Redfin gets a haircut

It’s bad out there for venture capital funded firms, as Sequoia Capital warned its funded companies the other day.

It’s far worse for the real estate market, as shown by plummeting prices and rising inventories in Seattle.

So if you’re a VC-funded startup focusing on real estate, it has to be hell times for you. And thus Redfin, which not only maps the collapse of real estate block by block in Seattle but also aims to cut the cost of buying a house through their underworked realtors, laid off 20% of its staff today.

The long winter is about to start for the Seattle economy. Get ready.

10 Comments so far

  1. matt0the0engineer on October 13th, 2008 @ 2:20 pm

    By "plummeting prices… in Seattle" did you mean "King County"?

    I think you’ll find, using Redfin’s awesome tool indexing over 4k houses, that prices are down a few drops in the bucket (check it out here). It’s King County (and, um, about the entire rest of the country) that’s seen real housing price drops. Despite Seattle’s heavy building, we’re still seeing a high demand and $30/sf higher sales price than offering price. That means a house that lists for $275k is actually selling at $305k.


  2. Dylan (dylan) on October 13th, 2008 @ 2:47 pm

    This is true, but six months ago if you searched Redfin for a <=$300k house in north Seattle with three bedrooms, you’d get half a dozen townhouses and maybe a stray fixer-upper here or there. Now, let’s see, there are five detached houses in 98125 alone at that price point? Looks like another three or four places in the Seattle half of 98133. Go up to $400K and you start seeing the people who are offering at or around what they paid for them three years ago.

    The differential was at $70/sq.ft. in Oct 07, looks like. Now it’s $30/sq.ft. We’ve a long way to go before it’s Las Vegas or Phoenix, but there’s a clear downward trend.

    Looks like the wave is starting outside the city limits and coming inward, e.g. compare 98125 (which borders Shoreline in the north) to 98115.


  3. matt0the0engineer on October 13th, 2008 @ 3:24 pm

    I think you’re letting allegory take the place of data. Besides, you can’t compare the spring housing market to the fall housing market.

    Go back to that chart I linked to, specifically the house price. I admit this year’s fall price bump isn’t as tall as last year’s, but the overall housing price for the year looks like it’s stayed the same. Considering all of the housing that we’ve recently added to the market, I’d say that’s pretty good. Yes, unless we keep pulling people in from the suburbs and California this will catch up to us. But compared to about anywhere we’re in good shape.

    Another interesting number in that link:
    Bank- & MLS-listed Foreclosures: 83
    Total houses and condos for sale: 4,527


  4. Beth (sea_beth2) on October 13th, 2008 @ 8:26 pm

    I agree with Dylan- I’ve used Redfin to keep track of my favorite houses over the last year; most of them have had to drop their asking prices. We can find a heck of a lot more in our price range than we could when we moved here a year and a half ago. It may be anecdotal data, but I still think housing prices are dropping in Seattle proper.

    On another note, I’m really sorry to hear that about Redfin. I think their business model is excellent, and am a huge fan of their site. I’m sorry that they’ve had to cut their staff, but I really hope they stick to their guns- they have a great idea.


  5. Dylan (dylan) on October 13th, 2008 @ 11:36 pm

    I think you’re letting allegory take the place of data.

    Except the data also says Seattle prices are going down. I can go get The Tim to confirm it, but I know he’s shown the Seattle proper numbers to be down.

    Go back to that chart I linked to, specifically the house price. I admit this year’s fall price bump isn’t as tall as last year’s, but the overall housing price for the year looks like it’s stayed the same.

    Except it’s not, since they’re measuring two different things, according to Redfin itself:

    It is important to remember that the two lines do not represent the same houses so the lines should not be interpreted as a ratio of list to sale price.

    The "sold" $/sq.ft. could be higher because it’s only more expensive homes being sold. It could be because Seattle may have a higher number of relists, and Redfin does say they price based on sales or when a house is delisted. Or it really could be because home sales in Seattle proper remain abnormally strong.

    I went and looked at a few other areas outside the Northwest that Redfin lists — San Diego, Orange County, Washington — and I couldn’t find anything that could coorelated sold $/sq.ft. being higher than listed $/sq.ft. to anything, except maybe in cases of very, very wide spreads. And it doesn’t seem like Seattle’s spread is that much wider than the ones I found in suburban Virginia where I know the market is in poor shape.

