Red-Hot Beltway (July 2011 Insider)

Redfin National Heat Index

Greetings Redfinnians,

This summer the market has been pretty hot, but we’re starting to see signs of things cooling off for fall.

Very few high-quality, well-priced new listings are coming onto the market. When one finally does, it’s the same story every time; the buyers that are out there all descend at once and end up bidding against each other.

To take a deeper look at what’s going on, we decided to mix things up a bit with a sneak peek at the Redfin Heat Index (Beta)*.

For starters, we developed the table at right, which includes our heat ranking for every market where Redfin collects real-time sales data.

Of course, the fact that DC and the surrounding Beltway are red-hot when taken as a whole isn’t a surprise to anyone. You probably want to know what’s going on at the neighborhood level, right?

Right.

That’s why we crunched the numbers for the entire DC area and produced an interactive Redfin Heat Index map, broken down by zip code. Just click the image below to play with the map on our blog.

Washington DC Area Heat Map by Zip Code

Heat Map Color Legend

(Note: the map above is broken in Internet Explorer 9 and Google is working on the issue. In the mean time, please use Mozilla Firefox or Google Chrome to view the map.)

Prices are still falling across many areas of the DC area, and although buyers are scarce, listings are even more rare, which is why you’re seeing some warmth in the map above.

Redfin Agents Give Their Take on the Market

The Beltway is super hot, with flames of activity spreading north and south into Maryland and Virginia. Not surprisingly, the downtown DC area has seen price increases and tough competition. But are things starting to cool down? DC Redfin agent Tom Lewis gives his take: “The market has been relatively busy this summer, but as we move into August, things are appearing to taper off ever so slightly.”

“My listing client is giving it one more month,” says East Montgomery Redfin agent September Lundeen. “If it doesn’t sell, he’s going to rent it out. He’s been on the market since October 2010, steadily decreasing his price.”

“Despite incredibly low interest rates, properties appear to be sitting a bit longer,” says Montgomery Redfin coordinator Phil Gvinter. “One looming issue is the pending reduction of conforming loan limits from $729,750 down to $650,000, which may have a material impact on large parts of the market.”

That’s it for this month’s Insider Report. If you miss the trusty old data tables, don’t fret! You can still download our comprehensive spreadsheet and dig into the data for yourself! Inside you’ll find county, city, and neighborhood information galore. You can also liven up the place by posting a comment on the online version of this report on our blog.

Best,
Taylor Connolly, Maryland Area Manager

*Methodology
The Redfin Heat Index (Beta) uses listings, sales, and price changes to determine the relative “heat” of a given real estate market. We set a baseline Heat Index of 75.0 at 6.0 months of supply and +5 % price change year-over-year.
Every percentage point increase in prices above the 5% baseline will increase the heat index by two points, every percentage point decrease in prices below the 5% baseline will decrease the heat index by two points.
Every one month of supply increase above the 6.0 baseline will decrease the heat index by seven points, every one month of supply decrease below the 6.0 baseline will increase the heat index by seven points.
Here’s the formula:
  • MOS = Months of Supply: End of Month Inventory / Closed Sales in the Month
  • $YOY = Year-over-year change in the median price per square foot.
  • Heat Index = ((MOS – 6.0) * -7) + (($YOY – 5%) * 2) + 75
  • Dwilkin

    Surely your data is incorrect.  Washington prices are not up 31.4% YoY.

  • SM

    I agree with Dwilkin.  Square footage in tax records for homes in DC and Northern VA are often very inaccurate.  Many times there is much more square footage than listed.  This would decrease the median price per square foot.  I have yet to find an accurate way to determine actual median price per square foot in this geographical area. Unsure if YOY is done on list price or actual sales data?  Also, better to stratify by price range.  Many of the listings in McLean are $1.2M and above, have had many days, some over 365,  on the market.  Seems that a DOM factor needs to be included as well to correct the algorithm and to reflect stratified data via price range. 

    Another additional factor that could be analyzed is the # of homes that were listed on MLS that are withdrawn or offered for rent (stratrified by previous list price and amount of rent asked for) and actually rented.  This also shows coolness of market.

  • Lisa Taylor

    Thanks very much for the feedback!  Agreed: overall prices for the entire Washington Metro area aren't up 31.4%.  We should have been more specific in our methodology.  The number we reported was the YoY change in $/sq. ft. for houses in District of Columbia, which isn't an accurate reflection of the entire area since there are many more townhomes than houses in the District.  Also, July 2010 was a particularly bad month in the market, likely due to the 2010 tax credit expiration at the end of June 2010.  We're going to tweak our algorithm next time to give a more accurate representation of the relative temperature of the market. Thanks again for the info!