Denver may need to redefine the “luxury” residential market.
The Denver Metro Association of Realtors defined the luxury market back in 2013 as any home priced at $1 million and up.
But $1 million doesn’t get what it used to.
“It’s almost like the million dollar price tag is not that big of a deal anymore,” said Kentwood City Properties Realtor Dee Chirafisi, who has worked locally for more than 25 years. “I hate to say that. But it’s almost like if you want to look at real luxury and what sets it apart, it starts at $2 million — which sounds crazy, but it’s true.”
There’s something of a mythical quality to a $1 million price tag. But sales of a single residence above that mark are becoming more and more common in the region.
BusinessDen analyzed six years of data on local homes sales, from January 2016 through the end of November 2021. The data, provided by DMAR, was for seven counties: Denver, Arapahoe, Adams, Broomfield, Boulder, Douglas and Jefferson.
The number of homes that sold for at least $1 million quadrupled, jumping 310 percent during that period, the analysis found. There were 1,353 such sales in 2016, and 5,548 in the first 11 months of this year.
“In 2016, a $1 million home would have purchased you something around a five-bedroom, four-bath home with a lovely two-car garage and backyard,” said Usaj Realty co-owner and broker Jenny Usaj. “Today, you’re looking at maybe a three bedroom, or only two or three baths, maybe it has a garage and maybe it doesn’t. There’s a lot less certainty in what that purchase power looks like today than what it used to.”
The spread of the seven-figure sale
The number of luxury home sales has increased steadily every year since 2016. But the biggest jump came from 2020 to 2021.
Homes closing at $1 million and up increased from 3,544 in 2020 to 5,548 in the first 11 months of 2021, a 56.5 percent increase. That figure will increase somewhat in the year’s final month, but December is not a peak time for home sales.
The $1 million price tag has crept into new Denver neighborhoods over the past five years.
In 2016, there were no luxury sales in Curtis Park, Whittier, or Sunnyside. In 2021, there were 13 in Curtis Park, 26 in Whittier and 25 in Sunnyside.
“They used to all be in Cherry Creek, Country Club, Greenwood Village, and the usual suspects,” Chirafisi said.
Home sales over $1 million in Sloan’s Lake increased from six in 2016 to 69 in 2021 (a jump of 1,050 percent) in part due to new projects such as the Lakehouse Residences condo building, which Chirafisi marketed.
“People have been buying properties in Sloan’s Lake for the past two years for over $1 million and scraping them to build $2 million or $4 million homes, and now it’s the norm,” Chirafisi said. “It just takes one or two brave neighbors to start the trend.”
In LoDo, LoHi and the Highlands combined, there were 11 luxury home sales in 2016, and 139 in 2021.
Surrounding suburbs like Arvada and Golden, and suburb-like Denver neighborhoods like Central Park (formerly Stapleton), have also seen a massive jump in $1 million-plus sales.
There were 15 luxury single-family home sales in 2016 in Central Park and 100 in 2021, according to separate data compiled by Land Title, which excluded condos and townhomes.
Arvada had eight luxury sales in 2016 and 94 in 2021, according to the DMAR data, with a record sale of $3.5 million pending. And Golden hit a record sale of $6.7 million last month for a 17,716-square-foot mansion on 35 acres.
In 2016, there were six $1 million and up sales in Westminster. In 2021, there were 37.
“A lot of this has been due to pricing and sprawl that happens when buyers get priced out of the central Denver market,” said Kentwood City Properties Realtor Sara Glaze, who focuses on northwest Denver.
And while new markets are experiencing a sudden boom of $1 million price tags, those neighborhoods that were already luxury are just upping the ante.
In Cherry Creek, there were 87 luxury sales in 2016 and 129 in 2021. Six years ago, there were 43 luxury single-family home sales in Hilltop and 61 in Wash Park. This year, there were 130 in Hilltop and 187 in Wash Park.