    As is, average sale price is currently less than average list price. That doesn’t suggest an upward trend.

    Yes, unless we keep pulling people in from the suburbs and California this will catch up to us. But compared to about anywhere we’re in good shape.

    We’re just starting later, it seems. Prices started down in the Southwest in early 2007; they only really started down here this past spring. Seattle has usually lagged behind the rest of the country in recessions. We were hit by the brunt of the 2001-02 recession very late (early 2002, though the dotcom crash had already played out by 9/11) and didn’t fully recover until a couple quarters after the rest of the country. If the market is softening in the north Seattle zip codes (which it seems to be) then that means roughly 20% of Seattle’s housing stock is seeing downward price pressure.

    And if the total number of houses on the market seems to be up from last year, wouldn’t that also suggest a supply glut forming?

    We’ve avoided most of the foreclosure problems so far… but for how much longer? It probably won’t be anything like Nevada here (where the foreclosure rate has been approaching 1% of all residences in the state), but even doubling the 83 we have now could be pretty devastating.

    The picture for detached home sales doesn’t seem to be all that rosy. Having tracked prices up here since the spring, I’m content to sit and watch from the sidelines rather than try and buy something that’s going to be 10-15% less by the time we hit bottom.


  6. matt0the0engineer on October 14th, 2008 @ 8:47 am

    It still feels like you’re taking a story and trying to make the data fit it, rather than the other way around. If the financial crisis hadn’t made the news, we’d just think this was a slightly less prosperous year than last year.

    But above all, you used King County data and proclaimed that Seattle housing prices are "plummeting", which is just not true even using the worst-case zipcode you linked to. In fact, unless you retract the "plummeting" statement or link to data that really supports it, I hereby proclaim bad journalism.


  7. Dylan (dylan) on October 14th, 2008 @ 3:16 pm

    I’ll have a whole post about it later (so busy today), but I talked to Tim Ellis over at Seattle Bubble, and he pulled the Seattle proper median price of closed sales numbers for me.

    In August 2007, median sale price of a single-family house in Seattle was $501K, highest ever recorded. In August 2008, it was $428.5K, about a 14 1/2% drop year-on-year. In all of KingCo, prices went from $477K to $424K, 10% down.

    I’d consider a 14% reduction in housing prices in a 12 month period to be "plummeting." And it was a bigger falloff than King County’s prices as a whole.

    He also told me the biggest problem with those Redfin graphs is we can’t see the underlying data driving them.

    More later.


  8. matt0the0engineer on October 15th, 2008 @ 1:19 pm

    I appreciate you trying to find real data to back up your claims, and revoke the bad journalism claim.

    But even your oft mentioned Seattle Bubble just released data that says Seattle is still a seller’s market. Yes the market could just be slow to respond to reality but my point is that without data showing otherwise, any claims of our housing market failing is no more than reading tea leaves.


  9. Dylan (dylan) on October 15th, 2008 @ 1:53 pm

    Seattle is still a seller’s market.

    No, parts of Seattle are seller’s markets by their definition — notably West Seattle, the Rainier Valley, and north of the Ship Canal. Everything else is a buyer’s market — pretty much everything in the dense core of town and on down through Georgetown.

    So, looks like about half the city’s housing stock is in a buyer’s market, the other half in a seller’s market. But if prices overall are down 14% YOY, then is it really a seller’s market? It should be easier to sell a house right now due to limited stock, and that should push prices up. So why are they going down?

    Mortgage interest rates haven’t risen that much over the year, and they only went down briefly post-Fannie/Freddie nationalization. For interest rates to account for the fall in prices, they’d need to move at least 140 basis points up YOY.

    And meanwhile, we get all this anecdotal stuff about people having trouble getting financing.

    So it’s the best time ever to buy, right? Why are prices still falling? Why are there so many for sale signs?


  10. matt0the0engineer on October 15th, 2008 @ 4:30 pm

    But you’re looking at YOY data against Seattle’s most booming housing market ever: "single-family house in Seattle was $501K, highest ever recorded". Looking at curves or at least average data is much more telling when talking about trends. Redfin’s curves don’t look bad (though I’d love to see something over a longer timespan). If you don’t like Redfin’s data, perhaps you could link to another source?

    I think it’s time I point out I’m in no way an expert in these matters. I just get annoyed when people yell "fire" just because everyone else is yelling "fire", rather than taking a moment to smell for smoke.



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