Although the median price has its drawbacks, it does at least give us a reasonably accurate measure of the general direction and magnitude of price changes in an area.
While we have had regular monthly updates on the county-wide median prices, we haven’t really taken a look at the price breakdowns by neighborhood for a while. Let’s check in on the total drop in median prices by neighborhood.
The chart below shows the total drop in the single-family median price from the peak month to the lowest month to date for each of 29 NWMLS neighborhoods (701—Downtown Seattle excluded, see a map here).
Note that the peak months ranged from January to November 2007. For the price troughs came in February for 11 areas, in January for 9 areas, in October through December in 8 areas, and in June for Area 550 (Redmond, Carnation).
The largest drops so far have been in Mercer Island (510) and Medina/Clyde Hill/West Bellevue (520) tied at 52%, Skyway (360) at 54%, and Vashon Island (800) at 55% off.
The smallest drops so far have been in Ballard/Greenlake/Greenwood (705) at 24%, Black Diamond/Maple Valley (320) at 23%, and East Bellevue (530) at 22% off.
It’s interesting that at 22% off, the county-wide drop from the peak is equal to the smallest drop that has been seen to date in any individual neighborhood. Due to the low volume of closed sales in individual neighborhoods, the median price tends to fluctuate more than it does county-wide. When comparing the individual peaks to February 2009, 8 neighborhoods have dropped 22% or less.
Does a median price drop of 50% off or more in a neighborhood mean that most houses in that neighborhood have had their values drop 50%? Probably not. But it is definitely more likely that houses in such neighborhoods have dropped in price considerably more than those in neighborhoods with only a 20% drop.
jon » Mar 10, 2009 at 9:30 am
Those prices reflect 4 closed sales on Mercer Island and Vashon, and 7 in Skyway. It would be interesting to see what those particular properties that were sold were. Are they the paper shuffling type transactions that regularly show up as the unusual prices in the eastside flop thread? The Feb median for Mercer Island was $591K, which is low even for tear-downs there.
50% Off » Mar 10, 2009 at 9:33 am
I’m not going to say ‘I told you so’ but perhaps my nom de plume was a bit more predictive than many might have thought.
That being said, we’re still only talking a median price of sales and this doesn’t reflect overall house prices. It’s a snapshot of ‘current’ buying and indicative of what’s selling in any neighborhood. The expensive houses aren’t selling as much so you’re only left with the lower end houses being sold. No one has much appetite for a jumbo type loan, IF they can even get one and that, too, may be the real issue here. Eventually, if no one can get financing for the more expensive houses then those prices will have to come down much more if selling is the objective.
deejayoh » Mar 10, 2009 at 9:37 am
I don’t think that is a globally true statement. I suspect the issue Jon points out – low volume, no really expensive homes are selling – is a big contributor. Some of your biggest droppers are also the most expensive neighborhoods
alex » Mar 10, 2009 at 10:16 am
[Tim]Although the median price has its drawbacks, it does at least give us a reasonably accurate measure of the general direction and magnitude of price changes in an area.
I gotta keep you honest here, man: when the median price kept going skyhigh, your tone was one of complete discredit of that measure… and now that it is going down, that tone has changed.
Kary L. Krismer » Mar 10, 2009 at 10:35 am
For Mercer Island and Bellevue the change probably is largely a reflection of the difficulties getting large loans. For Skyway (an area I used to follow closely) it’s most likely just a result of low volumes skewing the numbers (including possibly low volume skewing the number up last year).
Median is an important number, but this is one of the few areas where I agree a bit with Ardell–you need to look at how square footage changed too. On the way down median has hidden some of the declines because people are buying larger houses, meaning the decline per square foot is even higher than the drop in median would indicate. But none of these measures are as good as a CMA or appraisal of your particular type of house in your particular neighborhood.
I’d add you often see large movements in the prices of the various areas for the NWMLS, so seeing 50% down when overall it’s down about 20% isn’t terribly surprising.
Ray Pepper » Mar 10, 2009 at 11:02 am
Oh the HUMANITY! 50% off!!
“They promised us they would not sell for under market value!”
