What happened to the real estate market last month? Well, the Case-Shiller numbers for March will come out on May 26. And the National Association of Realtors will release data on last month’s home sales in a week or so. But we’re interested not just in what sold, but in what’s going to sell, based on offers that were accepted, on how many buyers are just now entering the market.
As a brokerage, Redfin has some insight into what kinds of deals are being done right now, and how the balance between buyers and sellers shifts from month to month. We’re not a microcosm of the whole market, but we think if you sat where we sat, and saw what we saw, you’d learn a little about the market.
So we’re publishing monthly metrics from our customer database in a report we’re calling Redfin by the Numbers. On Monday night, Redfin’s Chris Glew put up data for the Seattle area, the San Francisco Bay Area, Southern California, Chicagoland, the Boston area and the Washington DC area.
To get a national summary, read on… (as the picture indicates, we try to be as transparent as possible)
Nearly 1 in 4 Offers was on a Bank-Owned Property
Some of the best deals are in distressed properties. 24% of the offers we submitted to listing agents in March were on bank-owned listings (also known as REOs), a percentage that has increased steadily since October; in Southern California this number was 53% whereas in Boston it was only 5%. Most everywhere else the percentage was in the mid-20′s.
Sale to List Price at 95.6%
On Redfin offers that closed in March, the average sale to list price was 95.6%, which has remained steady throughout the overall market decline. As prices weaken, sellers usually respond with price-drops pretty quickly — usually 30 days — keeping the spread between asking and final prices at less than 5%.
So what does that mean for you? Well, a lot of buyers are asking us these days to tour properties costing, say, $500,000 when they’re only pre-approved for $440,000. We do the tour and hope for the best, but that gap is still probably a bit big.
In fact, we see a lot of bank-owned properties going for over-asking, especially in California, though that is balanced by some regular home-owners being caught a little flat-footed & over-pricing.
In general, our sale-to-list price is lower than the rest of the market’s by about a point, just because our buyers tend to be a bit more deal-savvy and our agents are paid differently too — they still make money when a buyer walks from a deal, and their bonuses are based on customer satisfaction — so they drive a hard bargain rather than just driving for a close at any price.
Escrow Periods are Lengthening Slightly
Another key market indicator is the length of the escrow period. Excluding new construction — which has a long escrow period because the listing may be half-built at the time of purchase — the time between when buyers and come to terms and the close is now at 38 days for the deals we handled in March. Escrow periods are the shortest in DC at 33 days and longest in Boston (where lawyers handle escrow) at 46 days.
Usually, escrow periods lengthen as markets weaken and vice-versa but one reason escrow is a bit longer has nothing to do with demand: it’s because banks are too busy with re-financings to prioritize new home-buyer loans. Banks have been especially overwhelmed in Seattle, where escrow periods jumped from 31 days in February to 38 days in March. It has been a lot more work to close deals on time.
But in the end, lenders are coming through with the money. Less than 2% of our deals in March failed to close due to financing problems; that compares to 11% of our deals that failed because the buyer and seller got hung up in negotiations following the inspection. Why so many failed inspections? Well, for one thing, the bank-owned properties are in sad shape and the bank won’t fix anything.
But we’re also seeing more negotiating taking place at the inspection, in part because the escrow period is lengthening and price drops occur more frequently. By the time of the inspection, buyers feel that they’re entitled to another price drop even if nothing’s wrong with the house. This drives sellers crazy, especially after they’ve already dropped their price a couple of times, once or twice while it was on the market, and again at the initial negotiation. A lot more of our deals fall apart late in the game, sometimes over less than $1,000.
Brokerage Activity Up 69%, Website Visits Up 22%
Demand meanwhile is way up. Leading indicators were very strong, with the number of listings toured increasing 69% month over month. In Chicago and Washington DC, the increase was 100% and 167%, respectively. In general, we’ve been very busy, and we’ve noticed other agents are too.
The increase in brokerage activity has out-paced the increase in website traffic — which is unusual for us lately. Typically, we’ve seen a lot of people come onto the site to looky-loo but without taking the next step.
Visits to Redfin were up 22% in March, with the strongest growth being in Boston (31%) and Chicago (28%). Some of that growth is because Redfin is growing search share, some of it is seasonal. Last year at this time, we saw a 26% growth in visits.
Customer Satisfaction at 97%
Customer satisfaction was also very high, with 126 out of 130 home-buying customers — or 97% — who responded to a customer-satisfaction survey saying they would recommend Redfin to a friend. Everyone at Redfin is paid on this number, so it matters a lot to us. We survey anyone who signs an offer or listing agreement, regardless of whether the offer is accepted or the listing sells. We publish all of our survey responses online — together with details of the listing that each client tried to buy or sell.
Redfin is Tops in Agent-Share
We survey a lot of customers. If you look at our agents’ deal history, what you start to realize is just how active they are in the market. One thing we started doing as a result — a marketing light-bulb went off last week — is measuring our agents’ share of deals closed in a market for a particular month.
Take, for example, the top-three buyers’ agents in terms of deal volume. In Seattle’s King County, all three were Redfin agents. Our other three Seattle agents were in the top 16 for King County; they too would have been top five if we had measured the deals closed in both King and Snohomish counties.
What this means is that our agents have the deal flow to know more about what’s going on in the market than just about anybody. We think the same would be true for Redfin agents in other markets, so we’ll start reporting on that for all markets next month.
Attached is the raw data. Let us know what other metrics you’d like to see and we’ll try to add them into the mix. If you’re an agent or a broker, tell us what trends you’re seeing. We’d love to hear from you.
(Photo credit: Oh You on Flickr)