Real Estate Report: First Quarter 2011

Some good news, and some not so much


A reader took us to task last month for our supposedly gloomy reporting on the state of the local real estate market.  With her house currently for sale, she worried that the drumbeat of negative market information might impact the decision making of potential house buyers, causing them to lower their offers or hesitate to purchase. On the other hand, we also heard from a realtor who said she thought our factual reporting was helpful, since in her opinion many sellers have an unrealistic view of market conditions and need a third party to confirm their need to “price to the market.”

We’re not attempting to be either doom-and-gloom or Pollyannaish in our coverage of Madison Park real estate.  We’re just trying to tell it like it is.  We have a strong belief that having information is a good thing. For markets to operate most efficiently, it’s important for both buyers and sellers to have a realistic assessment of market conditions.  This is only possible when information about what’s happening in the market is freely available.

So with that said, we can categorically report that the Madison Park real estate scene is not as bad as all that--and it certainly could be in a lot worst shape at this point than it actually is. It could, for example, be just as bad as it looked when the New Year began.

At the end of last year, the trend of home sales really appeared positive.  In December there had been 16 homes sold in Madison Park, a monthly volume not seen in several years.  In January, however, that run came to a screeching halt, with only four Madison Park homes sold, according to the Northwest Multiple Listing Service (MLS).  This low level of activity was repeated in February, with another four sales recorded.

Fortunately for our story (and, not incidentally, for Madison Park homes sellers), the glimmer of spring brought renewed sales activity to the market, with ten homes changing hands during March.  Moreover, there are currently 13 homes pending sale in Madison Park.

Just to put these numbers into perspective, we note that the absorption rate (the relationship between the number of homes for sale and the monthly sales volume) is currently 8 (in other words, it would take 8 months to clear the existing inventory).   When the market was at its worst (late 2008/early 2009) the absorption rate varied between 16 and 38 at any given point.  So, in this respect at least, things could definitely be worse.   We’ve seen it.

This is how the Madison Park market (Washington Park and Broadmoor included) looked during the first quarter in terms of sales activity:

Houses

Sales:  12
Median Sales Price:  $1,127,292
Average Sq. Ft.:  3,659
Average Price per Sq. Ft.:  $405
Average Days on Market:  270
Average Discount from Original List Price:  9.7%

Condos

Sales:  6
Median Sales Price:  $387,700
Average Sq. Ft.:  1,237
Average Price per Sq. Ft.:  $380
Average Days on Market:  178
Average Discount from Original List Price:  13.8%

This picture, as presented by the MLS, is made even brighter when information from the King County Assessor’s Office is thrown into the mix.  No few than six additional houses, three of them in Broadmoor, were listed as sold by the Assessor in the first quarter.  The median sales price for these non-MLS sales was a stunningly high $2.6 million.

If you include all of the sales reported by both data sources, 24 homes were sold in Madison Park in the first quarter of 2011, an average of 8 per month.  That’s in line with sales for the first quarter last year and significantly above the average of only 4 monthly sales at the depths of the market’s doldrums (September 2008 through August 2009).

The most expensive house sold so far this year is a 7,500 sq. ft. brick mansion in Broadmoor, originally listed at $6.5 million but selling in March for $4.7 million, a 28% haircut.  It had been on the market 822 days, according to the MLS.  Four other houses changed hands at over $2 million, and there were just five houses that sold for under $1 million, one of these being a “financial institution resale” for only $419,500.  That was a cute-but-tiny (though well priced) 1926 stucco located north of E. Madison St., which we pictured on the blog in December.  The least expensive house sold during the quarter was a 1,108 townhome, which sold for $364,000.

One of the six condos sold during the quarter suffered by far the biggest discount from the original listing price that we’ve seen in some time, a whopping 42%.  Originally listed at $485,000 481 days earlier, this 1,125 sq. ft. abode in Canterbury Shores finally sold in March for just $279,950.

Two sellers, however, were lucky enough (or smart enough) to sell their homes for an amount higher even than their original listing price. A house in Broadmoor was listed at $995,000 and then sold 12 days later for $1,050,000.  Another Broadmoor house, more surprisingly, was listed at $1,593,000 and sold 489 days later for $1,650,000.

The bottom line on property sales during the first quarter is that homes continued to sell, though it was taking six-to-nine months on average for it to happen, and only after one or more price reductions in advance of the final negotiation, which generally resulted in a discount.

Inventory, meanwhile, seems typical for this time of year, at least compared to the last three years.  What usually happens is that inventory levels rise as summer approaches and the peak selling season begins.  There are currently 77 homes on the market in the Park, but it is likely that the pattern of the last two years (when listing rose to over 100 by June) may be repeated again in 2011.

Here’s a snapshot of the current market, as reported by Redfin, utilizing MLS and owner-listing data:

Houses

Listings:  57
Median List Price:  $1,600,000
Median Sq. Ft.:  3,500
Median Price per Sq. Ft.:  $457
Average Days on Market:  136
Percentage with Price Reductions:  42%
New Listings: 13 (last 30 days)
Pending Sales: 8

Condos

Listings:  20
Median List Price:  $425,000
Median Sq. Ft.:  1,006
Median Price per Sq. Ft.:  $422
Average Days on Market:  120
Percentage with Price Reductions:  40%
New Listings:  3 (last 30 days)
Pending Sales:  5

The standout statistic here is the percentage of properties currently on the market that have suffered price reductions: more than 40%.  This is in spite of the fact the average days on market for these properties is significantly lower (136 days for houses) than the average number of days on market for recently sold properties (270 days for houses). And the percentage of listings with reductions is trending up.  Last year the percentage generally varied between the high-20s and mid-30s each month.

Let’s end this, however, on a happier note.  The Puget Sound Business Journal recently reported that pending and closed sales of homes worth more than $1 million have surged nearly 63% in King County so far this year.  The article speculates that this trend is the result of stock market gains and rising corporate earnings, which are freeing up cash for people able to afford these more-expensive homes.  Since Madison Park sits squarely in the over-$1 million market, this is good news, if true.

Finally, there’s this bit of encouragement from SeattleBubble.com: The high-tier of the market (the top third in terms of price) has suffered a smaller decline in sales price than the lowest tier.  All three tiers are, of course, down. But we’ll take our good news where we can find it.

[Thanks, as always, to Wendy Skerritt of Windermere Real Estate for providing some of the MLS market data used in this posting.]

Photo above: This house at 1115 McGilvra Boulevard E. certainly qualifies as the Steal of the Month if it sells for its listed price of $587,500, which is unlikely.  The habitable 1,800 sq. ft. structure, built in 1919, has sweeping views and a giant 7,800 sq. ft. lot that is perfect for re-development (though high on a hill with no intersecting alley).  The property recently became bank-owned through foreclosure.  The appraised value, according to the King County Assessor, is $1,264,000, of which $65,000 is contributed by the existing structure.  This is a listing of David Schroeder of John L. Scott, who tells us he expects multiple offers.        CLICK ON CHARTS TO ENLARGE.