March Real Estate Report

Real estate market surges: what next?

Those looking for evidence that a comeback is underway in the local real estate market need look no further than the latest statistics from the Northwest Multiple Listing Service (MLS). For March, the MLS reported that homes sales in Seattle were up a stunning 62% over the same month in 2009, and pending home sales (where contracts have been signed but the deals have not yet closed) were up a comparable 58%. Pendings are regarded as a good indicator of future events, so there’s reason to hope that the new trend line is sustainable. The median price of a Seattle home sold in March was 3.2% higher than a year earlier, lending credence to the idea that Seattle is finally out of the trough. We were late, relative to other regions, in taking the real estate plunge; and we’re also later than some areas in the timing of our recovery. Just to put our market into perspective, however, it’s worth noting that many parts of the country—including Las Vegas, Phoenix, and parts of California—continue on a downward trajectory.

The news for our little part of town is even better than for Seattle as a whole. The MLS area that includes Madison Park, Capitol Hill, Montlake, and Madrona experienced a 103% surge in home sales, March-to-March, and a 77% increase in pending home sales. Not bad. Madison Park home sales, which had been averaging only 2.5 per month during the fall and winter of 2008/2009, have averaged 8 per month during the same period this year. This is how the market looked in terms of home sales for the past two years, based on data from Redfin and the King County Assessor’s Office (click on graph for larger image):

The number of homes actively listed shows a similar roller-coaster effect, moving from 71 listings in April 2008 to a peak of 116 in July 2009. Inventory has begun to climb again after hitting a recent low of only 67 listings in January:

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The relationship between home sales in the Park and the total number of listings has also moved back into line. In March 2008 we actually had a 38 month supply of homes. By last month the absorption rate had fallen to only 8 months, more in line with historic patterns:

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We’ve been reporting for several months that the under $1 million market appeared to be recovering rapidly. The problem for Madison Park is the rarefied nature of our market, with the median list price of for-sale homes hovering around $2 million for at least the past year. There have been few under $1 million buying opportunities in our market in recent months, leaving a lot of expensive inventory just sitting. This began to change towards the end of last year, and there now appears to be strong movement at least at the lower end of the upper market.

Lincoln Thompson, an associate broker at Windermere Real Estate-Madison Park, believes that the dam has finally broken, at least for the $1 million to $2 million segment. He provided me with some recent statistics showing a downward trend of inventory and a significant increase in pending sales. In June 2009, there were 57 of these pricier homes on the market in the 98112 zip code area, with just 3 sales and one pending sale. In March 2010 the market was down to 32 listings, with four sales and 16 pendings. If all of the pendings close, the market will be halved for that segment, assuming no new listings.

Overall, there have been a significant number of new listings in Madison Park during the last 30 days. Redfin, using data primarily from the MLS, reports a total of 21 new listings, which is certainly a record monthly increase for the past year or more. Some sellers clearly perceive that the market is on the move and now is the time to take advantage. Financing is reportedly loosening up, and rates remain relatively low.

This is all to the good, but the simple fact remains that it will take years for a full recovery to the pre-2008 price levels. In a report on the Seattle real estate market in February, Dr. Stan Humphries, Zillow’s chief economist, noted that Seattle remained one of the “bad” markets in the “good, bad, and ugly” continuum. The Zillow Home Value Index for Seattle fell 20% from the peak of the market. Zillow this month shows a 7.1% decline in home values for just the past year, so the rate of decline was already moderating before the recent evidence from MLS of an uptick. Madison Park, meanwhile, has been down about 17% from the peak, according to Zillow. So if the question is “Are we there yet?” the answer is certainly “No.”

Let’s do the numbers

Madison Park had a pretty good month in terms of home sales: seven houses changed hands, plus two condos. House sellers took a 12% discount, on average, from their original listing prices, but one Broadmoor home actually sold in only four days with a 1% discount. Although another Madison Park house also sold in under a month, most sellers were not as lucky. The average number of days on the market for sold houses was 194, though the average for the two condos was only 41. The median sales price of the houses was $1,170,000, which is significantly below the median listing price of the Madison Park houses still on the market. The condos, meanwhile, sold for an average price of only $442,500, but the condos were each quite small (763 and 1,045 sq. ft. respectively). The average discount taken by condo sellers from their original list price was only 2.8%.

Here is how the market looks in April, based on data supplied by Redfin:

Houses

Listings: 60
Median List Price: $1,985,000
Median Sq. Ft.: 4,430
Median Price per Sq. Ft.: $448
Average Days on Market: 127
Percentage with Price Reductions: 28%
Pending Sales: 11

Condos

Listings: 23
Median List Price: $495,000
Median Sq. Ft.: 1,025
Median Price per Sq. Ft.: $483
Percentage with Price Reductions: 48%
Pending Sales: 4

There are currently nine houses in Madison Park listed at $1,000,000 or less, 15% of total listings. These houses have been on the market for an average of 45 days. By contrast, the ten most expensive houses currently available have been listed for 209 days on average.

The most expensive home currently available is the lakeside Washington Park house we featured last month, listed at $12,900,000. With 6,600 sq. ft., that works out to a selling price of almost $2,000 per square foot, about four times the median cost of houses in Madison Park overall. Zillow values this 2009 Stuart Silk designed house at just $3,516,000, in line with the median cost of housing in the Park. I’m pretty sure the seller does not believe in Zillow as an arbiter of value. The teardown that preceded the current house on that property alone sold for over $4,000,000.

[Upper photo: This, 3,770 sq. ft. “traditional” brick Washington Park home (1121 38th Avenue E.) was built in 1928, was remodeled in the 1990s, has three bedrooms and two baths, and is priced at $1,985,000. It is the median priced home in the Madison Park market this month. Lower photo: One of the new listings in the last month, this 4,300 sq. ft. Craftsman, priced at $2,195,000, was built in 2006 and includes a detached garage with an upstairs apartment. It is located at 1622 42nd Avenue E.]

Thanks to Wendy Skerritt of Windermere Real Estate for some of the sales data cited in this column. The Northwest Multiple Listing Service was a primary data source. All statistics refer to Madison Park as a whole, including Broadmoor and Washington Park.