Many buyers are waiting for the $15,000 tax credit for homebuyers in 2009 to be signed into law, as well they should. This will continue to keep the volume stats down through the month of February as to closings. If the bill is signed by the 16th of February or so, as expected, you will begin to see volume pick up in March.
The other thing that buyers have been waiting for, are signs that prices are “at bottom”. While median prices for King County continue to slide as short sales and foreclosures continue to impact sold prices Countywide, we are seeing two emerging trends as to “bottom”. 20% for non-distressed property and almost but not quite 40% for distressed property, more like 37%.
Who determines “bottom” as to prices? Sellers and real estate agents would love to control prices, but the buyers of homes ultimately control home prices. While we wouldn’t expect to see prices bottom with continued bad news as to layoffs, buyers are consistently calling the bottom at 20% under peak pricing for non-distressed property.
The odd thing about the stats on this is that it doesn’t seem to matter how long the property is on market. If it takes the seller 800 days on market to get to 20% under peak prices, the property sells. If it takes the seller 65 days to get to 20% under peak prices, the property sells. In several cases when the property gets to 20% under peak prices, there is more than one offer. BUT rarely do those offers push the price much under the 20% under peak range.
Exception seems to be when the homes sold at peak values did not have remodeled kitchens and baths, but the property sold today does have a remodeled kitchen and baths, and possibly an addition as well. In those cases, the sales can be as high as 11% to 14% under peak pricing.
Because every neighborhood has a different peak value, and peak MPPSF, you can’t do whole zip codes or a whole County using median statistics. You have to find the peak price in each neighborhood for each house sold, and calculate the % off peak of the sale. A tedious chore.
House #1 – Redmond – peak pricing $249 MPPSF – Home sold at $210 PSF, 16% under peak with a remodeled kitchen of 8 years ago. The odd thing about this house is that in September through January, this home sat on market at 16% under peak, after first trying only 5% under peak for over 200 days. Once the market determined the price was not going to reduce further and reach 20% under peak…it sold anyway. This is not the norm and if the kitchen remodel had been more recent, it may have sold a bit higher and faster.
House #2 – Bellevue – Peak pricing $1.5M – this property sat on market for well over 700 days. The minute it reached 20% under peak it sold. This would not seem like a basis in and of itself, for calling bottom at 20% under peak. But when you see house after house going from not sold to sold when it hits the same price point of 20% under peak, the buyers speak in unison.
House #3 - Peak pricing $1,059,000 – This is a sad one. More than 4 buyers called this one at 20% under peak at roughly $850,000. Unfortunately it is a short sale and the lienholder would not approve the sale price at 20% under peak, even with several multiple offers all in the same price range. How much more proof of value to do need then several buyers in a market like this all calling current value at the same place? This one will likely go to foreclosure and end up selling for even less than 20% under market. Still…the buyers called the price of 20% under market the acceptable level.
House #4 - Seattle 98103 - peak pricing $425,000 – Asking price at 20% under market sold – this one was unusual as the opening asking price was 20% under market…it sold immediately…in less than a week. Doesn’t seem to matter if the seller takes over 700 days or 1 day to get to 20% under market…it still sells either way. This consistent price point of 20% under peak turning a property from ‘for sale ‘”to “sold”, gives us a price at which buyers determine, bottom has been achieved.
House #5 – Seattle 98115 – peak pricing $800,000 – sold when asking price reduced to 20% under peak. This is a sad one because the owner started out at well OVER peak pricing. Hard to believe that someone was thinking prices would actually be going up from mid 2007. But the end result was consistent with the other properties, and a buyer made an offer when the price was within 20% under peak prices.
There are some houses selling for less than 20% under peak. There are many, many houses for sale with asking prices that are much higher than 20% under peak. But unless it is a distressed property or an especially miserable location or condition, there are NO houses sitting on market without an offer ,where the seller is asking 20% under peak pricing.
I don’t “call bottom” nor do sellers or any real estate agent. The buyers call bottom. And when they consistently respond to an asking price of 20% under peak by bringing an offer…the buyers are calling bottom.
It’s very hard for a seller to price his house at 20% under peak pricing, even if he bought it 15 years ago for much less that that. Now it seems equally hard for buyers to see a house at 20% under peak…and pass it by.
“At bottom” has nothing to do with more activity. “At bottom” does not help real estate agents sell MORE houses, as most sellers are not ready to price at this point that buyers have determined is the price at which they will buy. When a given price point not only guarantees a sale, but brings multiple offers consistently at the same price point…buyers as a whole determine that “comfort zone” of pricing. Now sellers collectively have to agree with them…or not.