THE BIG PICTURE

0 Comments | Gazette, The (Colorado Springs), Jun 10, 2007 | by RICH LADEN THE GAZETTE

There's probably no better time to buy a pricey home in the Colorado Springs area, assuming you have the bankroll, of course.

The supply of luxury homes for sale in the Pikes Peak region -- generally defined as $1 million and up -- is as fat as Warren Buffett's investment portfolio and will take years to exhaust.

"When you look at the big picture, there's a lot of sellers that are just sitting there, scratching their heads, saying, 'How do I get these things sold?'" said Joe Clement, owner of Re/Max Properties in Colorado Springs.

At the end of last month, the ranks of $1-million-and-up homes totaled nearly 200, which, at the rate they've been selling for the past four months, would take 2 1/2 years to dispose of, according to Pikes Peak Association of Realtors figures compiled by Re/Max Properties of Colorado Springs.

It's an ample supply when compared with other housing types; the supply of homes in the $200,000-to-$249,000 range, for example, is a little less than seven months.

The luxury-home backlog is just one part of a Springs-area market that's saturated with houses. The Pikes Peak Association of Realtors reported a record 6,576 listings in May, while sales for the month were down 18.4 percent from the same time last year.

It's also a reminder of where the Springs' economy has been in recent years.

Many highly paid company executives and managers were among the 10,000 layoffs that resulted from the 2001 recession, and those job losses probably hurt the luxury market before trickling down to other types of homes, said Trish Ingels, a broker associate who specializes in high-end properties for Gloriod & Associates of Colorado Springs.

The backlog of luxury homes for sale probably indicates that the overall market has a way to go before demand increases and supplies shrink, Ingels said.

Other real estate experts say the luxury-home backlog doesn't mean there's been an across-the-board slowdown in sales.

Stuart Scott of Stuart Scott Ltd. in Colorado Springs says there's plenty of sales activity, especially in a highly desirable area such as the city's southwest side, home to the five-star Broadmoor hotel.

"So much wealth has been created in the stock market, if you're somebody with a $5 million portfolio, you've made enough in the last year to buy one of these things," Scott said.

Ingels said the market is decidedly slower for $1 million homes, but homes of $2 million-and-up are selling well.

Why so many million-dollar homes to begin with?

Property values have appreciated to the point where some homes have been pushed into the $1 million neighborhood even if they didn't start out that way, Ingels said.

"Even when the market is slow, people price their homes higher," she said. "And in the high end, they're not giving away their homes, so prices remain stable."

Booming land costs also have put pressure on luxury housing prices, said Kevin Patterson, owner of The Patterson Group, an arm of Prudential Professional Realtors in Colorado Springs.

Home sites in desirable areas, especially west of Interstate 25, are in short supply, and land prices have been shooting up for years. When somebody pays $500,000 or more for a lot, the home that gets built easily will top $1 million, he said.

The inventory of unsold luxury homes symbolizes what Colorado Springs has yet to become, some real estate experts say.

"Colorado Springs is a community that isn't yet a corporate flagpole," Patterson said. "We tend to have division headquarters or subsidiaries. There are only so many folks who can afford to buy a $1 million, million-and-a-half or over-$2 million property. And every time you add another home, there isn't another buyer out there to offset it."

Too many pricey properties for sale is hardly a problem for the community at large; after all, of the thousands of homes in the Springs and El Paso County, milliondollar properties are relatively few and the median price in May -- the midpoint of prices for all homes sold last month -- was just $220,000.

The backlog, however, can be a financial burden to sellers. A seller who can't unload a home might be paying thousands of dollars a month for mortgage and maintenance costs, Patterson said. If the home languishes 18 months, "you go through six figures when you're just trying to sell," he said.

The challenge of finding luxury-home buyers in a slow market isn't much different than for lower-priced properties. Homes must be well cared for, decorated appropriately and, above all, priced right. In a soft market, asking too much is an invitation to a long stay on the "for sale" list. Sometimes, even owners of milliondollar properties have to drop their asking price.

A home that had been on the market for five years and was priced at $3 million recently sold for $2 million, Scott said.

What happened?

"The minute it was appropriately priced, it sold," he said.

The backlog isn't confined to resales. Some custom builders say they've seen a cooling in the demand for luxury homes, although it's nothing dramatic.

A year ago, Nichols & Comito of Colorado Springs had eight homes under construction; this year, it's six, said co-owner Larry Nichols. In 2006, Hidden Rock Homes Inc. of Colorado Springs had two buyers cancel their custom homes. The company had planned to build 10 last year.