According to Peter Niederman, who is the CEO of Kentwod Real Estate in Denver, it appears as if million dollar homes are faring quite well in the Denver Market.
“While our overall showing 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,” said Niederman in a recent Inside Real Estate News article.
This observation is quite important to note, as this data gives a clearer idea of where the market is headed rather than focusing on where the market has been, as is the case with the Case-Shiller report that was recently released.
“I like the Case-Shiller report and I am happy that they compile it, but it looks backwards, and I’m interested in looking forward,” continued Niederman. “Traffic through homes is a leading indicator and one we are following closely.”
To that end, Carol Ihli, who is the co-managing broker at Kentwood, took a look at the showings that took place during the month of June. She found that there were 422 showings of houses priced at the $1 million or higher mark, which is far more than the 390 showings that took place in June of last year. Interestingly, she also found that 38% of these showings were in Cherry Hills Village, which is where some of the area’s most expensive homes are located. In keeping with these findings, previous reports also indicated that more six-figure homes were sold in June of this year than during the same time period in 2009.
So, just why are luxury homes seeing so much action? While there is no definite answer to this question, it is likely that many buyers are seeking out the bargains that the struggling economy has provided. After all, sellers are far more realistic today than they were during the boom days of the past.
“I think sellers are much more likely to be realistic of what they can sell their homes for in today’s market,” said Niederman. “ I think last year, they were holding on to unrealistic prices, while now they are willing to meet the market.”
Another reason for the growing interest may be the fact that there is now more money available for so-called jumbo loans, which are also available at much lower rates than last year. In fact, qualified buyers can now snatch up these loans with a 5 percent rate as opposed to the 6.125 percent rate they were facing last year. When applied to a million dollar mortgage, this rate difference translates to a savings of about $720 per month. Assuming the buyer hangs onto the home for the typical seven years, that is a savings of over $60,000 during that time frame.
“That provides a real incentive for someone to buy,” said Niederman. “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.”
Very nice to see some good news!