While the overall median home price in the Denver metro market was relatively flat in February compared to a year earlier, there's some buzz being generated by a Coldwell Banker report that shows the luxury home market (defined as $1 million and up) saw a 7.2% increase from February of 2010.
The median price is a figure that gets a lot of play in the media, but like all statistics, it is subject to manipulation and interpretation. In short, the median price is that price at which half of the homes sold for more money, and half sold for less.
Here's what a rising median price in the million dollar market means to me: it means home that were listed a year ago for $1.9 million are selling today for $1.4 million. The difference is that a year ago, they weren't selling at all (because they were overpriced), but today values have adjusted down to meet the market and buyers are stepping in, albeit cautiously, for the most attractively priced luxury homes.
The increase in sales activity and median price at the higher end of the market does not mean that the luxury market is improving, but simply that the downward trajectory is bottoming out. If you owned what used to be a $2 million dollar home (which may only generate an offer of $1.6 million on the open market today) and you saw a report that said median prices had gone up, you might be fooled into thinking your home was in better shape than it is. The only high-end sellers truly in touch with the realities of today's market are those who are trying to sell into this very stiff headwind.
The reality is that buyers are still totally value-driven, and the median price only reflects those homes which have sold. And with few exceptions, the homes that are selling are those that are priced most attractively.
