A closer look at Madison East home prices

We recently looked at homes on Madison's west side that sold twice via the MLS in a short period of time. We learned 61% of those homes sold the second time around at a price that was at or above the most recent selling price (39% percent sold for a price decrease).

We've taken the same view of homes on Madison's east side, and here's what we've found:

• 47% of the homes on Madison's east side sold the second time around at a price that was at or above the most recent selling price. The highest price increase was $113,000.
• 53% of the homes sold at a loss the second time around. The largest loss was $100,000.

We've posted the details for each property on the DaneCountyMarket real estate trends page. We've also provided more information on the methods we used to collect and summarize the MLS data.

A closer look at Madison west home prices

The MLS median price is a good measure for tracking the market. It tells us what buyers are willing and able to pay when they make their real estate purchase. The median price measure does have one important limitation: It doesn't tell us how prices for the same properties are changing over time.

To answer this question, we looked to the MLS database for some answers. First, we identified all of the homes on Madison's west side that sold via the MLS during 2008. Then we identified the subset of these homes that also sold via the MLS during 2005, 2006 or 2007.

Here's what we found:

• Of the homes that sold via the MLS in 2008, 116 also sold via the MLS in 2005, 2006 or 2007.
• 71 of the 116 homes (61%) sold in 2008 for a price that was at or above the most recent selling price.
• 45 of the 116 homes (39%) sold in 2008 for a loss.

We've posted the details for each property on the DaneCountyMarket real estate trends page. The details shed some further light on the market. For example:

• Investors are still "fixing and flipping" properties in the current market. The highest price increase was over $433,000 - for a property that was bought and then sold 9 months later.
• Some neighborhoods have stronger price trends than others.
• Some sellers have taken some big losses in recent months, while some buyers have clearly come away with some good deals.

We'll take a closer look at other markets in the coming weeks. Our next market will be Madison's east side.

What percent of all Madison homes sell for under the assessed value?

We last covered this topic with data from 2007. The data from 2008 shows a greater percentage of Madison homes are selling for below the assessed value compared to every other year this decade.

The bar chart below shows how the relationship between assessed value and market value has changed over time. The blue bar represents the percent of Madison homes that sold for below the assessed value. The purple bar represents the percent of Madison homes that sold for above the assessed value.

Roughly 1 out of every 10 Madison homes sold for below the assessed value during the years 2000 to 2005. This relationship started to change in 2006, when 3 in 10 sold for below the assessed value. The number jumped to 4 in 10 in 2007, and almost 5 in 10 in 2008.

We drilled deeper into the 2008 data for Madison homes and uncovered the following:

• 29% of all homes sold for a price that was at least $10,000 lower than the assessed value.
• 40% of all homes sold for a price that was within $10,000 (above or below) the assessed value.
• 31% of all homes sold for a price that was at least $10,000 above the assessed value.

What does this data mean to you?

• If you're selling, you can't rely on the assessed value as a reliable measure of market value.
• If you're buying, realize a list price above the assessed value doesn't mean a home is over-priced. And a list price below the assessed value doesn't mean a home is priced at a good value.

For more information, read our articles on market value versus assessed value and pricing your home, both on the selling real estate page at DaneCountyMarket.com.

Dane County housing starts at lowest levels in at least a decade

Dane County housing starts in the month of July remained low, according to a Wisconsin State Journal article (print only) from Friday's edition.

The Dane County numbers

• 50 permits for homes and duplexes were issued in July compared to 85 permits in July of 2007, down 41%.
• 430 permits were issued through the first 7 months of the year compared to 716 permits during the same time period last year, down 40%.

The Madison numbers

• 95 permits were issued year-to-date through the month of July compared to 213 permits during the same time last year, down 55%.

According to the data source, MTD Marketing Services, Dane County housing starts are at their lowest levels in over a decade. This is tough news for the building industry, but a baby step toward driving Dane County inventory lower.

Madison Foreclosures by Zip Code - 2000 to 2007

Today's post is about Madison foreclosures and comes courtesy of Professors Andy Lewis and Russ Kashian from the University of Wisconsin Extension. Andy and Russ analyzed Wisconsin Circuit Court data to determine the number of foreclosures by zip code from the years 2000 to 2007.

Their data shows that Dane County foreclosures grew from 306 in the year 2000 to 898 in 2007, an increase of 193%. Foreclosure growth on Madison's west side outpaced the Dane County average, growing from 46 in 2000 to 154 in 2007, an increase of 235%. West side growth was highest in the 53711 and 53719 zip codes, where a number of new homes and condos were built and purchased since the beginning of the decade.

Foreclosures on Madison's east side also grew significantly, but at a slower pace of 142%. As in Madison's west side, the Madison East home-owner base increased significantly over the decade, which helped to fuel foreclosure growth. As an example, foreclosures in the 53718 zip code grew from zero in the year 2000 to 30 in 2007.

