When looking at a market to see if it's slowing down or speeding up, it requires examining more than just price. In fact, if an observer looks at just price to determine if a market has turned around, they've actually waited too late to get in on the bottom.
McLean, Virginia, is one of those markets that turned around in the Washington, D.C. area rather quickly. All the right numbers are headed in the right direction. Let's take the luxury portion of that market, for instance. Homes selling at $750,000 or higher are moving faster than they have the last two years in this city that is home to many of the nation's U.S. Senators when Congress is in session.
Comparing 1st quarter 2008 with the same period as last year, McLean definitely has something to brag about. The days on market have dropped by three weeks. This is very substantial and signifies that luxury home sellers with houses priced right can count on a rather short time on the market. In addition, seller subsidies have dropped 40 percent in this price category, from an average of $25,000 in the beginning of 2007 to almost half of that at about $15,500.
Why is this significant? When a market tightens up several things occur -- the days on market drop, sellers are less inclined to dole out buyer assistance for closing costs, and sellers start netting a bigger bottom line. All of these factors are in play today in McLean, Virginia. Luxury home sellers last year in McLean were netting 91 percent of their asking price -- now they are getting 95 percent. And finally, yes, the prices of luxury homes are moving up. Last year at this time the median sales price of a luxury home was $1.3 million, now it's up to $1.5 million.
