Determinig Real Estate Market Values
Do you know how to determine real estate market values for your DC Metro home purchase?
Whether you're in the market for a condominium, single family home, co-op or townhouse, knowing how to calculate value of DC Metro real estate will empower you to make well thought out decisions and position yourself for the best outcome in future transactions.
Washington DC market values are some of the strongest in the country. Here's how to determine if that special property you're considering is worth the listing price:
DC Metro Inventory/absorption rate
This is an important measure of market condition in DC metro real estate. 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 DC metro real estate market is considered to have an inventory/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, or by neighborhood.
Average list price trends in DC Metro real estate
Are listing prices in your DC Metro neighborhood(s) flat, decreasing or increasing? These numbers provide important insights on pricing trends, beneficial for structuring your offer, and aid your agent in presenting your offer to the lister, so they're very important in determining DC Metro real estate values. Remember to drill down the specific neighborhood in which the listing is located. Values, in DC real estate especially, can vary within a few blocks. Appraisers will use comparable sales and pricing trends within a 1 mile radius of the subject property, but in Washington DC values for two homes a few streets apart can differ greatly.
Number of homes sold
Compiled on a monthly basis, the number of homes sold in the DC Metro region or in any particular neighborhood provides another measure of neighborhood 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. This 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 selling price to listing price ratio
The average selling price to listing price ratio in DC Metro or any particular neighborhood can help provide credibility when justifying your offer to a seller. Of course, listing prices are not a true measure of a home's worth and many are unrealistic, so this is not the most important factor in determining an offer price.
Price per square foot
The validity of this metric varies from one region to another. In some markets, for example, garages are included as living space, skewing price-per-square-foot data. Learn the rules for each region in the DC Metro real estate market, and if the data is supportive of your negotiating position, by all means factor this into your plan.
Relative property condition
While all the other measures are based on hard facts, this one is highly subjective. The premium (or discount) you would place on a home’s fixtures, construction style, or numerous other tangible and intangible features—relative to similar properties currently on the market—might be quite different from another’s assessment. Still, relative property condition can be a valid tool in structuring your negotiating strategy. DOM, selling season and original list price should also be considered when formulating an offer.
That listing price
If you're disciplined in thoroughly assessing a property—researching and evaluating the DC Metro real estate absorption rate, average list prices, and 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 of course the point from which the negotiation begins, but not all list prices are realistic. The goal of assembling a demonstratable basis for your offer is to evaluate the list price, find the weaknesses, then use them to create a new measure.
Read the full article Determining DC Real Estate Market Values
For updated market statistics in the DC Metro region see Local Market Reports