October 6, 2007
$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?
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:
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:
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…
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.
Update: Mose cranked out some San Francisco graphs.
Jay Thompson said:
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?
October 6, 2007 1:52 PM
Glenn Kelman said:
Hey Jay, sorry about that, I was just on the run this weekend. We linked the file…
October 6, 2007 4:18 PM
Savan said:
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?
October 6, 2007 4:56 PM
roser said:
Nice stats. I’d like to see some for the SF Bay/Peninsula.
October 6, 2007 8:53 PM
Web Traffic inquirer said:
So which site drove most traffic to your site, Businessweek, TechCrunch or Guy Kawasaki and what is the delta?
Thanks
October 8, 2007 9:58 AM
Mose said:
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.
October 8, 2007 8:38 PM
Reuben Moore said:
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?
October 10, 2007 12:08 PM
Mose said:
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
October 10, 2007 6:10 PM
Reuben Moore said:
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?
October 11, 2007 5:18 AM
Cynthia.Pang said:
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.
October 12, 2007 10:20 AM
Reuben Moore said:
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?
October 12, 2007 10:32 AM
Glenn Kelman said:
Reuben, you are correct. Assuming other sites filter price this way, your strategy is optimal.
October 15, 2007 7:25 AM
Tom Swell said:
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.
October 19, 2007 11:18 PM
Glenn Kelman said:
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.
October 20, 2007 4:00 PM
Tom Swell said:
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).
October 22, 2007 12:37 AM
Metrowest MA Real Estate said:
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?
October 23, 2007 7:21 PM
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June 21, 2008 6:18 PM