Why are sales down and prices up?

We all know the market is slowing down.  Inventory is rising.  The number of sales are fewer.  BUT the prices are still going up.

To better understand what is REALLY going on, you have to look at what is not selling and why.  The two charts below show that the price of properties SOLD keeps going up year to year.  Likewise, the properties currently in escrow have a median price higher than anything ever sold to date.

BUT the median price of homes NOT sold is way out of proportion to what the sellers SHOULD be asking. 


In the chart above, you can see that the median price of homes for sale (SFR and Condos) priced under $800,000 sold at a median price of $377,257 in the 12 months preceding 11-25-2005.  (5,826 of them sold with the average days on market of 21 days.)

The median price of homes sold increased 12.7% in the twelve months ended 11-25-06 from $377,257 to $425,000 and the days on market decreased from 21 to 19 and the number of properties sold decreased from 5,825 to 4,932.  So the homes that sold did sell higher and in less time, but fewer properties sold overall.  Partly because the price increase caused some of the sold inventory to jump over the $800,000 mark.

In the 12 months preceding 11/25/07, the median price increased 5.8% for homes sold from $425,000 to $449,950 and the days on market increased from 19 days to 24 days.  Those currently in escrow represent a 4.4% increase over the median of anything sold to date in 2007 at $469,000 vs. $449,950.  So prices are still climbing. 

But the biggest news is that the median price of homes NOT SOLD is $519,245.  That is 15.5% higher than homes sold for in the last 12 months.  Sellers are simply asking way too much to be successful in their efforts.  So when you see price reductions, that means the sale prices are coming down to where they should have been in the first place.  Not as high as sellers would like; but still higher than the comps. 

If sellers don’t Get Real Real Fast, then the market will start undervaluaing due to increasing overpriced inventory. 


In the chart above you can see that many of the homes priced up to $1,000,000 are even more “off” as to asking price.

The median price of homes NOT sold is $579,000, while the median price of homes sold from 11-26-06 to 11-25-07 is only $470,000.  The median price of those currently in escrow is $495,0000, so prices still increasing.  BUT the properties NOT sold have a median price of 23.2% over the median price of homes sold in the last 12 months.  Way out of line.

Sellers are simply asking way too much with no basis for this pricing.  So to a large extent more things aren’t selling because they shouldn’t be selling.  Sellers are simply asking way too much relative to reality.  Buyers are correct to refuse to buy property for way more than it is worth.

A 23.2% increase?  Who are they kidding?  Apparently…no one but themselves.

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ARDELL is a Managing Broker with Better Properties METRO King County. ARDELL was named one of the Most Influential Real Estate Bloggers in the U.S. by Inman News and has 33+ years experience in Real Estate up and down both Coasts, representing both buyers and sellers of homes in Seattle and on The Eastside. email: ardelld@gmail.com cell: 206-910-1000

66 thoughts on “Why are sales down and prices up?

  1. Pingback: FBS Blog » Blog Archive » Everything Is Advertising

  2. If you want to know why the median price is going up it is very simple the number of lower priced home sales decline in numbers is greater than the decline of sales of upper end homes. The reason is loss of sub prime financing for first time home buyers and minimal down payment investors.

    Median price is not a good measurement when there is a rapid change in a market that effects part of the market (in this case the lower valued homes) more than the market as a whole. If you want to know what is happening to home values then you have to go back to basics of looking at sales of similar age size location and quality of homes sales and compare sold prices. When you do that, you will be shocked to find South King County has areas that have declined as much as 7% over the past 6 to 7 months.

  3. Jim,

    I used all single family homes and condos in Kirkland, Bellevue and Redmond (K B R) from zero to $800,000 which would include all of the lowest priced condos. If the higher end were selling better than the lower end, the median price of properties not sold would go down, not up. If the properties for sale were overweighted with low end condos due to financing woes, the median price of homes not sold would be less and not more.

    I agree that your market in South King County and below may be different. I rarely use median prices as a guide. But given I’ve used a market that includes many lower priced condos in Juanita, Kingsgate, Totem Lake, Bellevue etc. plus fixers and only up to $800,000 which excludes high end in these markets, I don’t think the results are skewed.