“Thats not fair”
http://www.youtube.com/watch?v=10WoQZKZkNs&feature=related
Emma Anne » Mar 10, 2009 at 11:23 am
Ray, at least the reporter mentioned the first time home buyers (like fire fighters) at the auctions who could afford these houses for the first time.
Ben » Mar 10, 2009 at 11:25 am
Ray – awesome link!
This video explains nicely how few people understand what “market value” means.
BTW – anybody else got a comment on the sucker rally happening on Wall Street right now? Some people are about to make a killing shorting bank stocks.
Scotsman » Mar 10, 2009 at 11:54 am
“Lies, "golly" lies, and statistics!”
This really only says one thing to me. The people like my cousin, who make $150K a year or so, can no longer buy $800,000 homes with 5% down an a teaser interest-only introductory rate of 3%.
Seattle is surprised to discover that its citizens fall along a fairly normal income distribution curve. Yes, it’s true,Elizabeth, there just aren’t as many people making big incomes as there are over-priced homes. Especially now that the fairytale financing has disappeared in a puff of Pink Pony Dung….. uh, sorry, make that “dust.”
Dave » Mar 10, 2009 at 12:00 pm
Gotta agree with Alex.
I don’t care either way – but when median was going up everyones consensus it didn’t matter. We can look at the logs if you want to see.
Now that it is going down the onyl legit intellectual statement about still is..it doesn’t matter.
Unless you are willing to re-evaluate the orginal premise.
Ira Sacharoff » Mar 10, 2009 at 1:26 pm
RE: Kary L. Krismer @ 5 –
I live in area 360, Skyway, et al, and follow that area fairly closely.
In July 2007 at the peak of the market, 23 homes were sold. The median price was 399,000 dollars. The lowest price home was 257,000 dollars and the highest was 704,000 dollars.
In February 2009, 7 homes were sold. The median price was 198,000 dollars. The lowest price home was 160,000 dollars and the highest was 549,000 dollars.
The low volume of February was certainly a factor, but it seems to me to bear out that thoery that the less expensive areas started dropping earlier , the “it begins at the bottom” school.
A lot of area 360 homes are lower tier, and they’ve fallen hard. A house at the end of my block has been for sale since the summer, in the Earlington neighborhood near the Renton city limits. It was first listed at 400,000 dollars, and has been completely redone with all the requisite stainless appliances and granite countertops…60’s brick home in good shape. It’s now for sale for 249,000 dollars.
I went to the open house when it was first listed, and I thought it was insanely overpriced and I mentioned to my wife that the sellers weren’t going to get anywhere close to 400,000 dollars for that house.
Either the sellers or the listing agent thought they were in Bellevue, or they were completely deluded, or they didn’t really want to sell the house.
What would have happened if the sellers first listed that house at 340,000 dollars last summer?
It probably would have sold.
softwarengineer » Mar 10, 2009 at 1:42 pm
WHERE’S THOSE BLOGGERS FROM SIX MONTHS AGO?
You know, the one’s telling us the bottom will be like 2005 prices. Hey, the fun could go on and on; perhaps we’re headed for 1935 prices…LOL
deejayoh » Mar 10, 2009 at 3:11 pm
By Kary L. Krismer @ 5:
Do you think it is a matter of difficulty getting a loan, or simply unwillingness to take on that albatross in a declining market/uncertain economy?
I suspect there are plenty of people who can qualify for a loan who are just choosing to wait. You don’t get wealthy enough to buy a million dollar house by investing in a bunch of declining assets.
Kary L. Krismer » Mar 10, 2009 at 3:13 pm
RE: deejayoh @ 13 – A response from a mortgage broker would be better, but from what I’ve heard financing above a certain point (perhaps $1,000,000) is both difficult and expensive (much higher interest rates).
PhinneyDawg » Mar 10, 2009 at 3:17 pm
I bought a home in December 07 (I know, sucker) and looking at the current MLS listings, the quality of homes out there is POOR compared to when I was looking for a home.
Anyone who has a home worth buying is hanging on to what they have. No one likes to sell at the low point in the market unless they have to. Add to that, no one has the stomach to take out a jumbo loan right now, and it’s no wonder that home prices are down.
