$549,999 is A Better Price for Your Home Than $550,001 (5% Better)

With more than 70% of home-buyers looking on the Web for real estate to buy, we wondered if it made sense when pricing a house to take into account the parameters used on most real estate search sites. For example, since every site lets folks filter on price in increments of $25,000 at lower price ranges and increments of $50,000 at higher price ranges, wouldn’t a property priced at $549,999 get seen by more Web shoppers than one priced at $550,001?

Filtering on Price via Redfin

The answer is maybe, just a little.

How so? Enter Mose Andre, Redfin’s ace statistician, who analyzed the logs of the Redfin site to determine how often Seattle users of our site see properties in different price ranges, between September 10, 2007 and September 24, 2007. His findings:

  • About 30% of searches don’t even filter on price. But the number of searches that don’t filter on price is exaggerated on Redfin’s site because Redfin.com price filters aren’t easy for users to find.
  • For most neighborhoods, the maximum percentage of Redfin searches you are likely to lose by moving from one price band to the next is 6.5% . For most Seattle neighborhoods, this band occurs for homes costing more than $550,000.

Based on these findings, we would only recommend taking into account how search sites filter on price in cases where a property is priced very near one of the popular threshold amounts. In other words, if you were going to price a house at $570,000, you shouldn’t price at $549,000 just to have it show up in 6.5% more price-filtered searches; but we would consider it if you you were going to price a house at $551,000.

You can see how this plays out on Mose’s graph of search exposure and listing count for Bridle Trails:
Bridle Trails Real Estate Prices

The red line represents the percentage of Redfin’s Bridle Trails searches filtering on price that include Bridle Trails properties at different price points; use the numbers on the left axis to measure the percentage of searches that return a result at the prices appearing along the bottom axis. As you can see, less than 20% of Redfin’s Bridle Trails searches filtering on price include properties costing more than $800,000.

The black line represents the density of listings in the area; more precisely it is a curve fitted to the shape of a histogram representing the number of listings at different prices. You can use the numbers at right to track the number of listings at different price ranges. The most common price is the one where demand becomes scarce: $800,000.

The biggest drop in buyer exposure in Bridle Trails occurs at $550,000. One reason drops tend to occur at this point is that Redfin, like many other real estate search sites, only allows price filtering at $50,000 increments for prices greater than $500,000. So the first $50,000 steps are doozies.

Let’s look at a few more graphs, this one of Capitol Hill:

Capitol Hill Real Estate Prices, Demand

Here most of the inventory is clustered at a price just below $400,000, probably because there is a glut of condominiums on the market, and most of the price-filtered searches are in that range. There is a little hump around $700,000 for houses and townhouses in the neighborhood.

One more graph, this time for stuffy, old Queen Anne…

Queen Anne Real Estate Prices and Search Price Bands

And here is a table of the price-points where the biggest drop in search activity occurs, and how large that drop is:

Neighborhood Greatest Drop in Searches Occurs at $ % Drop in Searches
Ballard $550,001 -5.0%
Belltown $550,001 -4.3%
Bridle Trails $550,001 -5.0%
Capitol Hill $550,001 -4.5%
Columbia City $425,001 -4.4%
Georgetown $425,001 -5.1%
Green Lake $500,001 -5.5%
Klahanie $2,000,001 -5.6%
Laurelhurst $550,001 -4.9%
Newport Hills $550,001 -4.9%
Phinney Ridge $550,001 -5.3%
Rainier Valley $425,001 -4.4%
Ravenna $550,001 -5.4%
Windermere $550,001 -4.9%

If you want to see how demand compares to inventory for your neighborhood, download a package of all our graphs for the Seattle area. If you want these graphs for another market like San Francisco or Boston, just let us know. Thanks to Mose Andre for the stats and analysis; if there are other analyses you’d like to see us perform, just leave a comment for that too.

Mose Andre, Superstar Real Estate Satistician

Update: Mose cranked out some San Francisco graphs.

Discussion

  • http://www.phoenixrealestateguy.com Jay Thompson

    Interesting analysis, thanks for sharing.

    “WordPress doesn’t support uploading zip files”

    ??? Uhm, why not just FTP the zipped file to your server and link to it??? There at tens (hundreds?) of thousands of zip files linked to in WordPress blogs every day.

