Sellers ‘capitulate’ to the market
During my ramblings around Madison Park last month I happened to cross paths with a well-known local real estate agent who was standing in front of a house—one of his listings—where a “sold” sign had recently been posted. He was watching the movers cart out the last vestiges of the “staged” furniture that had been on display in the home during its many months on the market. My congratulations on the sale were met with a weary sigh. “Well,” the agent said, “the seller lost a bundle and I lost a bundle, but at least we got the thing sold!” Then he added wryly, “It sure was a heck of a deal for the buyer, though.”
The seller had been “testing” the market over a long period by holding out for a higher price. But he ultimately succumbed to market realities, accepting a much reduced sale price. In a phrase borrowed from the stock market, he finally reached his personal capitulation point. And he was not alone. With only one notable exception, every Madison Park seller in October accepted a discount from their originally-hoped-for selling price, 12.5% on average. Even so, it appears that the market is achieving equilibrium and maybe even a bit of momentum.
Eight home sales were recorded in the Park during October, which was down from September’s volume of 11 sales but is level with the average eight-sales-per month pace of the market during the third quarter. There were also a large number of new pendings added during October and the first two weeks of November, bringing the total pendings at mid-month to 23, including three homes sold on a “contingent” basis. This is a huge increase from the 12 pendings outstanding a month earlier.
All but one of the six houses sold during October were in the $1 million or more price range, with a median sale price of $1,272,500 for all the houses. Their median square footage was 3,497, reflecting a median price per square foot of $454. The two condos (each boasting less than 600 sq. ft.) changed hands at about $300,000 each, for a median price per square foot of $524. While the houses sold in only 90 days on average, the condos took over twice as long to sell: 188 days each.
This combination of sales activity and the fact that there were only ten new homes listed for sale during the last month has caused inventory levels to continue their steady decline. The total number of homes on the market in Madison Park is now only 78, which compares favorably to the 116 active listings we had at the beginning of the summer (for those who are number oriented, that’s a 33% decline). Where there was a 17-month absorption rate (total listings divided by the month’s sales) in May, now there’s only 9.75 months of inventory, a pretty substantial improvement.
In addition to the two condos sold in October, there are nine additional condos that are now listed as pending, including two of the three units in this 2007 building at 1611 43rd Avenue E. These condos have been on the market for almost 700 days, according to Redfin; and it's expected that the developer will be taking a bath on the sale of the units, so to speak:
Median List Price: $1,995,000
Median Sq. Ft.: 4,372
Median Price per Sq. Ft.: $456
Average Days on Market: 129
Proportion with Price Reductions: 45%
Condos & Townhouses
Median List Price: $599,950
Median Sq. Ft.: 1,125
Median Price per Sq. Ft.: $533
Average Days on Market: 185
Proportion with Price Reductions: 56%
Interestingly, the proportion of for-sale properties that have been reduced in price is trending upwards, perhaps another sign of the capitulation process at work. As any viewer of cable TV’s Million Dollar Listing (Bravo channel, Mondays at 10:00) will tell you, sellers in even pricier neighborhoods than ours can be pretty unsophisticated about the market and resistant to facing the reality of declining real estate values. Many of them, of course, don’t have to sell and simply withdraw their properties or stick to their over-market price while awaiting a recovery that may or may not occur.
If you don’t have to sell, of course, there are more options available than for those who cannot afford to hold. But clearly it is possible with the right property to properly gauge the market and price accordingly. One Madison Park home, for example, was sold in October after only 9 days on the market—and at a 3% premium to the list price. It could be a fluke, or it might just be a good example of “pricing to the market.”
On the other hand, there is the example of that Washington Park house I mentioned in an earlier posting, the one whose owners had been “chasing the market down.” After almost 500 days on the market, the nicely located Hillside Drive home was finally sold early this month. Though the sale price of $1,350,000 was a 52% reduction from the initial offering price of $2,795,000, this was still a 35% increase in value from what the owners reportedly paid for the property in 1999. Not quite a hard-luck story, but a come down and a capitulation to the market nonetheless.
[Upper photo: a 2007 contemporary home at 1840 41st Avenue E., listed by Kathryn Hinds of Windermere at $1,795,000 (my favorite for-sale property in Madison Park). Thanks to Wendy Skerritt of Windermere Realty for her help in providing some of the market data utilized in this report.]