The April stats are in and it appears we’re at an exciting chapter in the Seattle condo market boom. One thing that jumps off of the table below is how much listings grew compared to the same time last year and how closed sales grew compared to last year, but at a fraction of the rate of listing growths.
Many buyers will be happy to see increasing inventory and stablilizing prices. Owner residents can also find comfort knowing the last couple year’s exuberance is now settling back towards more sustainable long-term growth without giving up their recent gains.
(NWMLS statistics. Information deemed accurate but not guaranteed.)
Hard core optimists will argue that the fact that April year over year closed sales didn’t grow as fast as April year over year active listings has more to do with seasonality than market cooling. Perhaps April was a ramping up month where sellers decided to start the season off and an even larger number of buyers decided to wait till May to make their moves. We’ll have to wait and see how this May’s closings increased over last May’s to see if they’re right.
The pessimists will argue that the doubling of listings this year versus the same time last year is clearly a sign that we are turning towards a buyers’ market. If demand in the busy Spring and Summer months doesn’t ramp up fast, they may be right.
It’s very possible both camps are on to something. There will probably be more buyers coming off the sidelines in the next couple months since some were frustrated by the buyer competition in previous years that made home buying frustrating and often fruitless. While these buyers come back to the shopping circuit, there will also be a lot more sellers who wanted to maximize their gains and were waiting for the perfect time to cash in (as well as find a bigger place that they could afford).
My gut says the market will continue to be very active and strong and prices will appreciate a few percent this year — neither crashing nor growing by the double digits. Ultimately, I think we’ll most likely return to a ‘normal’ market benefiting buyers and long-term owners at the expense of some of the more extreme flippers who won’t be burned but won’t be building too many new overnight riches either.
Technorati Tags: Seattle Real Estate, Seattle condos, Seattle condo market, Seattle Economic Indicators
Looks like we were both doing stats today at the same time. I posted a link to this article over in the comments section of my post on Rain City Guide.
It’s interesting to note that even though actives went up dramatically, prices held steady for the closed sales.
Wendy,
Thank you for posting an objective view of the condo situation. I fully agree with you…prices are returning to a normal level, and the exuberance has faded.
I am sick of reading the Times and the P-I everyday saying that things are “only getting hotter” and the NAR stating that things will get hot again at the end of the year.
I would point out that the increase in closed sale price is due to completion of new condo projects, and is not a true representation of the market as a whole (but that might be nitpicky)
Dan… it’s not nitpicky at all. It’s like seeing a big drop in “listed prices” when a new building comes onto the market; if it’s all studios and 1BD it can skew the stats.
Even a relatively small number of flippers can skew things, too; a building gets done, units start closing, and then immediately are relisted at higher prices- it appears the market in that building is skyrocketing, when the reality is that it’s just flippers looking for quick scores. Give it a couple of years, come back, and look, and the sharp spikes up/down will moderate quite a bit.
I disagree that the closed sales prices for new construction doesn’t reflect the market overall. Seems to me that if there are a lot of them, they’d be representative of the market overall. It might be pronounced due to the number of simultaneous closings from a single building but to say those prices aren’t going to represent and directly influence the market seems innaccurate.
As far as prices go, note that Wendy listed the median sale price, which is far less affected by outliers than the average sale price.
For example, say we had 3 sales in ’06, at prices of 500, 300, and 700. The median sale price would have been 500, and the average would also have been 500.
Now, say we had 3 sales in ’07 as well, but at prices of 500, 400, and 1200. The mean sale price would still be 500, but the average sale price would shoot up to 700.
In other words, a few high (or low) sales are typically not going to affect the median sale price.
Edit: “mean sale price would still be” => “median sale price would still be”
ALWAYS look at the median, not the average
if gates ever sold his house, average prices would shoot through the roof for that month. 🙂
Great discussion here. To be clear, I guess I’d say we should “almost always” look at the median. Sometimes the mean can be better.
If, for example the market was deteriorating, the higher end of the market could show signs of pricing weakness before the rest of the market which in theory might not impact the median as much.
I think the main thing is not to get too fixated on any single number and look at all the indicators to tell the most accurate story. Of course, if it’s just a blog post, the median seems fine to me 😉
In some applications, analytics for example, averages are preferred over medians. The problem with medians is that they assume that the data is normally distributed. This is useful when attempting to normalize right-skewed wealth and income data (see Sam’s above Bill Gates example)
For real estate, I’d be most interested in comparing the mean to the median, and using that analysis to identify possible trends and market floods. I’d also like to see some data on how normally distributed prices are in each category. That information would be extremely useful when determining your target price when purchasing or selling.
The neighborhood segmentation used in these statistics is also somewhat confusing and something that I believe is frequently used by developers to mislead buyers. Gallery is perhaps the guiltiest offender, over-emphasizing all that is Belltown on marketing collateral, locating their sales office in the very heart of belltown, despite a construction site that is only 1/2 block from Lower Queen Anne. Personally, since I live just inside the Lower Queen Anne side of the Denny corridor, I average the QA and Belltown stats together to estimate Lower Queen Anne.
After all, location -IS- everything, right?
I’m a student at UW studying the condo market for a paper and am interested in understanding the optimist side this logic. I realize that basic supply/demand economics is not the sole driver of pricing given the elasticity of demand of houses but it’s a great indicator, especially for the condo market.
If you establish a supply/demand ratio based on the marketplace statistics – I get the following result: (note: the ratio is based on number of sales divided by number of active listings to understand what % of listings is actually selling.)
Belltown/Downtown: 2006 38%, 2007 26% – sales, as a % of inventory decreases 12% year over year
Queen Anne 2006 48%, 2007 25% – sales, as a % of inventory decreases 23% year over year
Cap Hill/Mad Park: 2006 53% 2007 31% – sales, as a % of inventory decreases 22% year over year
If I were to draw a supply demand curve – then as supply increases over demand, price shifts downward as demand controls pricing power. The anomaly in the data is in the pricing being positive at all for April. However, given that inventory (supply) is between 91-160% increase, while sales volume is dropping sharply I’m suggesting any positive return at all is unsustainable.
With all the unfinished inventory coming on to the market – one could hypothesize that the ratio of sales volume to inventory will continue to drop off substantially. When supply is dramatically outstripping demand how does any pricing power remain with the seller in the condo market?
Note: I’m working on an April summary this week so the comments below only take March and prior trends into account.
Interesting question. I’m not an economist but here are some potential explanations:
-Sellers are confident that demand will pick up again / are convinced their property is worth a lot more than the market is offering and are willing and able to wait or only adjust prices slightly instead of dropping prices dramatically for an immediate sale.
-Sellers see that many units that have dropped prices do not necessarily get sold much more quickly suggesting that buyers have convinced themselves to wait longer almost regardless of current pricing.
-The real estate market is not very fluid. Prices may indeed go down at some point but it may take some time for prices to adjust.
-A disproportionate amount of the remaining demand in the market today is going for higher end units so the median pricing is holding firm / rising slightly.