Logic would tell us that the luxury housing market would go off the rails in a time of economic uncertainty. And nothing says economic uncertainty quite like a global pandemic.
But it seems that uncertainty is no match for a high income and a high desire to relocate. Demand for upper-end homes ($1 million or more) in Northern Colorado is not just chugging right along in 2020, it’s picking up speed compared to last year.
As of Oct. 14, luxury home sales had already surpassed 2019 sales by 14% for Larimer and Weld counties (see accompanying chart). And based on pending contracts, we can estimate that luxury sales this year will top 2019 by 51%.
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What’s driving the luxury locomotive?
The pandemic-inspired movement from city to suburb has been well documented. Realtor.com recently reported that 51% of all property searches by city residents during the second quarter were for homes in their city’s suburbs. And Redfin.com said 27.4% of its users in the second quarter were looking to move to a different metro area.
Many people with means, most of whom are able to work from home, are looking for a different setting and a different lifestyle. And Northern Colorado is a place where they can find it.
Taking a closer look at cities in our area, Fort Collins is showing the greatest growth for luxury sales — up 50% as of Oct. 14, and on track to beat 2019 by 94%. Berthoud and Timnath, both home to new golf courses and lakefront developments, are right behind the pace of Fort Collins. Berthoud is expected to see 92% growth in luxury sales this year, and Timnath is lining up for 87% growth.
This surge in high-end sales is soaking up inventory. In Northern Colorado, there is currently just three months of inventory for homes priced between $1 million and $3 million. That means if sales continue at the current rate without any new homes coming on the market, luxury homes would be sold out in three months. Fort Collins is down to 2.3 months of luxury inventory, while Berthoud and Timnath are each at 3.3 months.
In fact, outside of Berthoud and Timnath, there are very few luxury estate lots available, as high construction and water costs are making it difficult for developers and builders to bring new homes on the market. If demand continues at the current pace, expect even more pressure on prices.
Here are some other insights from the luxury market:
- The high-end trend is not unique to this region. Data from Denver-area housing sales shows that luxury sales in the metro market were up 72% in September. Another 415 luxury sales were pending at the end of September, more than twice the pending total in September 2019.
- Ironically, luxury demand in Boulder — the most expensive non-resort community in Colorado when it comes to housing — is likely to end the year as essentially flat in that category. It appears Boulder will see a 2% gain in luxury sales compared to 2019.
- Back to Northern Colorado, we can see how the luxury prices are influencing overall housing values. For the 12-month period ending on Sept. 30, the average price for all single-family detached homes across the region is up 5.3% to $511,478. Timnath, which includes the Harmony Club golf course community and the WildWing lakefront community, is leading the way at $601,124.
Brandon Wells is president of The Group Inc. Real Estate, founded in Fort Collins in 1976 with six locations in Northern Colorado.