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Can Luxury Housing Slow Denver’s Price Increases?

Luxury HomeA recent study from economists is calling for more diverse housing options in the Denver area, which has exploded in popularity over the last few years. Denver’s housing prices on lower-to-mid range have been steadily climbing recently, which can spell bad things for the market as a whole. But, believe it or not, there is a way that luxury homes and more diverse housing options can bring a stronger balance to the rapidly growing region.

A Booming Region

Home to natural beauty and spacious living, Colorado’s population has grown significantly over the past decade and a half. The US Census Bureau reported a total on 1 million people entering the state to become permanent residents between the years 2000 and 2013. Meanwhile, Denver specifically has been ranked as the fourth fastest-growing city in the country. This boom, however, has come at the price of housing becoming scarcer in the region, and low- to mid-range homes have risen 7% since 2013. Coupled with this price increase is the fact that family earnings have declined steadily since 2011, which has made for lean times for those on the lower end of the market.

The Luxury Market

In contrast to this recent study, the luxury market in the Denver area seems to combine the best of both worlds: readily available housing at prices that have remained relatively stable. Home sales for properties of $1 million or more saw steady increases over the course of 2014, but the median property price either remained stable or decreased month after month. This is the type of behavior that home buyers on the lower end of the spectrum would like to see duplicated in their markets. This naturally begs an important question: how can standard real estate become more like the luxury market? It turns out that the answer may be more luxury homes in the Denver area.

How Luxury Homes Can Help

While it shouldn’t be the only measure taken, making more luxury homes available in Colorado can actually help to control prices, even for those who can’t afford to be a part of the luxury market. More homes on the market means more options for homebuyers, which in turn means better cost control. And if the costs at the top end of the market remain steady, it puts a hard cap on those at the lower end of the market as well. Many realtors determine a home’s value by comparing it to both the high end and the low end of the market. More affordable luxury homes mean that when a house is compared to the high end, the price needs to come down to meet the luxury trends.

When the luxury market is strong, everybody wins. Although Colorado is currently attracting more new residents than it has land prepared for, the fact that there is such a strong luxury homes market in Denver indicates that prices may stabilize soon. This, coupled with other measures being taken to continue to upward trend of real estate success in Colorado, signals good times ahead for all markets.

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