The state of real estate: a 17-month supply of very expensive inventory

It probably comes as a shock to no one who’s been paying attention, but the 2009 statistics released by the King County Assessor for the year through the end of May show that Madison Park experienced a 44% drop in home sales over the same period in 2008. This continues a downward trend which began sometime in 2007.

For the first five months of the year a total of 36 homes were sold in Madison Park (including Broadmoor and Washington Park), compared to 64 home sales during the same period in 2008 and 80 in 2007. For the single month of May 2009 only six homes were sold in Madison Park, a 60% month-over-month decline from the 15 that were sold in May 2008.

The 116 properties currently on the market represent a 17-month level of inventory, based on the average seven-sales-per-month pace achieved so far in 2009. It is possible that some additional May sales still need to be reported to the County, and it is apparently the case that based on closings through this week, June will certainly show greater sales activity than May. Nevertheless, it’s clearly been a dismal first half of the year for home sellers and real estate agents in the Park.

One of the most interesting aspects of the local real estate market is the fact that, on the whole, the houses for sale are significantly more expensive--and therefore harder to unload—than most of the homes in the Park would be if placed on the market. The median value of a Madison Park home is $994,870 based on current Zillow.com estimates. Yet the median price of the 116 homes Redfin lists for sale in the Park is 68% higher: $1,675,000.

Madison Park is not alone in having such a disparity between the median value of its not-for-sale and its on-the-market properties. The 42 homes for sale on Capitol Hill, for example, have a median listing price of $925,000, 66% more than the $556,764 median value estimated by Zillow for the other 2,921 homes that are not for sale. The difference in Montlake, meanwhile, is much less: an $800,000 median for-sale price versus a $636,706 not-for-sale median value, according to Zillow. This is only a 26% differential.

[The above photo, courtesy of Windermere Realty, is of 2334 41st Avenue E., a listing of Lincoln Thompson priced at $1,895,000, which is the median house price for the 83 houses currently on the market in Madison Park.]

So what’s selling? The completed sale transactions for the market in 2009 have ranged from a $5.3 million Broadmoor house (1105 Parkside Drive E.) to a $613,000 abode in Washington Park (617 33rd Avenue E.). The median price is $1,200,000 for those sold homes for which prices have been reported to the County. Redfin reports that the sales price of homes over the last six months in Madison Park (exclusive of Washington Park) averaged $590 per square foot. This compares to an estimated median value of $459 per square foot for the overall market, according to Zillow.

In general, it is the larger homes in our market that are being sold, and it is the even-larger homes that are currently listed for sale. While Zillow estimates the median Madison Park home size at 2,049 sq. ft., the median size for homes that have sold in the last six months is 2,359 sq. ft., according to Redfin. And the median size for homes currently listed for sale, says Redfin, is 2,871 sq. ft. (Redfin excludes Washington Park from its analysis).

These figures include houses, townhouses and condos. Here’s a snapshot of the current listings in Madison Park for each category:

Houses

Listings: 83
Median Asking Price: $1,895,000
Median Square Footage: 3,680
Median Price per Square Foot: $515
Average Days on Market: 99
Percentage with Price Reductions: 37%

Condos

Listings: 28
Median Asking Price: $650,000
Median Square Footage: 1,246
Median Price per Square Foot: $522
Average Days on Market: 66
Percentage with Price Reductions: 50%

Townhouses

Listings: 5
Median Asking Price: $450,000
Median Square Footage: 1,200
Median Price per Square Foot: $375
Average Days on Market: 39
Percentage with Price Reductions: 20%

The figures on price reductions, in particular, are misleading due to the fact that many of the units have been on the market in the past, were unsold, and have been put back on the market at a reduced price after a brief withdrawal. Price reduction percentages refer to any price cutting that has occurred since the newest listing.

The real estate agents I’ve talked to see several factors influencing the market. Foremost is the fact that there are so few qualified buyers in such a rarefied market. Those who can afford to buy are taking their time, according to Windermere agent Jan Sewell, who notes that these buyers can also afford to wait for the right opportunity. One of the things they appear to be anticipating is better terms from the lending institutions for jumbo mortgages. Wendy Skerritt, also of Windermere, reports that she is hearing anecdotal evidence that some banks are getting back into the game of financing upper-end houses. If this is true, it will certainly help move the market at the upper end.

Right now, with a buyers’ market fully in play, a Madison Park house owner who wants to sell needs to do everything right, says Lincoln Thompson, associate broker at Windermere-Madison Park. “Houses that are average or not well priced are just going to sit.”

[The real estate market analyzed in this report comprises Sub Areas 6 (Broadmoor) and 7 (Madison Park and Washington Park) of Area 14, as designated by the Office of the King County Assessor. Differences between the median figures used above and those of Zillow result from the combining of the two Sub Areas, which are analyzed separately by Zillow but are not broken out for purposes of this report.]