Luxury Market Revival

America’s luxury real estate market has been in an economy-induced coma for the last couple years, but across the American west and right here in Boulder, this sleeping giant seems to be waking. There has been a wave of record-breaking (or at least eyebrow-raising) luxury sales in the western United States recently. Consider these:

• In late April, the 3,000-acre Boot Jack Ranch in southwest Colorado sold for $46.5 million to become the state’s largest residential transaction of 2010. At the time of the sale, it was also the nation’s largest residential transaction of the year.
• In June, a 48,000-square-foot French-inspired mansion in the Bel-Air neighborhood outside of Los Angeles sold for around $50 million to surpass Boot Jack Ranch as the nation’s largest residential transaction of 2010.
• On June 25, Aspen Lakes Ranch in Aspen sold for $24.5 million to mark Aspen’s largest residential sale in more than a year.
• The Bell Ranch, a 290,000-acre offering in New Mexico offered at $83 million, is reportedly under contract.
• The Phipps Mansion, a sprawling historic estate currently owned by the University of Denver and operated as an events center, is under contract for $9 million after being on the market for only a month.

It seems that mega-millionaires are slowly coming out of the woodwork, investing big bucks in icon properties and bolstering the confidence of the overall regional luxury market in 2010.

On the local front

The Boulder market has had some significant sales of its own this year. In 2009, the area MLS recorded no residential sales for more than $4 million in Boulder proper or the outlying areas including the foothills, Boulder mountains or Boulder plains into Niwot and rural Longmont. This year’s to-date stats tell a more promising story: As of July 13, three residential properties in the Boulder area have sold in 2010 for more than $4 million.

Additional evidence of a luxury market revival includes:

• Sales volume of homes selling for $1 million or higher in the Boulder area has increased 14 percent in 2010 compared to the same time frame in 2009 (Jan. 1 through July 13). In 2010, 59 homes have sold in the $1 million+ price range compared to 49 homes in the same timeframe in 2009.
• In Boulder County’s outlying areas, 10 homes priced at $1 million or higher are currently under contract, while 15 homes priced $1 million or higher are under contract in the City of Boulder.

The shift to resales

Perhaps the most interesting story angle of the Boulder area’s luxury market revival is the impact that Boulder building regulations have had on Boulder’s housing market. In early January, a stringent set of building codes went into effect after a 4-3 vote by Boulder City Council. The new codes, which apply to roughly 13,000 single-family homes in Boulder, limit a home’s square footage, footprint size in relation to its lot size, long walls and bulk. On a 7,000-square-foot lot, which is the average lot size in the city of Boulder, a home’s interior floor space is limited to 3,500 square feet and the home’s footprint cannot cover more than 35 percent if its lot square footage.

These new codes are collectively known as the city of Boulder’s plan for ‘Compatible Development in Single-family Neighborhoods.’ Proponents argue that the plan helps preserve the harmony of Boulder’s established neighborhoods and protects homeowners from those who may otherwise buy an existing home, demolish it and rebuild a “mini mansion” that disrupts the aesthetics of the community. Opponents, including builders and architects, argue that these regulations are too strict and have made building a home too cost prohibitive at a time when the local construction industry is already bleeding.

Boulder native and veteran Boulder real estate agent Scott Franklund of Fuller Sotheby’s International Realty has closely monitored the market’s response to such regulations and feels that the Boulder resale market will be the clear winner as the codes and regulations gain traction over time.

On the up and up

Franklund believes Boulder’s luxury market is poised for tremendous growth and appreciation as the new regulations intersect with major employment opportunities on the area’s horizon.

“The key in Boulder is what the future will hold for buyers and builders as banks will not fund new construction under such constraints. What will happen in three years when Conoco Phillips opens its plant in the old Sun MicroSystems site and employs up to 7,500 people with massive stock holdings? Where and what will these people buy? What I'm saying is the home you own in Boulder may be the bank or retirement account of your future.”