Just because a home sells for seven figures doesn’t necessarily mean it will stay standing. Usaj had a listing in Cherry Hills earlier this year that was marketed as a scrape and sold for $2.4 million.
“When you have an average price of $703,000, it’s no surprise there are $2 million scrapes in places like Cherry Hills,” Usaj said.
Big jump coincides with the pandemic
The timing of the biggest annual jump, 2020 into 2021, points to the pandemic as a major factor.
With vacations on pause, and many working from home, buyers have shown more interest in larger properties, and an increased willingness to be farther from downtown. That has spread the $1 million home to new parts of the metro area.
“Bidding wars propped that generic valuation up over the last year or two,” said Land Title sales agent Harrison Stadnik. “But now that the wars are dropping off, it’s nice to see those prices holding steady and growing.”
Mortgage rates also dropped, which made the $1 million home more affordable.
“Interest rates are so low to the point where money is pretty much free,” Stadnik said. “I mean, if you can get a loan at 2 percent, what’s $1 million?”
Currently, buyers can get a mortgage rate of around 3 percent for a $1 million home, according to Redfin, which translates to a monthly payment of $3,952. In 2016, the average mortgage rate was 3.7 percent with a monthly payment of $4,261. The figures assume a 20 percent down payment of $200,000.
Out-of-state buyers from big cities like New York and L.A. also flocked to Denver during the pandemic for more elbow room and lower prices. Chirafisi recently spoke with a buyer moving here from Mill Valley, California, where the luxury market starts at $3.5 million.
“He was shocked to hear that anything over a million dollars was considered luxury,” she said. “But really what you get for $1 million absolutely depends on where you are. If you’re in McGregor Square, you get a one-bed, one and a half-bath with tons of amenities; if you’re in Platt Park, you can get half a duplex.”
Chirafisi added, “It’s hard to find a nice single-family home for $1 million. The standard bungalows that used to sell for $550,000 or $600,000 are now selling for $1 million.”
Andrew Abrams, chair of DMAR’s market trends committee and chief operating officer of BSW Real Estate, said concerns over construction defect litigation have limited condominium development over the past couple decades.
That has pushed buyers toward single-family homes, which tend to be more expensive.
“Now that migration to Colorado is increasing, the amount of housing per buyer is not enough,” Abrams said. “So, naturally, prices are increasing.”
$1 million is ‘the number we picked’
Denver’s $1 million definition of luxury dates to 2013.
That year, Realtors Gary Bauer, an independent real estate analyst, and Steve Danyliw with Danyliw & Associates, both members of DMAR, put together the association’s first monthly market trend report.
Bauer, who died last year, was an agent in Denver for more than 40 years and was the “go-to” statistical analyst for major brokerages in the area, Danyliw told BusinessDen. Bauer created the report’s initial brackets and set the luxury market definition as $1 million and up.
“There’s no national standard or national definition of what luxury means,” Danyliw said. “This is the number we picked and went with.”
Back in 2011, properties priced at $1 million and up made up 0.9 percent of the marketplace, according to Danyliw. Now, they make up 7.9 percent of the market.
Danyliw said that Redfin defines the luxury market as the top 5 percent of homes in each market.
“If we apply that to Denver, the starting price would be around $1.2 million. So, we’re not that far off,” he said.
Danyliw, a previous chairman of DMAR’s market trends committee, said the association has been having an internal discussion about whether to redefine the luxury market over the last year.
“I just don’t think, as a committee, we’ve crossed that threshold where we need to seriously reconsider yet,” he said. “One of the things that holds us back is the historical reports. We use those same price brackets to compare data year-over-year and month-over-month. So, if we changed that, it’d be like comparing apples to oranges.”
But he said the current thinking could change if the market boom continues.
“If we get 10 to 13 percent growth in average and median price by the end of 2022, we’ll probably have to have that conversation a little sooner rather than later,” Danyliw said.
This interactive map shows locations of homes that sold for $1 million or more in the Denver metro region in 2016 and 2021. To view the years separately, click on the icon at the top left of the map.