We'll cover foreclosures in surrounding Dane County communities in our next post. For more information on Madison foreclosures, visit our foreclosures by zip code article at DaneCountyMarket.com.

Total required marketing time is lower on Madison's west side

The total required marketing time for the "average" single family home seller on Madison's west side was 162 days (5.3 months) in 2007, compared to 210 days (6.9 months) for all of Dane County. The graph below shows how marketing times have grown since the beginning of the decade. Sellers had all of the leverage from 2000 to 2004, back when the average west side home sold in just over 2 months, compared to about 3 months for all of Dane County.

How do we calculate the total required marketing time? We use our knowledge of other market statistics to calculate this measure. We know how often listings sell versus expire, and we know the average days on market for those listings that sell and those that expire. When we put these measures together, we come up with an equation that looks like this:

Total DOM = DOM (sold) + DOM (expired) * [(percent expired)/(percent sold)]

For more on the Madison West market, check out our historical report on DaneCountyMarket.com, and visit our year-to-date snapshot for updates throughout the year.

We'll be covering some new real estate topics in the coming week.

Days on market are increasing on Madison's west side

Single family home days on market are increasing on Madison's west side, but marketing time remains low when compared to the larger Dane County market. This graph shows the average days on market for listings that sold for the Madison West and Dane County markets dating back to the year 2000. Note how the days on market for sold listings have increased significantly over the years, with the Madison West market consistently out-performing the larger Dane County market.

This graph shows the average days on market for expired listings dating back to the year 2000. Once again, days on market have been consistently lower within the Madison West market.

For the 2008 sales year, our year-to-date snapshot at DaneCountyMarket.com shows that the Madison West market continues to out-perform the larger market when it comes to the marketing time for sold and expired listings.

But there's more to the story...Given that some listings sell and some listings expire, this data doesn't tell us how long it takes to sell the average home on Madison's west side. We'll cover the total days on market experience for the average west side home in our next post.

Sellers on Madison's west side enjoy the highest listing success rates

In our last post we covered recent price and inventory trends for homes on Madison's west side. West side homes fare very well when it comes to inventory and price, and the theme continues with west side listing success rates.

The listing success rate is a good measure for assessing the relative effort required to sell a home. As an equation:

listing success rate = (sold listings)/(sold listings + expired listings)

When fewer listings sell and more listings expire, the listing success rate goes down. This is exactly what happened in 2005, 2006 and 2007 for the Madison West and Dane County single family home markets. Prior to 2005, the success rate for Madison West listings was about 80% year in and year out, compared to about 75% for Dane County listings. In 2007, the success rate for Madison's west side decreased to 58%, compared to 52% for all of Dane County.

The Madison West listing success rate has out-performed the Dane County success rate every year dating back to the year 2000, and the trend continues this year. As of May 31st of this year, the year-to-date listing success rate on Madison's west side was 60.3%, compared to 49.5% for all of Dane County. In fact, the success rate on Madison's west side is higher than any other location in the county (see the year-to-date snapshot at DaneCountyMarket.com).

In our next post we'll cover recent "days on market" trends for homes on Madison's west side. For more information on the Madison West single family home market, feel free to visit these pages at DaneCountyMarket.com:

• Year-to-date snapshot by location, under real estate trends
• Madison West historical trends, under real estate trends

Also view our previous post on Madison west price and inventory trends.

Dane County's most consistent real estate market

Year in and year out the Madison West single family home market continues to be Dane County's most consistent market. We'll take a closer look at this market over the next few days by comparing it to the larger Dane County market.

We define the Madison West market as all of the Madison MLS locations W01 through W18. Of course there are many different "micro-markets" within the west side of Madison, down to the neighborhood level. We'll cover some of these neighborhoods in more detail throughout the year.

The west side of Madison has proven that it is home to stable home prices. Take a look at this graph which compares the median price growth for single family homes in the Madison West and Dane County markets, dating back to 2001.

The median price growth for Madison West homes ranged between 6.8% and 13.2% from 2001 through 2004, consistently out-performing the larger Dane County market. In 2005, price growth slowed to about 2% per year. Although Dane County median price growth slowed to .9% in 2007, the Madison West market stayed the course at 2.1%.

As of May 31st of this year, the year-to-date median price for a Madison West home has decreased by .2%, while the median price for a Dane County home has decreased by 1.8% (see our year-to-date snapshot at DaneCountyMarket.com). The west side of Madison continues to perform well given the cooling of the overall market; the Dane County market continues to fare well when compared to trends at the national level.

One big reason for the success of the Madison West single family home market is that the west side of Madison has the fewest months of inventory in all of Dane County. As of June 30th, there were 6.4 months of inventory on Madison's west side, compared to 8.8 months for all of Dane County.

In fact, virtually every area within Madison's west side has fewer months of inventory than the Dane County average of 8.8. Note how the W11 and W13 areas on the near-west side only have 3 and 4.1 months of inventory respectively.