Feeling somewhat decent that I bought a home in Phinney. We seem to be losing value at a slower rate than other Seattle neighborhoods (but it just might be a longer fall to the same bottom point).
EconE » Mar 10, 2009 at 3:48 pm
Some houses are up to 70% off.
http://www.redfin.com/WA/Seattle/712-S-Trenton-St-98108/home/476969
It appears that the banks treat them like “hot potatoes”.
No riots today.
I guess 70% off doesn’t mean the end of the world as some may attest to.
Angie » Mar 10, 2009 at 4:10 pm
Ira, I’d be curious to see a comparison of volume in Media, B’vue, and Vashon comparable to what you sketched out for Skyway.
I’d say that if three of the four hardest-falling areas are sky-high costly, that belies the idea of “happens at the bottom”.
If people in the jumbo loan end of the market are having as hard a time gettting loans as the low-end first-time-buyer cohort, I’d say that this bodes most poorly for the high-end markets. If you’re well-heeled you can always find a less expensive place to live if you want to buy but encounter hurdles… but if you’re barely making the cut, those hurdles mean you’re out of luck entirely.
Cris » Mar 10, 2009 at 4:12 pm
I have just renewed my lease for another 12 months and the owner is still insisting to sell the house for $1,299,000.. Last year he priced it $1,599,000 and couldn’t sell it. Now he had $300k drop a year.. If he drops another $300k, maybe I’d buy it next year..
Kary L. Krismer » Mar 10, 2009 at 4:35 pm
RE: EconE @ 15 – I think the 07 sale on that property looks a bit fishy. It was a non-listed sale (although the property was listed at that price). Second, it’s not clear how many bedrooms and bathrooms it has, but even assuming two full bathrooms (rather than the 1.0 it’s listed with now) the highest price listed sale in that area anywhere near that time frame was about $50,000 less. All very fishy.
Rhonda Porter » Mar 10, 2009 at 4:36 pm
RE: Kary L. Krismer @ 14 –
Jumbo loans are much harder to come by these days… out of the banks our company works with, just a couple were offering them and the rates were unattractive. (2-3 points higher than conforming). In fact, often times I’ve not priced jumbos when I do the “Friday Rate Post”.
Kary L. Krismer » Mar 10, 2009 at 4:37 pm
By Angie @ 16:
The lower price areas are not having any problem with loans. Loans are readily available–just not subprime.
Kary L. Krismer » Mar 10, 2009 at 4:38 pm
RE: Rhonda Porter @ 19 – Rhonda, can you please give the loan amount that currently kicks in at?
EconE » Mar 10, 2009 at 4:52 pm
RE: Kary L. Krismer @ 18 –
Seemed questionable to me also.
Angie » Mar 10, 2009 at 5:40 pm
Kary @ 20–indeed, not subprime. I’ll bet that will have a disproportionately big effect at the entry level buyer.
Using traditional standards (20% down, loan no more than 3X annual income) a $200K house will require $40K down and 53K/year income. That’s an awfully big fraction of yearly salary to put together on 53K/year.
Kary L. Krismer » Mar 10, 2009 at 5:50 pm
By Angie @ 23:
20% down is not traditional. PMI has been around since at least 1978, and FHA since the 1930s.
Fran Tarkenton » Mar 10, 2009 at 7:28 pm
By EconE @ 15:
Assuming that’s a reference to my comments, what I wrote was:
Comparing the two gives you a nearly 1:1 ratio of ideas expressed to misrepresentations about my position (one house != many houses, much less the market as a whole, 70% != 80%, and “the end of the world” != riots). And that ignores not only the questions Kary raised about the house, but also that it appears from the photos that the house has recently been destroyed, making the old sale price and the current asking price not directly comparable.
If you’re going to goof on my comments, go ahead. It’s only the internet and my name isn’t really Fran Tarkenton, either. But if you can’t do it without fudging things your way, then don’t do it.
Ira Sacharoff » Mar 10, 2009 at 7:31 pm
RE: Angie @ 16 –
I’m too lazy to look them all up, but Mercer Island, in July of 2007, had 40 sales. The lowest price home was 642,500 and the highest was 5,600,000. 23 of those homes cost one million dollars or more.