  4. Kim asked if I could check how many of the not solds are recent purchase flips. I don’t want to do any more stats until I can do them for 2007 calendar year and not 12 month rolling basis. Am planning to do a truckload of stats on January 1, 2008 so we have good benchmarks moving into the new year.

    I’ll do some the first week of December to augment the one I did for October sales over on my blog, but will wait till year end to update the ones shown here.

  5. What’s your (or Kim’s) hypothesis, Ardell?

    Do you think the invensters/sellers of recent flips would be more willing/able to lower the price quickly to initiate a sale or less?

  6. Kim is answering sitting behind me here. He thinks many investors spent way more than they anticipated on improvements and in carrying costs. Much more than they budgeted for at time of purchase.

    As long as they continue to want a profit on top of all the extra costs, they will continue to try to sell them for more than they are worth. They won’t start dropping the price to below the set % of profit they desire until the banks start calling them on a daily basis. Most small investors can’t afford to hold onto properties for a long period of time, so when they are pressed to the wall by their investors, they will have to drop the prices and cut their profits to get them sold.

  7. Agree with ur hypothesis. I recall seeing an older post by you (december 06 perhaps) where you say the really old updated are the worst possible buys in this market. I would much rather buy a brand new or really old home than a old updated home.

  8. Really. I would think they would be more apt than a non-distressed resident home-owner to make a purely business decision to drop their price to get it sold, rather than watch their profits get eaten away by carrying costs. Maybe I’m over-estimating the smarts of flippers.

  9. A seller with a lot more equity, even though not distressed, usually has a lot more flexibility. It’s a lot easier to walk away with $250,000 instead of the $275,000 you “wanted” after costs, than it is to walk away with nothing or worse yet, reduce the price to less than your costs.

    A lot of flippers keep piling on the loans by refinancing until they owe more than they can sell it for.

  10. Pingback: Why are homes not selling? « Just Jenn …. Bi-monthly blog

  11. Hey Ardell, when that phenom was occuring here in Chicago a year or so ago it had more to do with the ‘Median’ indicator than anything else; Median, of course meaning as many ‘above’ as ‘below.’ A reduction of lower priced inventory pushed this number up here…I think. Math wasn’t my best subject. Anyway, very interesting piece.

    Hope you are doing well


  12. Hey Geno,

    Thanks for stopping by. I’m doing GREAT! It’s been a fabulous day.

    I agree with your logic in March, but my November the 2nd and 3rd tier markets should have caused a balancing back, and they have not. I doubt much will change by year end, though November seems to be the hottest month since July.

    I can hardly wait to see where the whole year lands come December 31 and how 2008 plays out by mid April.

    It’s definitely an exciting time to be in real estate in Seattle.

  13. Passing through “KBR” it seems like the “median home” hardly exists. The $400k -> $500k homes are being torn down and replaced with +$700k new homes. Often several on the same lot as the old home occupied. Isn’t this severly scewing the median as an indicator of a homes value fluctuation? I.e the median raises due to a change of the type of homes sold and available for sale not due to a raise in value of mostly unchanged homes?

  14. tj,

    At this point I don’t think there are enough of those to be skewing the median, considering I am including condos and townhomes.

    I am in complete wonderment at what is happening over in Bridal Trails Bellevue at 134th and 30th vicinity. Huge mansions and shortplatting of the kind never before permitted in that area.

    I can do a tax record search to figure out what the “median” home really is in K B R. Will get back to you on that. I can check on “as built” vs. property listed in the mls. I’ll try anyway.

  15. Thanks and sorry Ardell, I didn’t mean to cause you more work.
    I think if it was easy to calculate and include the median sqft and median age of the homes in your data it should be easy to spot if there is a trend of change to the type of home that is the median.

  16. tj,

    No trouble at all. I’m quite interested in the results myself. Give me a “wish list” of stats you would like for K B R combined or separately. I’m too agent oriented to do them in a manner that consumers might find of more value. Your input is much appreciated.

  17. The data and rest of comment didn’t post for some reason. Not in the spam bin either. I’ll have to post it as an update to the post. Not feeling too great tonight…will try to get it up tomorrow.

  18. Ardell,

    This is the second time today that WP cut a comment short. My guess is that the problem started with a “less than” character (i.e. “<") because WP thought you were trying to use HTML. One solution is to put the "<" in quotes.

