If you’re shopping for a home, chances are you’re looking at homes that are more expensive than the one you would actually buy. We’ve been monitoring this trend, and now we’re noticing the gap between the price of homes people look at online and the price of homes people buy is narrowing, especially in markets where home prices have risen the most.
Seattle is a great example. In 2014, the median list price of Seattle homes was $429,000. But the median list price of homes viewed on Redfin.com was 11 percent higher, $478,000. Since then, the median list price has jumped to $519,000, but the median price of homes viewed on Redfin.com hasn’t kept pace. So far this year it’s just $6,000 above the list price.
It makes sense that people look at homes that are out of their price range, especially when you remember that we’re counting views of home listing pages on Redfin.com and not the number of prospective buyers who come through the door. It’s easy for people to view photos of homes online. People like to look at nice kitchens, even if they don’t intend to buy the home.
But what’s really going on? As home prices skyrocketed in the nation’s hottest markets, the price of homes people have checked out online hasn’t meaningfully changed.
“Most serious buyers set up their online home searches based on how much their financing will allow. In Seattle, buyers quickly realize that due to limited inventory, most homes on the market will sell over list price because a bidding war will drive the price up,” said Redfin agent Allie Howard. “Buyers get used to including an escalation clause in their offer. This leads to buyers looking for homes right at their pre-approval amount, or even a little under, knowing they need room to offer over asking price. When Seattle was a slower market, buyers could look at homes in a higher price range and negotiate on price, but that’s not the case today, especially in really desirable neighborhoods.”
Take Boston. So far this year, people in Boston have been looking more at the less expensive homes and less at the more expensive homes. In 2014, the median price of Boston homes viewed online was $40,900 more expensive than the typical home for sale. Two years later, the median price of viewed homes is $9,000 less than Boston’s median list price. During that period, the actual median list price shot up 15 percent, while the median price of viewed homes fluctuated within a range of eight percentage points. This is unusual, but it’s starting to happen elsewhere, too.
San Francisco is trending in Boston’s direction. In San Francisco, people have been looking most frequently at homes priced around $1 million since 2014. Also since 2014, the median list price soared from $899,249 to just about that million-dollar mark, while the gap between the price of homes people look at and buy has closed from almost $100,000 to a deficit of $3,000.
Chicago and Philadelphia are following a different, more steady trend. In these cities, home prices have been rising more slowly. The price gap between listings and online views has remained steady. The Washington, D.C., market has been hot, but it tends to be relatively stable due to the constant flow of people in and out of the city for jobs. In D.C. the price to views gap has also been steady.
What does this mean for the housing market? Some might be tempted to link it to possible bubbliness in the markets where view and list prices have converged. Afterall, Seattle buyers recently cited affordability as their top concern. But we aren’t sure that there’s that strong of a tie. We do think that sellers this year can take a token of advice from homebuyer behavior, though. Especially as list prices and view prices converge, it’s as important as ever to price your home right from the start. Overpricing won’t get you the attention you might have gotten a couple years ago.
Method
Data came from Redfin. Median prices are aggregated to the city level. List prices were included for a city and year if a home was listed any time during a calendar year in that city. View-price medians were calculated by expanding each listing by its view count. If a home was viewed eight times, we put eight copies of that home’s price in our array of view prices. We did this for each listing. Then we took the median, grouped by year and city.
