"Say you have someone moving out of the San Francisco Bay area or the Los Angeles basin and they're selling their two-bedroom condo for $1.1 million," Mygatt suggests. "If they come here with their $1.1 million, they can find a beautiful luxury home for $920,000 and not even blink about adding another $100,000 or $200,000 of remodeling or landscaping improvements. They'll do it and have a big smile on their face."
According to Mygatt, "The reason Denver showed up on the power market list as a seller's market has a lot to do with the fact that the population in the area is booming. We can expect another 100,000 people to move to Colorado this year, as they did last year; that's a massive number. Job growth is up, too, and the property appreciation rate is very solid. Home owners have seen a 54 percent appreciation rate over the past five years, which tops any five-year period in Colorado's history."
This stretch is hardly an anomaly.
"The website of the Federal Housing Finance Agency has been tracking home buying across America since 1990," Mygatt points out. "And Colorado as a state has enjoyed a 320 percent appreciation rate over that time, which is higher than any other state in the country. It's second only to Washington, D.C., which is pretty remarkable. People may think the highest appreciation rate would be in California or somewhere like that. But, no: Colorado is it."
National Association of Realtors defines a luxury home as one listed for $1 million or more. But that's not quite how things work in Colorado.
"Usually what we look at is the top 10 percent of any given market," Mygatt explains. "If you look at the top 10 percent in Denver, that's probably about 5,800 homes. If you count down from the top price of a home sold in the Denver area last year" — $8,116,000 for a six bedroom, nine bathroom spread in Highlands Ranch — "you end up with what's considered luxury at about $780,000 and up."
This price point means more metro-area neighborhoods contain luxury listings than many people might expect.
"The historical, really high-end markets are places like Country Club, Cherry Creek North and Cherry Hills Village — really iconic parts of the luxury market," Mygatt allows. "But if you go down south to Castle Pines Village, which has a very good inventory and not as much of a demand, you'll see it's kind of nouveau high-end. In places like Washington Park, Congress Park and the Highlands, we're seeing product that's squarely in that $780,000-or-higher range — and that's also true for LoDo and some of the downtown markets, where all of the inventory is attached. So there are micro-luxury markets in Denver that have seen really good lifts and really good activity."
The authors of the global luxury report also mention that Denver landed among the top twenty prospects as home for Amazon's HQ2, or second headquarters, which could potentially create 50,000 new jobs and attract an investment estimated at $5 billion. But Mygatt stresses that the power-market ranking isn't dependent upon Denver winning the contest.
He adds that "if Amazon doesn't come here, it will make the luxury home-buying experience for everyone else a lot calmer and a lot more thoughtful. It will give existing home buyers a better experience. If you look at the overall metropolitan market, homes are selling in about 28 days right now. But in the $1 million-plus market, it's taking 88 days — nearly three times as long. And even though we don't have a shortage of high-end properties, we don't have a large surplus, either."
Granted, the overall number of luxury homes in the U.S. isn't huge. Mygatt says homes that go for $1 million or more "make up only about 3 percent of the overall housing market in the country. It's a fairly narrow band, but understandably, it gets all the attention. It's what people want to see, because it's on HGTV and places like that. So there's a lot of talk about it, especially with what's happened in the stock market lately. Whenever there's uncertainty in the stock market, we see a flight to luxury real estate."
Such a development could cause the Denver real estate market to grow even more powerful. Click to view the Coldwell Banker Global Luxury Report.