Real Estate Rebound or Simply Lowered Expectations?

Yesterday GM saw something in Georgetown he hasn’t seen in long time: a home selling above list. Granted, it was only $10,000 above the list price of $880,000 (a whopping 1% surplus), but given the way the Georgetown market has performed, it could be the beginning of a silver lining for homeowners. Or is it?

After crunching the numbers, GM found out that there has actually been a couple of such sales in Georgetown recently. Overall, the drop in sales prices from initial list prices appears to declining for Georgetown recently:

This chart shows the percentage decline in price from initial list price to sale price for Georgetown homes since the beginning of 2009 (in retrospect, GM realizes it would be easier to read if he inverted it, but hopefully you get it: the higher the dot, the bigger the drop from listing price the seller took).

As you can see, towards the first part of this period, some sellers were taking huge cuts in order to get rid of their property. Since then, the gap has been declining, as demonstrated by the red trend line. You can see on the far right that the number of homes selling for list or above has been increasing.

But that does not necessarily mean that the market is heating up. It could simply mean that sellers are finally reconciling themselves to the fact that their house is worth less than it was a few years ago.

One possible way to test this would be to see whether the initial list price of homes has lowered over the same period:

The trend line says it has decreased, but just eyeballing the chart it looks like the biggest declines have come in the upper tier. But the vast majority of the sales are below $2 million, and would thus influence the trend line the most (any actual statisticians out there want to weigh in?).

Another way to analyze whether prices have come down is to look at price per square foot. Unfortunately this data is only available for condos. Nonetheless, at least for this slice of the market, the price per square foot has declined:

This data appears to support the theory that the reason sales prices aren’t falling so much from list prices is that sellers are finally lowering the list prices. GM’s anecdotal observations conforms with that theory: buyers still have the advantage and the only sellers who move their homes fast are those that recognize that fact.