July Real Estate Report

What happened to the trend?

Madison Park home sellers looking for a sign that the tide has turned in the local real estate market may have to wait a little longer for their good news. The upward trend in sales volume that characterized the last quarter does not seem to have kept its momentum into the summer.

During the second quarter of the year six homes were sold on average each month, a significant increase in volume from the two sales a month recorded at the bottom of the market last winter. In July, however, only four houses were reported sold in Madison Park, according to the King County Assessor’s Office, and no houses were recorded as sold during the first half of August. These initial results for summer home sales break the trend line, making it harder to argue that a recovery is underway:

Just to put these numbers into perspective, there were 14 homes sold in Madison Park (including Broadmoor and Washington Park) during July and the first half of August last year, and there were 16 sales in 2007. There’s a hopeful sign in the fact that through mid-August there were seven houses listed as “pending” sale by the Northwest Multiple Listing Service (MLS). But the four closings to date this summer certainly define a market that’s still drifting in the doldrums.

Even though recent sales figures are not positive, in other respects things are at least not getting worse. For example, the level of for-sale inventory has been holding steady at about 100 homes for several months. Based on current pendings, that represents about a 14-month absorption rate. Not robust, but much better than the 30-month rate or higher recorded in the first quarter.

Values, meanwhile, also seem to be holding up. Zillow.com estimates that the median home in Madison Park has declined in value by only 4.7% in the past year. Of the 99 Seattle neighborhoods the website surveys, only four have a better record than Madison Park of retaining their home values in this down market. Some, such as East Queen Anne, have seen declines of 20% or more, in Zillow’s estimation.

Our real estate market continues to be characterized by relatively big and expensive homes, with the bigger and more expensive of these dominating the list of properties for sale:

The median home currently on the market in Madison Park (condos and townhouses included) has a list price that is 74% higher than Zillow’s estimate of the median value of all area homes. Of the 76 houses for sale, over 40% of them boast at least 4,000 sq. ft. Many of these properties have been on the market for a year or more (one Broadmoor house has the record at 460+ days).

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Here’s a snapshot of the current listings in Madison Park (Washington Park and Broadmoor included), based on data from Redfin.com:

Houses

Listings: 76
Median Asking Price: $1,995,000
Median Square Footage: 3,870
Median Price per Square Foot: $516
Average Days on Market: 83
Percentage with Price Reductions: 45%
Average List-Price Reduction: 8.2%

Condos & Townhouses

Listings: 28
Median Asking Price: $525,000
Median Square Footage: 1,152
Median Price per Square Foot: $456
Average Days on Market: 95
Percentage with Price Reductions: 45%
Average List-Price Reduction: 7.2%

The most expensive home currently on the market is a $12.8 million waterfront mansion located in the Reed Estate (1500 42nd Ave. E.). The least expensive is a 680 sq. ft. condo, listed at $279,000.

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The four-bedroom, 3,300 sq. ft. home pictured above is located across the street from McGilvra School at 1620 38th Ave. E. and is a listing of Coldwell Banker Bain agent Laurie Way. At $1,300,000, the house is actually one of the more modestly priced properties currently on the market here in the Park.

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Chasing the Market Down

A continuing phenomenon of the current real estate market is the disconnect between the expectations of sellers and perceptions of buyers over home values. Almost half of those with homes on the market have had to reduce their list price at least once to try to catch the market as it has headed downward. And while the average price reduction so far in this cycle has only been 7-8%, many sellers with unrealistic expectations have taken a beating while trying to “chase the market down.” The most extreme example of this is a five-bedroom Washington Park view home (610 Hillside Drive E.) which went on the market over a year ago at $2,795,000 and, after numerous price reductions, is currently listed at $1,549,000--a 45% come down. But have the owners finally caught the market? Until someone makes an offer, it’s hard to tell.

Windermere Associate Broker Lincoln Thompson believes that one of the biggest problems with the market right now is that with so few sales occurring, especially in the upper market, there just isn’t enough data available to properly determine values. Owners, agents, buyers and appraisers are all without information, and this is causing a lot of discomfort for everyone. Agent Jonathan Himschoot of Windermere agrees, saying “the hard thing is finding the right price. How do you pull comps when there’s so little to compare to?”

One agent told me that she thinks many sellers who want to put their houses on the market perceive that they are taking an actual loss if they list their houses at a price consistent with the current market. But for most people in Madison Park who’ve owned their homes for any appreciable period, the only thing they will be giving up is part of an unrealized gain, a different thing entirely. But try telling that to someone who set the value of his own house on the basis of what his neighbor got when selling his house two years ago.

Several other agents that I spoke with told me that many buyers are just as unrealistic as the sellers, expecting big discounts from the list prices. The fact is, however, that on average Madison Park home sellers are currently getting 97% of their list price at sale. Small comfort, perhaps, to those who have had their houses on the market for months without any offers.

Next month we’ll take a look at two other factors having a significant impact on house sales in Madison Park: the difficulty in finding mortgage financing, and the downside of the new rules governing appraisals.

[Thanks to Windermere agent Wendy Skerritt for her help in providing market data utilized in this report. Please note that the Average Monthly Homes Sales chart above, which shows different historical data from the numbers used in the June real estate report, has been adjusted to exclude sales that are not the result of properties being placed on the public market (such as changes of ownership within a family as part of an estate settlement, etc.).]