  19. I agree with Jim–the second response above–that the reason for the median rising is that the lower end properties are not selling as well. But I don’t entirely agree with his conclusion–it’s not all sub-prime. Part of it is perceptions–that people in the lower income brackets who are not sub-prime think they also are somehow affected by what the press calls the “mortgage meltdown.” Thus, they are not out looking for properties. People in the higher income brackets expect to be able to get financing because they’ve always gotten it in the past. They are still out looking. Carried to an extreme and the median in Seattle could be $700,000 in the next couple of months! 😉

    BTW, if I had to guess, I’d guess the median price of unsold homes is always higher than the median price of sold homes–even in the best of markets.

  20. One thing I did notice is that 04-05 included 100 condos that sold for less than $100,000. A price category that became non-existent in later years.

    I could not run an age of property median, but the square footage median indicated that the higher median sale price bought less and less each year on the sold properties. The square footage median of the properties not sold was higher than those sold.

    Properties sold in 04-05 for $800,000 or less and a median square footage of 1,612.

    In 05-06 the median price went up $50,000 and the median square footage decreased to 1,500.

    06-07 the median went up $28,000 and the median square footage went down to 1,400.

    Currently in escrow up $20,000 as to median price but also up to 1,558 as to median square footage.

    The up to $1M chart about the same trend with 1,700, 1,500, 1560 and 1,526 on the sold properties from 04 to present. In escrows at 1,575 and not solds at 1,745.

    To Kary and Jim, the not solds are more square footage and pricier. So it doesn’t seem it is the lower priced and smaller properties that are creating this result by not selling due to financing issues. Though I agree my perception might be the same, the stats don’t seem to prove that theory out.


    I can’t do a median age. I can break the stats down into age segments though, for comparison purposes. Would that be worthwhile? Maybe ten year increments or built prior to 30, between 20 and 50, built in the 60s, and then ten year increments from there?

  21. Thanks Ardell!

    This makes the data more inline with what is reported elsewhere that the peak of home values might be reached for this cycle. When looking at the sqft $1 buys you it can be seen that the low seems to be behind us.

    Period sqft / 1$
    —– ——–
    04/05: 4.28
    05-06: 3.53
    06-07: 3.11
    Escrow: 3.31
    On sold: 3.35

    I also suspect that the same $ might buy you a newer home today. Age segments would absolutely be interresting to see.

  22. One more, the “not sold” calculation I did is wrong. The number should be 2.69 sqft for $1k. I fully agree with you, who are they kidding?

  23. Still wrong with “Not Sold” since I noticed you didn’t give the sqft for “Not Sold” under $800k. Sorry about all the corrections…The rest of the list should be correct though with it’s indication that the peak value might be passed at this point of time.

  24. tj

    In the up to $800,000 the median square footage for in escrow is 1,460 and the median square footage for not sold is 1,558.. Sorry, I was rushing that in before a meeting this morning.

  25. Every time I see this piece I think to myself one thing–and it’s somewhat inconsistent with what I wrote above–but not entirely so.

    I’m not sure it’s that useful to compare the price of sold and “not sold” properties, especially in this market. The sold properties probably are more likely to have certain attributes than the “not solds.” Remodeled kitchens, fresh paint, no mess scattered about, etc.

    Whenever I’m previewing houses/condos, I really wonder how some owners ever expect to sell their houses. When there’s 10 properties that meet the criteria, similarly priced, and only 2 of them are neat and clean, which 2 do you think will sell first?

  26. I felt that way last year and in year’s past, Kary. But this year we really need ot hone in on if anything is substantially different than in past years. Yes, I do think we won’t know everything we need to know until March or April of next year, as in most years. Some and most days I feel like the worst is over and August to November was the darkest before the dawn period.

    I’ll check your hypothesis when I work on the age range for tj this weekend, and post the results.

  27. anything substantially different from previous years……

    huh? what could there possibly be?

    i can’t imagine a single thing that has changed since 2004.

    oh, wait. didn’t i hear something about ridiculous speculative financing tools disappearing? people being expected to actually bring cash to the table when they sign a loan? a nationwide recession bringing consumer confidence to levels previously caused by natural disasters?

    i know as Realtors you are expected to pretend things are ok, but they really aren’t. much sounder markets than Seattle are already on the downhill side of this boom. sacrifice a few sales today for credibility tomorrow. it will be worth it.

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