Adding to the recent stellar news regarding Seattle's real estate market, this month's stats show another big median price increase compared to last year, and a continuing surge of home sales. The median home price in Seattle rose 11.1 percent year-over-year in June, to $425,000. Sales, at the same time, were up 13.2 percent compared to June of 2011.
Attention should be paid to the median price statistic, but this stat has to be taken with a grain of salt. Your home's value did not increase by 11.1% in the past year if you live in Seattle. I emphasize this point, because it's easy to take any metric and broadly apply it without a lot of analysis.
Median home price increases certainly signal some gains in the value of an overall market but, in a recovery phase, they also have much to do with the category of homes being purchased. To put it simply, people buy smaller, cheaper, less-risky homes in a downturn. This pushes the median home price lower, not just because values are decreasing, but also because the "average home" being sold is just smaller.
When real estate markets hit an upswing, consumer confidence returns along with luxury and higher-end home buyers. For a certain period at the bottom, median home prices will actually increase while true home values might be still sitting flat or even decreasing slightly. The mid-point marker on the median home price statistic is still sliding upward as larger homes begin selling, but actual values take some time to begin their swing upward (we're likely past that point with many months of consecutive gains).
To put it simply, the median home price statistic tends to exaggerate the peaks and valleys of the market. The downturns and the recoveries are more dramatic statistically than they are in reality.
Should that temper the enthusiasm for the recent increases? Only to the extent that we don't start raising prices on homes for sale significantly. In general, every real estate statistic we're seeing is as good as we've seen in years. All signs point toward a recovery. This is likely the best time to buy that we've seen in a decade. It's just important to not allow a single statistic to color one's entire view of the market. Prices in the Seattle area are likely on the rise for an extended period--your own home, however, is not worth 11% more than it was last year.
Data Source: NWMLS - The Northwest Multiple Listing Service did not compile or publish this information.