In February 2008, there were 4 sales. The lowest price was 380,000 dollars ( and had major fire damage) and the highest was 1,100,000 dollars. Only one of those homes was a million dollars or more.
You can justify a lot of beiefs with statistics. As someone pointed out here a while ago, the median is a liar.
February is always slower than July, and you’re not really comparing like houses.
But it does suggest to me that the very expensive homes, which usually tend to be on the market longer, are barely selling at all right now.
deejayoh » Mar 10, 2009 at 8:00 pm
RE: Ira Sacharoff @ 25 –
Angie, you can look up all the home sales yourself at Redfin. Just do a search of all closed sales for the past year in that neighborhood. It will bring up a list of all of them that you can download into excel and chart away to your heart’s content
FWIW, I looked at the $ per sqft chart for each neighborhood and they were off in the range of 25-30%
Mike2 » Mar 10, 2009 at 8:34 pm
Based on the 2007 “best places” data, the average home in Skyway cost 5.25 times the median income. It must me a very nice area to command an premium like that!
http://money.cnn.com/magazines/moneymag/bplive/2007/snapshots/PL5308552.html
Angie » Mar 10, 2009 at 9:59 pm
Thanks for looking that up, Ira–and for the good tip, Deejayoh. Who knew?
The Tim » Mar 10, 2009 at 10:39 pm
RE: alex @ 4 – I don’t really see what you’re getting at. In this post I added numerous disclaimers, such as:
and
In addition to starting the post off by downplaying the significance of the median price by referring to it as merely
Also I still put an asterisk next to the median price in every month’s main NWMLS update post back to the post I wrote in August 2007 titled Median Price Not Telling the Whole Truth. I meant to add it in this post, but forgot since I wrote most of the post offline last night and was rushed this morning during my brief time online before I headed back home from TX.
So I guess I don’t see where you’re coming from. I am still downplaying the median, and especially when we’re looking at such a small sample of sales. I just thought it was interesting enough to share.
patient » Mar 10, 2009 at 11:43 pm
I’ve been saying all along that median is a crappy measure of home values and this post proves it. Anyone who watches the market knows that homes are not listed at 50% off in general in those markets. It’s interresting to see that the royal defender of the median is now starting to spin in his chair and tap his feet. I guess it’s only good when it fits his objectives. And no, I do not mean The Tim.
David Losh » Mar 11, 2009 at 7:24 am
RE: Ray Pepper @ 6 –
Thank you for the link. The second link inside talks about Bakersfield. $579K for a house in Bakersfield, that is now worth $300K.
I haven’t been to Florida or California in a while, but the numbers seem right. Now that people have bought at lower prices what will they do with the houses? A real second wave I think is going to be investors who jumped in on really “good” deals that are stuck, just like banks being stuck with foreclosures.
Kary L. Krismer » Mar 11, 2009 at 8:23 am
The median is hardly a useless piece of information, like a lot of you seem to think. Between the median and Case Shiller I’d look at the median all day long, because it’s more timely, and doesn’t cover such a large area to be nearly useless. But when valuing a particular house, I don’t use either. They’re both merely gauges of the health of the market, and over the longer periods of time they show relatively the same thing (with the median being a bit more volatile, perhaps because I hear C-S uses a three month moving average–something I’ve not verified).
But just as with Case-Shiller they have the various tiers you can look at to get more information, with the median you can also look at the mean, and the difference between the mean and median. For example, the difference tells you that the higher end did better in February relative to January.
Kary L. Krismer » Mar 11, 2009 at 8:26 am
By David Losh @ 33:
I discount talk of houses outside the area because it’s hard to verify what the facts are about them. Like perhaps the one in South Park discussed above, or the $600,000 condo that Elizabeth Rhodes put on the front page of the Times last year, even though the story was considerably different than the story she told (due apparently to lack of research).
Kary L. Krismer » Mar 11, 2009 at 9:50 am
RE: Kary L. Krismer @ 34 – Just to follow up on my comment about the difference between mean and median showing the upper end doing better, I ran some numbers.
