Why Should You Care About DC Real Estate Values?
Whether you’re in the market for a condominium, single family home, co-op or townhouse, learning to calculate home values will empower you to make better decisions when buying or selling Washington DC real estate.
How Do I Determine DC Real Estate Values?
As the saying goes, real estate is “local” and values can vary by neighborhood, home type, market saturation time of year and other factors.. Using hyper-local data, market and neighborhood knowledge is essential in determining DC real estate values.
DC Inventory and Absorption Rates
Inventory and absorption rate are important measures in determining DC real estate market values. Current ‘Active’ inventory divided by sold properties (typically within 30 days), shows how many months it would take to clear all the current inventory from the market at that point in time. Generally, a healthy, balanced real estate market is considered to have an inventory and absorption rate of four to six months. A rate greater than six months indicates a buyer’s market, and a rate under four months is a seller’s market. To target specific trends, the same analysis can be conducted by price, home type and/or by neighborhood.
Average List Price Trends
Are listing prices in your DC neighborhood flat, decreasing or increasing? These numbers provide important insights on pricing trends that are beneficial for structuring your offer. Remember to drill sold data down to the specific neighborhood in which the listing is located. Washington DC real estate values can vary within just a few blocks, even less. Use comparable sales and pricing trends within a 1 mile radius of the subject property, then narrow your research to the specific block you want to target for results.
Median and Average Data – What’s the Difference?
Median Sales Price is the half of all purchases falling below the target sales price, and the half above purchase price during a specified period of time. Median Sales Price is considered an indicator of market strength. Median Sales Price is considered a stronger indicator than Average Sales Price, which is the sum of all sales prices divided by the total number of sales. One low or high sale can skew this indicator, making less reliable.
Number of Homes Sold
Compiled on a monthly basis, the number of homes sold in any particular neighborhood in Washington DC provides a measure of demand. You can evaluate month-to-month trends, or look at a month, quarter or year relative to the same time period one year ago on our DC Market Data page. This data adds perspective to your analysis, since certain months are often considered more or less active than others, and economic or other events affect the market.
Average Sales Price to Listing Price Ratio
The Average Sales Price to Listing Price Ratio in any particular neighborhood can help provide some understanding of your local real estate market. Unfortunately, listing prices are not a true measure of a home’s worth and some may be unrealistically high or low. Averages can be altered by just one sale, so this is not the most important factor in determining an offer price.
DC Real Estate Price Per Square Foot
The price-per-square-foot metric can vary by neighborhood, street or condominium building and can be affected by home features, size and other factors. Building codes can affect this metric as they relate to livable square footage. Learn the values for your target property and if the data is supportive of your negotiating position, factor this in.
Relative Property Condition
Relative Property Condition may be the most difficult of values to compute because it is subjective and assumes that you have had the ability to assess the condition of competing properties. This is the value you would place on a home’s condition, features, finishes and attributes relative to similar properties currently on the market. Relative property condition is a valid tool in structuring your negotiating strategy if you have physically inspected the competing listings. Buyers and agents can find it difficult to attribute monetary value to differing attributes. This metric should be considered along with Days On Market, original list price and presentation when formulating offers.
The Listing Price
If you’re disciplined in thoroughly assessing a property by researching and evaluating condition, attributes, the absorption rate, median sold price and price-per-square-foot along with other important factors, you’ll greatly improve the likelihood that you can approach negotiation with objectivity. This includes ignoring, to some degree, the property’s list price. The list price is the point from which the negotiation begins, but not all list prices are reasonable. The goal of assembling a solid basis for your offer is to weigh all metrics for Washington DC real estate values against your and others’ desire for the property and ability to purchase. In the end, the old saying is true; “A property is worth what someone is willing and able to pay for it at any given point in time.”
Property value is largely an equation of assessed value, appraised value and market value (i.e. value of the home against others currently available in immediate neighborhood or similar neighborhoods by individual buyers), neighborhood and Location Desirability Value (neighborhood characteristics and location of home within the neighborhood) and the Amenities Value (amenities of the home, neighborhood and specific location such as shopping, transportation, recreation facilities and commute). But there’s one more key element to determining DC real estate market value.
Yes, Spidey Sense is a legitimate ‘thing’ in the Washington DC real estate market. Data is just a snapshot of the past. Our market often moves ahead of data and demand is frequently a key driver of value. It’s not uncommon to find that there are no ‘comparables’ for a desired property. That’s where expert neighborhood and market knowledge come in. Hire a great Realtor. We are in and out of homes throughout The District daily, and have been for years. That archived mental knowledge gives us a “spidey sense” of value even when there are no apples-to-apples comps, or when comps don’t exist at all. This knowledge is perhaps most important in determining DC real estate values because what translates on paper and in electronic data does not tell the whole story about a property. Realtors like The Isaacs Team who specialize in working with buyers provide an advantage in analyzing neighborhoods, identifying properties of interest and evaluating price.