For the average homeowner, buying a million-dollar home may seem like a distant dream, or even a complete improbability. But here in Denver—where our real estate market continues to outperform other cities across the country—homes in this price range are not only selling, but competition for these properties is heating up.
According to the Denver Metro Association of Realtors’ (DMAR) latest market trend report, more homes over the $1 million mark sold in May than ever before. A total of 179 luxury properties (including both single-family homes and condos) closed in this timeframe, up 21 percent over April and 39 percent over May 2016. By the end of June, sales of homes in this range will likely surpass $1 billion, year-to-date.
“We have never had a month in at least as long as we’ve been tracking—10 years of history—where 179 properties sold over $1 million,” says Elaine Stucy, member of the DMAR market trends committee and associate broker with Liv Sotheby’s. “And it could continue to go up. Was this the high month of the year? Perhaps. We might have one more month that will beat that.”
What’s even more notable is that inventory for single-family homes in the luxury market (defined by DMAR as any properties priced above $1 million) decreased in May to 5.8 percent. That means that if you froze time and every home on the market was sold, it would take a little less than six months to sell all the homes at the rate they’re moving now. As you go down in price, the months of inventory gets lower: Homes from $750,000 to $999,999 have less than three months of inventory; between $500,000 and $749,999 have 1.7 months of inventory; between $400,000 and $499,999 have .9 months of inventory; and $300,000 to $399,999 have only .4 months of inventory.
The decrease in the luxury market is notable because it shows that more people are looking to buy in this once-elusive price range. And that, of course, translates to increased competition. “It used to be if you’re looking at homes over $1 million, as a buyer you’re not going to end up in multiple offers. You can go in and make a lower offer and end up 5 to 10 [percent] off asking. That’s dropping,” Stucy says. “Now we’re averaging 97 percent of list to sale.”
So what’s behind this record-breaking moment for the luxury market? Stucy offers a few ideas. First, as housing prices continue to appreciate, homes that wouldn’t typically be listed at over $1 million are being thrust into that category. Second, because inventory in the lower markets is so tight, more individuals and families are increasing their budgets to avoid the stiff competition at lower price ranges (while it lasts, at least). Third, while the Federal Reserve is set to raise interest rates again this week, mortgage rates are still at record lows. Buyers are taking advantage of the fact that they can get more house for their money, especially if they’re planning on staying in the home for the long-term.
And lastly, Stucy says the housing market continues to heat up because Colorado in general (and Denver in particular) is such a great place to live—but you already knew that. The closer to the city center, the hotter the market, even for the priciest properties. So if you’re looking for more house for your money, regardless of your price range, it might be time to look to the suburbs.