First Quarter Real Estate Report

Will lack of inventory push prices up?

During the first quarter, Madison Park had the lowest level of homes for sale since we began tracking market statistics three years ago.  In fact, the 51 houses and condos currently available for purchase represent a dramatic 34% reduction in the level of inventory over the past year.  If the normal relationship between supply and demand holds true, this dearth of properties on the market should bode well for those who do choose to list their homes.  Declining supply when confronted with a consistent level of demand theoretically results in higher prices.  But while other Seattle neighborhoods may be enjoying the benefits of a supply and demand imbalance, Madison Park’s housing market at this point doesn’t seem to be reacting.

The probable reason for this is that the “hot” market right now, real estate agents tell me, is in the $400,000 to $800,000 price range.  We hear stories of bidding wars in many places around Seattle, six or seven bidders for a bungalow in Ballard and 17 offers for one house in another neighborhood.  But this frenzy does not seem to be impacting the $1,000,000-and-up segment of the market.  And frankly, that’s about all Madison Park currently has to offer.

Believe it or not, the median house in Madison Park (Washington Park and Broadmoor included) is currently priced at almost $2,500,000.  Only seven houses in our market, 18% of the 39 current listings, are priced at under $1,000,000.   Almost every house has three bedrooms or more. The square footage of all but the bottom third exceeds 3,000 sq. ft.

These are big houses with a small audience.

Here’s a capsule view of the market in April, as provided by Redfin, utilizing information from the Northwest Multiple Listing Service:

Houses

Listings:  39
Median List Price:  $2,495,000
Median Sq. Ft.:  4,010
Median Price per Sq. Ft.:  $622
Average Days on Market:  98
Percentage with Price Reductions:  26%
New Listings:  10
Pending Sales:  12

Condos

Listings:  12
Median List Price:  $517,000
Median Sq. Ft.:  1,106
Median Price per Sq. Ft.:  $467
Average Days on Market:  134
Percentage with Price Reductions:  42%
New Listings:  4
Pending Sales:  8

Looking forward, the outlook is definitely better than the rear-view reality of the first quarter.  There are 20 homes pending sale, representing more than 50% of the market inventory.  That’s pretty solid, assuming that a high percentage of those pendings can be converted into completed sales.

In the entire first quarter, however, only 17 sales occurred: ten houses and seven condos.  That’s under six sales per month, on average—a pretty unimpressive performance.  The good thing is that quite a few of those sales cleared out relatively old inventory, with four of the six most-recent house sales occurring after the properties had been on the market for 200 days or more.  One house changed hands at $2,150,000 after 871 days on the market, the seller finally accepting a 17% discount from the original asking price.  Another house, however, sold after 328 days on the market, with the seller taking only a 4% discount from the original $1,875,000 asking price.

The most-happy seller, on the other hand, was probably that person who really priced to the market.  His or her $1,998,000 list price was trumped by a buyer willing to pay $2,025,000, 101.4% of list, after the house had been on the market for only five days. That’s either incredibly good fortune or a smart “priced to sell” calibration of the home’s market value.

As a result of some of these sales, the average days on market is currently under 100 days, although there are five homes that have been on the market 200 days or more (as well as five condos).

There were no hugely expensive homes sold in Madison Park in the first quarter, the most expensive being the $2,150,000 sale earlier noted.  But by the same token, only two houses sold in the under $1,000,000 range, and they changed hands at $800,500 and $950,000, respectively.

Here’s what happened on the sales front during the month of March:

Houses

Sales:  5
Median Sale Price:  $1,800,000
Average Sq. Ft.:  4,688
Average Price per Sq. Ft.:  $384
Average Days on Market:  318
Average Discount from List Price:  13.2%

Condos

Sales:  4
Median Sale Price:  $615,000
Average Sq. Ft.:  1,490
Average Price per Sq. Ft.:  $461
Average Days on Market:  74
Average Discount from List Price: 7.8%

As has been true since the beginning of the market downturn, discounts from original list price remained high last month and the average days on market for sold houses was also grim.  For the quarter as a whole, however, the number was much lower, more like 200 days on average.   The condo market continues to suffer from weak sales, but the average days on market has declined for sold units.

Will the heating up of the under-$1,000,000 market begin having an impact on the upper-tier neighborhoods any time soon?  Opinion appears to be divided on that issue.  One realtor I spoke to recently said that where the lower market goes, the upper market follows.  On the same day, another realtor said that she thinks there is no correlation between the lower- and upper-market tiers.   In the next few months, we may find out who’s the better prognosticator.

[Photo above: A 4,310 sq. ft. view house, located at 602 36th Avenue E. in Washington Park, built in 1987 and priced at $3,895,000.  Thanks to Wendy Skerritt of Windermere Real Estate for her help in compiling the sales data.  Listing data courtesy of Redfin, using information from the Northwest Multiple Listing Service.]