We got some pushback recently when we described Madison Park as an extreme “buyer’s market” on the residential real estate front—in other words, a “very cold” sales environment. That was not an original conclusion on our part, however. We were simply quoting the opinion of real estate website Zillow.
Not surprisingly, some readers disputed the notion that this is not a seller’s market; and they seem to have a point. According to Merriam-Webster, a buyer’s market is “a market in which goods are plentiful, buyers have a wide range of choice, and prices tend to be low.” That seems to be pretty much the opposite of the situation here, where at the end of the first quarter there were only 22 residential listings, hardly a “goods are plentiful” situation for a market that saw more than 100 listings during the downturn, with prices significantly lower than the current median sales price.
Here’s a capsule summary of the market at the end of the first quarter:
Median List Price: $2,595,000
Median Sq. Ft.: 4,105
Median Price per Sq. Ft.: $625
Average Days on Market: 78
Percentage with Price Reductions: 9%
New Listings: 22
Pending Sales: 10
Median List Price: $475,000
Median Sq. Ft.: 1,025
Median Price per Sq. Ft.: $463
Average Days on Market: 132
Percentage with Price Reductions: 60%
New Listings: 2
Pending Sales: 0
This market snapshot seems to prove we’re experiencing a seller’s market, which the dictionary defines as “a market in which goods are scarce, buyers have limited range of choice, and prices are high.”
We went back to Zillow to get a clarification of their reasoning, and here’s how the website defines its approach: “Based on three metrics—sale-to-list price ratio, the prevalence of price cuts on home listings, and time-on-market—the market temperature provides information on the current balance of bargaining power between buyers and sellers in this neighborhood relative to other neighborhoods in the same metropolitan area.” So the “hot/cold market” issue for Zillow has do with other variables than simply inventory levels. In the case of Madison Park, Zillow showed 21.3% of Madison Park properties as selling below the list price earlier this year, with 26.7% of properties on the market having undergone a price cut from the point of the original listing. The days-on-market metric, however, was not high at the end of the first quarter.
Here’s an overview of the first quarter’s sales activity:
Median Sale Price: $1,499,000
Average Sq. Ft.: 3,457
Average Price per Sq. Ft.: $434
Average Days on Market: 80
Average Discount from List Price: 5.8%
Median Sale Price: $597,500
Average Sq. Ft.: 1,500
Average Price per Sq. Ft.: $542
Average Days on Market: 81
Average Discount from List Price: 6.8%
An average rate of six sales per month is certainly not barn-burning performance, but for the market as a whole it’s clear that discounts are still being required of many sellers and price cuts are common. So Zillow has a reasonable point to make about a “cold” buyer’s market in Madison Park, using their definition of what that means.
|Most expensive listing, at $6,450,000: 3414 E. Shore Drive, Broadmoor|
As we discussed last month, however, the market here can really be divided into two segments, each of which is exhibiting a different sales pattern. Houses priced under $1,500,000 or so are selling quickly, may garner multiple offers, and are sometimes being sold at a premium from the original list price. At the upper end of the market, however, price cuts and discounts are the norm and the waiting time is longer. Hotter (a seller’s market) at the bottom, but colder (a buyer’s market) at the top. Interestingly, Zillow has now removed the “Hot/Cold” thermometer from the Madison Park home-value page. Perhaps the company’s methodology was just not in keeping with the generally accepted definition.
We noticed some other changes as well. When we first reported on Zillow’s analysis of our market we were looking at the website’s Madison Park page in mid-March. At that time, Zillow showed a 7.1% year-over-year increase in Madison Park home values and was projecting a 4.8% increase for the upcoming year. The Zillow Home Value Index for Madison Park (Broadmoor excluded) then stood at $925,200 (the estimated median value of homes in the neighborhood). Now, just two months later, Zillow shows a Madison Park Home Value Index of $964,300, an 11% increase in neighborhood values over the past year, and a one-year forecast of a 7.9% rise.
Things are looking up, at least in Zillow’s significantly revised opinion.
[Thanks to Laura Halliday 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. Lower photo courtesy of Ewing & Clark, via Redfin.]