This year’s headlines pretty well summarize the state of the national luxury home market:
“Market for new million-dollar homes drying up” — Las Vegas Sun, April 2009
“Higher-end home sales are slipping” — San Diego Union-Tribune, Feb 2009
“California million-dollar home sales hit 5-year low” — Sacramento Business Journal, Feb. 2009
“Expensive homes miss the recovery,” CNN Money, August 7, 2009
But as recently as July there were also these pronouncements:
Multi-Million Dollar Diamond Head Home Sales Picking Up, www.hawaiilife.com, July 2009
“Denver Metro Area Luxury Home Sales Rise Sharply, Coldwell Banker Residential Brokerage Reports, http://www.cbagentinfo.com/
So where does the Pikes Peak region stand? Are the upscale properties that adorn local hillsides, preserves, reserves, golf courses, mesas and prairies selling — or not?
In general, response from the Colorado Springs real estate community is that any home priced from $600,000 or $700,000 and up is selling, but not without some significant price discounting, hair-pulling and sheer luck.
Real estate data tracker Trulia.com said in its August quarterly report that price reductions for luxury homes (especially those listed for $2 million or more) “tended to take a bigger hit, with average price reductions of 14 percent, rather than the 10 percent seen in the overall the Pikes Peak region market.
So far this year, sales of only 17 homes priced $1 million or more have closed.
During a more “typical” year, that number would have been closer to 35, said new Prudential Real Estate franchise owner and long-time luxury home broker Becky Gloriod, adding that she expected to see only 35 sales for all of 2009.
“We’ve changed our strategies,” she said, citing ongoing difficulties encountered by million-dollar buyers in qualifying for jumbo loans (in excess of $417,000), sellers or buyers facing volatile home appraisal valuations and a smaller pool of qualified buyers.
“The high-end market is extremely slow; you have to deal with new realities,” she said. “In the past (as Gloriod & Associates), perception was that we focused strictly on million dollar-plus homes. Our new affiliation will open us to other markets, and it won’t hurt us on the high end. Don’t get me wrong — we joined the Prudential network not just because of (challenges) with the high end. We’ll also have access to national tools and networking — we’ll be able to diversify.”
According to Pikes Peak Association of Realtors sales statistics, the Gloriod Team — like many other brokers who focus on moneyed buyers and sellers — has good reason to rethink its business model.
Re/Max Properties’ broker/manager Ken Richardson said that the Pikes Peak region has plenty of inventory in the $1 million-and-up category, but he sees some hope as desirable homes in coveted neighborhoods become more affordable.
“If they’ve already sold their existing home, there are lots to choose from,” he said, adding that properly staged and priced properties continue to sell — often for less than sellers would like. “You’ve got one chance to make the best presentation — and if you don’t, the buyer will move along.”
His view is echoed by broker Kevin Patterson, who admits that while The Patterson Group still specializes in luxury home sales, “to eat, you sell in all ranges.”
He pointed to 2008 sales data which showed that more than 7,000 homes sold in the Pikes Peak region. Of those, 90 percent were priced less than $405,000.
“In today’s market, there are 890 homes listed at $500,000 or more,” he said. “Twenty percent of all homes that have sold this year were in that price range. We are seeing activity, but a return to 2006 or 2007 levels will take a while.”
Patterson said that today’s higher-priced home surplus is tied to events that happened long ago.
“Three or four years ago, buyers for high-end homes were employed by companies like Hewlett Packard, Intel or MCI/Verizon,” he said. “Tech companies typically offered higher paying jobs and employed a wider range of workers. Today, many have downsized or closed. The EDC (Economic Development Corp.) has brought in new jobs to replace the ones we lost, but not at the same compensation levels.”
Patterson also pointed to the challenges of one-to-two year’s worth of million dollar inventory listed on MLS.
“You have to spend time telling sellers what they don’t want to hear,” he said, “that they need to position their properties in the best possible light, to send a message, ‘This is a great deal, it won’t last’ to buyers who are currently like kids in a candy store.”
Patterson said the only local buyers who can afford million-dollar homes these days tend to be medical professionals or entrepreneurs.