more than the 411 in June 2009, said Steve Blank, a veteran broker at the company.

High-end homes bottoming

But the high-end market is not on fire. “It is definitely better than it was,” Blank said. “I think bottoming out is the way you would describe it.”

And Blank has not experienced prospective buyers knocking down the door of a $1.6 million home he is listing in Park Hill, even though the price has been slashed 18 percent from $1.95 million a year ago.

“It’s really a cool, Georgian-style home almost 100 years old on Montview Boulevard,” Blank said. “But I’m only getting a couple showing a month.”

The problem is that buyers are having problems unloading their current homes, to pave the way to move into an even bigger home.

One prospective buyer first must sell a home, also in Park Hill, for about $1.2 million, and another potential buyer is looking to sell a home for $900,00, but likely will get $750,000 to $800,000 for it, he said.

“One of the problems at the upper-end is that people are not as likely to buy, before they sell,” Blank said.

Quality buyers bargain-hunting

Kelli Lanphere, a broker with RE/MAX of Cherry Creek, who is listing a number of homes above $1.5 million, said she is not seeing an increase in quantity of prospective buyers, but the quality of the buyers has gone up.

“It’s kind of interesting,” Lanphere said. “It’s not as we are seeing an increase in showings, so to speak, but the people looking are truly interested in buying. I do believe they think that homes in the $1 million and up range are priced very attractively. So we’re not seeing a ton of showings, but the ones who are looking are willing and able to perform.”

And Lanphere is walking the walk.

“I bought a home in that price range in Hilltop,” she said. “It was a spec home by a developer, and it was financed using commercial paper. The investors in the commercial paper were very willing to work with buyers.”

She said that infill development of spec mansions in places such as Hilltop have come to a halt, which means there won’t be more supply coming on the market to compete with existing homes.

“Land values used to drive up the price of entry level homes in places like Hilltop,” she said. “Builders used to pay outrageous prices for small homes to get the property. No more. Builders can’t get financing and a lot of them who did build homes at the end of the last cycle, are out of business.”

That is probably the one positive trend for high-end housing, said Greg Geller, principal of Vision Acquisitions, who this week made headlines for buying the Washington Park home of Democratic Senate candidate Andrew Romanoff.

Sea change in buying sentiments

“I can buy homes in any price range, but I seldom buy anything above $400,000, because there just isn’t the market for those homes,” Geller said.”I’m concerned that we are in a new era where people just are not as interested in buying expensive real estate, as they once were.”

Jason Miller, of Milan Realty, said he thinks the high-end market is in worse shape than may realize, and is not close to recovering.

Shadow inventory clouds recovery

“I believe going forward, the high end market will have fewer sales and additional price reductions,” Miller said. “There is too much inventory for prices to stabilize.”

He also said that the many builders, unable to sell their castles, are renting them, instead. This has created a “shadow market” that is not being counted, but will soon hit the market, further depressing prices.

He, like Blank of Fuller, said that people who buy expensive homes, are having trouble selling their homes.

Miller said that some areas, such as Ravenna and Colorado Country Club, “are looking at 60 percent haircuts from their peak. When sellers do come down in price on the higher end, it will compress prices down the food chain. When a $1.3 million home sells for $1 million, the old $1 million homes needs to drop to $800,000 to compensate.”

All markets cyclical

But Niederman is not so skeptical.

He notes that last year, many people had written off the lowest end of the market, thinking that appreciation was years away.

“Now, you can’t buy homes at the low end for the same price today you could have even at the beginning of this year,” Niederman said.

Granted, the number of buyers a the high-end even when the economy is strong, is about as thin as the air at the top of Pike’s Peak.

“All of real estate is cyclical, and we’re in part of the cycle where sellers need to cut their prices before they can sell,” Niederman said. “But if they do, their are buyers out thee and there are unbelievably low mortgage rates available to them. It is really the buyers, not the sellers, who set the market.”

For other blogs on this topic, please visit: Million dollar home market moving, Million dollar homes show life

If you had the money, would you buy a home priced at $1 million or more today?

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John Rebchook

John Rebchook has more than 30 years of experience in writing and communications. As the Real Estate Editor for the Rocky Mountain News, he wrote about residential and commercial real estate for 26 years. He has won numerous awards for business stories and columns that he wrote, both as an individual and part of teams. In addition to real estate, he also covered economic development, banking and financing, the airlines, and cable TV for the Rocky. In addition, he was one of the original freelance writers for GlobeSt.com, covering commercial real estate for the Internet publication.

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