Analysis of 25 Luxury Home neighborhoods in Denver proves that it’s a good time to Move Up!

If you’ve been looking to sell your home and “trade up” to a new luxury home, your timing is good.  We recently analyzed 25 luxury neighborhoods in Denver (the top 5% of Denver Market).  The data reveals several indicators that the luxury market is well into a turnaround.  There is a lot of seasonality in this segment, as most homeowners purchase in spring and summer.  Consequently, the strong buyer demand for those months drives up the prices.   If you are looking to trade up, the best scenario is to buy in the winter when prices are down and sellers are more motivated.

Increased Sales Prices:
Over the last three years we’ve seen prices increasing in the luxury market, especially in the last year.   The average price in these areas was $755K at the beginning of 2013.  By the 2nd quarter the price increased to $775K and by the 3rd quarter we saw an average price of $815K.  We’re still off the 2007 peak average sales price of around $900K, so we expect a steady increase in prices for the next several years.

Reduced Days on Market:
Historically, declines in days on market (DOM) have been a leading indicator of price increases.  This is what you would expect as inventory of unsold homes declines.  Throughout 2013 we’ve seen DOM decrease each quarter from 110 to the 3rd quarter average of 60.  This is the best DOM performance since 2006!.  If you tried to sell a high end home in 2009 you may recall that the average DOM back then was about 6 months.  We’ve come a long way since then!

Seller’s Taking Less Discounts:
We often refer to the difference between the asking price (or list price) and the sold price as the “discount.”  Discounts on high end properties usually run a little higher than the market average.  What we’ve seen over the last three years in the luxury market is steadily falling discounts.  At the beginning of 2012 the average discount was -4.1%.  In 3rd quarter 2013 we saw an average discount of only -2.5%.  The smaller discounts together with declines in DOM indicate that prices will be increasing in this market.

Homes Sold:
We’ve seen strong gains in homes sold in the luxury segment.  There were 502 sales in 3Q2013 vs 449 in 3Q2012.  There is a lot of seasonality in this segment with 2nd quarter and 3rd quarter historically the highest in sales volume with 1st quarter the lowes.

Showing Traffic:
We track showing traffic (average number of showings per listing) each month to give us an idea of sales in the short term.  When showings increase we see an increase in sales the following quarter.  The showing traffic in 3rd quarter 2013 suggests that there is still a strong buyer demand.  October 2013 had 11.6 showings per listing — very strong traffic (vs. 10.9 in 2Q 2012).  For the luxury home market we have seen showing traffic climb from 5.2 per listing in 2010 to 7.1 in 2013.  The strong buyer demand bodes well for an extremely active spring and summer for this market segment.