How To Calculate Value

Using The Right Data

Internet and Ai search results often conflate data for the Washington DC Metro Area (DCMA, or “Greater DC Area) with that of the District of Columbia, though they are two distinctly different markets. So be sure to differentiate between markets when evaluating data.

We provide basic data on several pages of our website and our Market Data page is updated monthly to reflect new MLS-based transaction data. Our National Market page covers key market-related influences and news about mortgage interest rates.

Common Data Sets

COMMON DATA SETS USED IN REAL ESTATE

Inventory and absorption rate (supply & demand) are important measures in determining DC real estate values. 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 real estate market is considered to have an inventory and absorption rate of 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, home type and/or by neighborhood.

Are listing prices in your DC neighborhood flat, decreasing or increasing? These numbers provide insight on pricing trends that can be beneficial in structuring your offer. Remember to drill sold data down to the specific micro-neighborhood in which the listing is located. Washington DC real estate values can vary within just a few blocks, even less. Use comparable sales and pricing trends within a 1 mile radius of the subject property, then narrow your research to the specific block you want to target for results.

This represents a new wrinkle in determining the market value of a DC home.

Historically, the cost of brokerage compensation has been folded into real estate listing prices. To what degree it is realized comes down to a per property variable, but typically, at least some portion is baked into overall market value.

With the new system of eliminating offers of cooperative compensation from MLS comes less transparency, more concession activity and the need for a separate valuation history.

Starting Aug. 14 2024, Bright MLS will remove offers of buyer broker compensation, but its record of concessions will remain. This record will become a marker for valuation, albeit an incomplete one. Offers of buyer broker compensation may still be made by sellers off-MLS. So there will be a blind spot where data used to be for a large number of DC real estate transactions.

It will be important to compare pricing trends on the new timeline against historical data.

Median and Average values are another component used in determining DC real estate values. Median Sales Price is the half of all purchases falling below the target sales price, and the half above purchase price during a specified period of time. Median Sales Price is considered an indicator of market strength. Median Sales Price is considered a stronger indicator than Average Sales Price, which is the sum of all sales prices divided by the total number of sales. One low or high sale can skew this indicator, making less reliable.

Compiled on a monthly basis, sold volume in any particular neighborhood in Washington DC provides a measure of 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 on our DC Market Data page. This data 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.

The Average Sales Price to Listing Price Ratio in any particular neighborhood can help provide some understanding of your local real estate market. Unfortunately, listing prices are not a true measure of a home’s worth and some may be unrealistically high or low. Averages can be altered by just one sale, so this is not the most important factor in determining DC real estate values.

The price-per-square-foot metric can vary by neighborhood, street or condominium building. These values can also be affected by market conditions, time of year and location, among other factors. Building codes could affect this metric as they relate to livable square footage. Learn the values for your target property and if the data is supportive of your negotiating position, factor this in, though don’t over-emphasize it. All square footage is not considered equal in DC.

Additional Factors

OTHER VALUE MARKERS

Property value can be summed up as an equation of assessed value, appraised value and market variables (value and availability of the home and its features against others in the immediate neighborhood or similar neighborhoods and demand for the home), the property’s location within a neighborhood and general neighborhood desirability, along with list price, days on market, market conditions and time of year. Here are other key elements to determining DC real estate market value:

This metric is the value of a home’s location, condition, features, finishes and other attributes relative to similar properties currently on the market at that particular time.

Relative Property Condition is one of the most difficult values to compute because it is somewhat subjective. We can all discern difference between a derelict property and one in average condition, but what about differentiating between two similar properties with different floor plans, fixtures and finishes? Buyers often do not have the knowledge, experience or objectivity to accurately assess the condition of competing properties as it relates to market value rather than their personal interests.

Relative property condition is a valid tool in structuring your negotiating strategy if you have physically inspected the competing listings and understand the value of their differences. Photos and old listing descriptions are not an accurate measure of this metric, nor is price per square foot. Buyers should seek expert advice when using this metric in formulating offers.

The list price is the point from which the negotiation begins, but not all list prices are based on comparables and data.

While it may be tempting to adopt values from listed properties that have not yet sold (and thereby offer demonstrated value), this should be the least-employed value marker in deetermining a subject property’s price. List prices can begin anywhere, and are not necessarily based on real market value.

Weigh all metrics for Washington DC real estate values against your desire and that of others’to secure the property. In the end, the old saying is true; “A property is worth what someone is willing and able to pay for it at any given point in time.”

Does the property possess unique factors that make it more desirable than others in its location or of its home type? Special properties often sell well above comp value in the District.

For whatever reason, at any given time, there’s a home type, style or location trending in the DC real estate market that has buyers bidding fiercely against one another.

Sometimes a home just has all the right stuff to prompt target buyers to compete. That’s why we encourage our sellers to define their target buyer and tailor their home’s presentation to that buyer’s needs. It translates to top dollar. When you’re pricing “hot homes,” allow for that ‘it factor” and don’t make the misteake of valuing other properties similarly if they don’t have “it.”

Doing The Math

1. Absorption Rate = (Homes Sold in the Last 30 Days
÷ Active Listings) × 100 =

Total:
Above 20% → Seller’s Market (rising home prices)
Below 15% → Buyer’s Market (potential negotiation)

2. Months of Inventory = (Active Listings
÷ Homes Sold Per Month) × 100 =

For District of Columbia:
Below 4 months → Seller’s market
4-5 months → Balanced market
6+  months → Buyer’s market (rare)

3. Orig List To Sold Price Ratio = (Final Sold Price
÷ Original List Price) × 100 =

Total:
98% or above → Competitive seller’s market
95-99% → Neutral market.
Below 95% → Buyer’s market (room for negotiation)

4. Appreciation Rate = (Current Home Price – Previous Home Price ÷ Previous Home Price) × 100 =

Total:
3-5% per year → Average growth
Above 5% → Strong market growth
Below 3% or negative → Declining market