    Or (I’m assuming you have your own servers), save the file to disk and walk over there and transfer the file to the server, then link to it here.

    How can that be difficult for a tech company?

    What am I missing?

  • http://blog.redfin.com/blog/author/glenn%20kelman Glenn Kelman

    Hey Jay, sorry about that, I was just on the run this weekend. We linked the file…

  • Savan

    Mose, this is great stuff! I love seeing stats visually; it helps me understand the concepts so much better. Though I wonder why we always use the same picture of Mose?

  • roser

    Nice stats. I’d like to see some for the SF Bay/Peninsula.

  • http://trafficstats.org Web Traffic inquirer

    So which site drove most traffic to your site, Businessweek, TechCrunch or Guy Kawasaki and what is the delta?

    Thanks

  • Mose

    Hey Roser, thanks for being interested. We put up a link for a package of SF graphs. The searches captured this time were for the full month of September.

  • http://www.brickandgarden.com/blog Reuben Moore

    I am curious, what happens if you price at the break point? In your example, at $550,000. Would the property end up in both searches?

  • Mose

    Yes, when search bounds are set the range restriction formed is inclusive. That is, if I set a “max” price of 550k, I’ll get everything up to _and equal to_ 550k. Similarly, if I set “min” price of 550k, I’ll get everything greater than _or equal to_ 550k. On Redfin, at least.

    This is an example of a search that has min=max=550k, but still returns 550k priced homes.

    http://tinyurl.com/253le4

  • http://www.brickandgarden.com Reuben Moore

    Hi Mose,

    I meant, if the seller prices a property at $550,000 – Would it show up in both the $500,000-$550,000 search and the $550,000-$600,000 search?

  • http://blog.redfin.com/blog/author/cynthia.pang Cynthia.Pang

    Hi Reuben,

    The short answer is yes. On Redfin, when a listing is priced at $550,000 it will show up when the search parameters include $550,000.

  • http://www.brickandgarden.com/blog Reuben Moore

    Thanks Cynthia, So my question becomes, if the seller is considering a price of $551,000, instead of lowering the price to $549,000, why not lower it to the break point and have the property show up in both searches for maximum search exposure?

  • http://blog.redfin.com/blog/author/glenn%20kelman Glenn Kelman

    Reuben, you are correct. Assuming other sites filter price this way, your strategy is optimal.

  • http://sandiego.redfin.com/blog/author/tom.swell Tom Swell

    There’s another thing to consider. Some of us have learned that prices that end in 99 cents or 99 dollars are usually posted by questionable sources. If you buy something from your brother, your neighbor, your co-worker, etc it almost always has a nice round number. It’s the petroleum companies, the discount stores and the used car dealers that perpetuate the 99 cent insult.

    I have to admit that it works on a lot of people who instinctively round the number down, but it is so insulting to a few of us that we might refuse to do business with the seller.

  • http://blog.redfin.com/blog/author/glenn%20kelman Glenn Kelman

    Good point Tom. Have you seen this post:
    http://blog.redfin.com/blog/2007/03/pricing_advice_make_the_last_3_digits_-500.html
    I think your argument explains our earlier finding about what the last three digits of a price communicate to a potential buyer.

  • http://sandiego.redfin.com/blog/author/tom.swell Tom Swell

    Well I guess I haven’t seen ALL the blogs yet. That was an interesting study, although of doubtful statistical significance. I think Redfin’s mad scientist, Mose Andre may have a little too much time on his hands.

    BTW in my blogs, I ignore anything less than $1000 in house prices. I round up or down depending on the random number generator in my microwave oven or the phase of the moon (more than half full tonight).

  • http://www.sellmyhomeinmetrowestma.com Metrowest MA Real Estate

    I agree with you pricing analysis, however, I am not sure about your statement regarding most websites not allowing you to search in less than 25k increments. I have not found this to be the case. It certainly does not work that way in my site or in most of the sites I have seen in Massachusetts?

  • http://www.nuhomesource.com/blog/michael-pannell/ Mike Pannell

    I think it is great information. I just talked to my listing agent about this. I think this might help.

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