In King County in January and Febuary the following are the unofficial stats over $1,000,000:
Volume 18 & 34
Mean 1512k & 1898k
Median 1150k & 1323k
Max price 3675k & 5300k
So the volume almost doubled, and prices improved with that increase.
As to the overall market, the median for pendings in King County (both with and without STI) is just under $350k last I looked. And contrary to Ardell’s claims, the volumes are not up significantly, but she’s reporting on SFR and condo, while I’m only looking at SRF. It’s possible the $8,000 credit is having an effect in the condo market, but it doesn’t seem to be in the SRF market. Anyway, that’s a significant difference from the February median, and thus would tend to indicate probably at least two months of declining medians.
jon » Mar 11, 2009 at 10:20 am
There is nothing wrong with looking at the median. The problem is looking at any statistic with a sample sizes of 4. Especially in markets like Mercer Island and Medina, where there is a 100 to 1 ratio between the highest and lowest prices. Also not good is taking a larger number of highly variable data points like that and thinking that the statistical outliers are telling you anything about the market, as opposed to just exhibiting the usual behavior of sampling fluctuations. It’s just a waste of electrons.
monkey » Mar 11, 2009 at 10:54 am
‘Yeah, Seattle is different’.
http://online.wsj.com/article/SB123673662900091009.html#articleTabs%3Darticle
wreckingbull » Mar 12, 2009 at 5:22 pm
RE: Angie @ 17 – Angie, aren’t you only telling half of the story? Eventually those higher-end homes become mid-priced homes, and mid-priced homes become lower-priced homes, and lower-priced homes become sob stories.
If you are only referring to the short-term, then yes, I think you may have a point.
WaitingForSanity » Mar 15, 2009 at 7:36 am
I’d really like to see sales pairs (where you look at the same house sold at 2 points in time) and calculate the percentage drop based on that. (Basically, take the Case Shiller index and break it down by neighborhood.)
Still waiting for sanity.
Kary L. Krismer » Mar 15, 2009 at 8:04 am
RE: WaitingForSanity @ 40 – I was actually thinking of doing a piece like that over at P-I land, where I’d take four different types of houses.
1. 2 bed 1 bath built before 1950 in Skyway.
2. 4 bedroom 2+ bath built after 1980 but before 2000 in some part of Kirkland.
3. Something in Clyde Hill.
4. 2006-2007 house built in Kent (or maybe Snohomish).
If someone has some other ideas, I might through them in.
Kary L. Krismer » Mar 15, 2009 at 11:11 am
I did a variation on that piece here:
http://blog.seattlepi.nwsource.com/realestate/archives/164212.asp#extended
I used east Bellevue instead of Kirkland.
WaitingForSanity » Mar 16, 2009 at 5:56 am
Kary – that’s a very good article you wrote.
Ira sacharoff » Mar 16, 2009 at 2:50 pm
Thanks, Kary, that’s useful information.
Looking at the Skyway examples, and then extrapolating a little more, noting the size difference, the price per square foot during the peak months was about 265 dollars, and more recently about 215 dollars, a reduction of about 19% from the peak. Does this mean that Skyway prices have only fallen 19% from the peak rather than the 50% drop in the median price? Probably not, the truth likely lies somewhere in between.
Yes, Skyway was seen as one of the most affordable places in an area of rapidly escalating prices, so it did see huge gains, but one can use statistics to show almost anything you want them to.
Kary L. Krismer » Mar 16, 2009 at 4:03 pm
As I mentioned in one of the comments to my piece, I used a 4.5 month period on both ends, where Tim used the peak month for each area and then the lowest recent month for each area. Since the NWMLS area numbers are very volatile from month to month, his approach would show a larger decline than my approach. My approach would be more like using a 4.5 month moving average. It’s also possible that Tim’s peak and low months weren’t even within my 4.5 month periods–but I sort of doubt that for that area.
Also, because I was looking at a very limited type of property for each area, and not just all sales within a given area, I couldn’t look at just one month. As it was for Skyway I only had 4 transactions over 4.5 months.