In our next post, we'll cover the listing success rate for homes on Madison's west side.

For more information on the Madison West single family home market, feel free to visit these pages at DaneCountyMarket.com:

• Year-to-date snapshot, under real estate trends
• Historical performance, under real estate trends
• Months of inventory by location, under selling real estate

Can FSBO sellers succeed in this market?

Absolutely. Look at this screen shot from fsbomadison.com. All of the listings below are for homes on the west side of Madison. Note seven of these eleven listings have either sold or are waiting to close. Not bad at all.

On the flip side, look at this screen shot. All of these fsbomadison.com listings are from the village of DeForest. None of these eleven listings are shown as having sold or as having an accepted offer.

Why the difference? Location is a big factor. The west side of Madison has only 6.5 months of inventory, compared to 10.8 months of inventory for the village of DeForest. In other words, housing supply relative to housing demand is much lower on Madison's west side.

If you're planning to go the FSBO route for the sale of your home, research the months of inventory for your area. If your area has 8 or fewer months of inventory, your odds for success will be quite good compared to many other sellers who choose the FSBO route.

We'll offer tips for FSBO sellers in a future post.

Does assessed value have any bearing on market value?

The short answer is no.

We measured data from the South Central Wisconsin MLS to take a closer look at the relationship between the assessed value and the selling price for homes in Madison. The results show that during the years 2000 to 2005, roughly 90% of all Madison homes sold for above the assessed value. However, this relationship started to change in 2006, and in 2007 only 56% of all Madison homes sold for above the assessed value.

The bar chart below shows how the relationship between assessed value and market value has changed over time. The blue bar represents the percent of Madison homes that sold for below the assessed value. The purple bar represents the percent of Madison homes that sold for above the assessed value.

We drilled deeper into the 2007 data for Madison homes and uncovered the following:

• 26% of all homes sold for a price that was at least $10,000 lower than the assessed value.
• 44% of all homes sold for a price that was within $10,000 (above or below) of the assessed value.
• 32% of all homes sold for a price that was at least $10,000 above the assessed value.
  
  
  
  

What does this data mean for you?

If you're selling your home, you can't rely on the assessed value as a reliable measure of market value. You or your real estate professional need to research the market in your neighborhood to establish the proper market price.

If you're buying a home, realize a list price above the assessed value doesn't mean a home is over-priced, and a list price below the assessed value doesn't mean a home is priced at a good value. Same as above, you or your real estate professional need to research the market in your area of interest to determine the market value of a particular home.

For more information, read our articles on market value versus assessed value and pricing your home, both at DaneCountyMarket.com.

The first two rules in real estate

Rule #1: All real estate is local.

Let's use data from our own Dane County real estate market to look at how the market can vary from one location to the next.

Months of inventory is a great measure that uses supply (# of listings) and demand (# of listings recently sold) to approximate the number of months needed to absorb the current listings on the market. As you'll see below the months of single family home inventory within Dane County varies significantly by location. Note: this data excludes condos (you'll find more info on condos later in this post).

The average months of inventory for all of Dane County is 8.7 months, with the Madison West, Madison East, Verona and Cottage Grove locations all faring well relative to the county as a whole. On the other side of the spectrum six suburban communities - Sun Prairie, Fitchburg, Stoughton, McFarland, Oregon, Mount Horeb - all have at least 11 months of inventory.

The data is very telling when you take a closer look at the months of inventory for the city of Madison. As you'll see below, four different MLS locations on the west side of Madison all have fewer than 6 months of inventory. All of these locations consist of older neighborhoods that offer relatively easy access to the University and Madison's downtown.

On Madison's east side, 3 different MLS locations have under 6 months of inventory. All of these locations consist of well-established neighborhoods located along or near the Atwood Avenue corridor.

Rule #2: The market varies by property type.

Take a look at the months of inventory for the Dane County condo market. The average for all of Dane County is 16.9 months, almost double the 8.7 months for the Dane County single family home market. The numbers for the the condo market include some big swings. Middleton and Cottage Grove have 12 or fewer months of inventory. Stoughton, Verona, Mount Horeb, Oregon and Monona all have at least 25 months of inventory.

On the west side of Madison, you'll also see some big swings in the months of inventory by MLS location. And you'll see some big swings by MLS location on Madison's east side.

The Dane County condo market has some very large inventory levels due a ton of new construction that has entered the market in the last three years. In some locations, where the historical demand for condos has been low, the data suggests it will be a matter of years (not months) before the market is able to digest all of the condos on the market.

On the flip side, there are locations within the Dane County single family home market where the months of inventory are actually quite low.

Related Reading:

• A recent article by the Wisconsin State Journal on the months of inventory by location
• Historical trending of active listings at DaneCountyMarket.com
• Months of inventory historical trending at DaneCountyMarket.com
• Monthly updates on how the months of inventory vary by location for homes and condos (DaneCountyMarket.com)