High-end homes' price tags dropping
By Kristi Arellano, Denver Post Business Writer
The last time Chris Pham tried selling a sprawling custom home, it was snapped up within a month, and the grateful buyers covered his moving expenses.
Those were the days.
Pham and his wife, Tracey, have been trying to unload their 4,500- square-foot, five-bedroom home with granite countertops and a sprawling unfinished basement for more than a year. Pham shaved $20,000 from the original $849,000 asking price for the house in Aurora's Bel-Aire Estates, and expects he'll have to go even lower.
"Some people down the street sold for $150,000 less than it was listed for, so I guess we might have to lower it again," said Pham, a homebuilder who typically lives in his homes before selling.
Pham is mired in a slowing real estate market that has left high- end sellers slashing prices and buyers sifting through bargains like they were blue-light specials.
"It's terrible," Pham said. "The market's dead right now."
Low interest rates have helped bolster Colorado's real estate market in general, which has helped to take some of the sting out of the foundering economy. But prices for high-end homes are sliding, and researchers said that suggests a peak is near in the market for median-priced homes.
Mike Sklarz, chief valuation officer for Fidelity National Information Solutions, a real estate market analyst, recently compared sales of homes larger than 4,000 square feet - about double the size of the median American home - to the overall housing market in several Front Range communities and in Eagle and Pitkin counties.
It pays for buyer to be picky
Prices are inching up in most counties, but in some markets, big homes have shed significant portions of their value, Sklarz said.
In Denver, overall median home prices appreciated 3.5 percent in the third quarter, while bigger homes lost 34 percent of their value, according to Sklarz's research.
Luxury homes in Douglas County lost 21.8 percent of their value, compared with an overall gain of 5.6 percent. Large homes in Arapahoe County dropped by 19.9 percent, while the market as a whole appreciated 4.8 percent.
High-end home prices are holding steady in Boulder, Eagle, El Paso and Pitkin counties, the Fidelity National Information Solutions data showed.
Sklarz's data confirm what some metro Realtors said they've been seeing for a long time.
"There are fewer buyers than there are homes," said Howard Narlinger, a broker associate with Re/Max Masters in Greenwood Village. "Homes are sitting on the market longer, and buyers have the time to be picky."
Narlinger is listing a 6,620- square-foot, four-bedroom home in Centennial's Chenango subdivision for $859,000. When the house was listed in July, it hit the market at $875,000.
Chris and Stuart Allen have slashed $2 million off the asking price for their recently built seven-bedroom, 11,361-square-foot home in Genesee, which was listed for $6.9 million in 2001.
The Allens' Realtor, Janine Freeman, of Re/Max Professionals, said that, generally speaking, the market is tough.
"People are getting really good deals right now because the market is soft," she said. "Two people on my street got houses listed for $1.25 million for $950,000, which is bad for the seller but great for the buyer."
The sagging executive housing market is a drastic turnabout from years past, when the construction of big, posh homes was viewed as the salve to Denver's economic woes.
If it didn't have enough high-end homes that corporate executives would want to call home, then Denver could never be viewed as a place where companies would want to relocate, economic developers said.
"Colorado wasn't prepared for the kind of buyers who were coming in to work for Sun, McData and the other tech companies," said Scott Franklund, a broker associate with Coldwell Banker Colorado Landmark Realtors. "It drove the prices of homes over $700,000, up 18 to 20 percent in one or two years."
Bellwether for market?
Today, big houses are practically the norm. But once-eager buyers - especially victims of the tech fallout - are no longer feeling flush.
"There was a lot of euphoria in the '90s, when a lot of these houses got built," said Tom Clark, head of the Metro Denver Network, the economic development arm of the Denver Metro Chamber of Commerce.
Clark sees a reduction in high-end prices as an economic development boon for the city. Homeowners might suffer heavy financial losses, but cheaper homes would help the city appeal to the sticker-shocked executives who tell the chamber that they are deterred by Denver's high housing prices.
"I have sympathy for the people who bought at the high end of the market, but the lowering of the prices in the executive market is a good sign for recruitment of the future," Clark said.
Sklarz sees the suffering luxury market as a bellwether for the rest of the metro-area housing market.
"My experience has been that the upscale market is a leading sector; it starts going up before the rest of the market does, and it drops before the rest of the market does," he said.
But a 30 percent drop in high- end prices doesn't necessarily mean a 30 percent drop looms in all price ranges, he said.
"The ups and downs of the high- end market are more pronounced, but I think we are going to see the rest of the market peak," he said.
While Sklarz defines the high end as homes that are 4,000 square feet or larger, many local Realtors said the million-dollar mark divides the high end from the rest of the market.
Baby boomers' effect
Even using that standard, brokers still point to a slowdown in the market.
Scott Byer, of Metro Brokers Colorado Realty, said his office has seen a big drop in high-end showings. Byer said that only 11 people have viewed Pham's two-story Bel-Aire Estates home in the past year.
His office has experienced a 25 percent decline in showings, and that's translating to lower sales.
In the past 12 months, sales of metro-area homes priced at $1 million or more were down 22.7 percent from the year-earlier period. According to sales data from Metrolist, the metro area's multiple listing service, 286 homes sold for more than a million; 367 sold a year earlier.
In addition to the overly optimistic building combined with economic malaise, the luxury market is also feeling the effect of the first wave of baby boomers who are downsizing from their sprawling properties, said U.S. Bank regional economist Tucker Hart Adams.
Based on demographics alone, the demand from subsequent generations won't be as strong, Adams said.
But Nina Gruen, principal sociologist with Gruen, Gruen + Associates, a San Francisco-based development consulting firm, anticipates the market will bounce back based on demand from baby boomers who are accustomed to their big homes and don't want to downsize, and from their children, the echo boomers, who will enter the housing market expecting the same big, suburban homes they grew up in.
As a result, the current slowdown will cause temporary heartburn for sellers in a hurry, but it won't result in a long-term surplus of luxury homes, Gruen said.
Until that demand makes itself known, however, buyers have the upper hand and are getting some sweet bargains.
For Pham, dropping his price yet again is becoming a bigger possibility. He'll also consider nontraditional offers, like a part-cash, part-trade deal for a smaller house.
"If somebody would trade the house, I would consider the move down," he said. "I know it's easier to sell a smaller house."
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