As you can see below, or in the complete set of June 2008 Urban Exchange construction photos, the lowest floor of structured parking has been mostly completed, and prep work for the second level is beginning.

This project, 194 condos and apartments and 12,000 SF of retail space in downtown Harrisonburg, is slated for completion in the summer of 2009.  Pricing and floor plans will be available in the near future.



Click the photo above, or here, to see the latest construction photos.

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It would seem that many buyers in the market today are hesitating before making an offer because they are unsure of the current and future value of the home they think they want to purchase. 

While it's impossible to predict the future 100% accurately, I can definitely help you to better evaluate your buying decision.  Here are a few ways we could quantitatively analyze a property:

Price-per-square-foot trends

If you are buying a home in a subdivision where other homes have recently sold, we can certainly look at average price-per-square-foot trends to estimate the value of the home, and to see how those values have changed over recent months and years.  This graph shows price-per-square-foot trends for all of Harrisonburg and Rockingham County.  We would be doing the same sort of analysis, but with a smaller data set.

Comparative Market Analysis (CMA)

In my opinion, a CMA isn't just for a seller before they list their home for sale.  Comparing a property for sale to other similar properties that have recently sold can shed significant light on the potential value of the property.  The "comparable" sold properties would be as similar as possible based on features such as: age, bedrooms, bathrooms, location, condition, square footage, amenities, etc.

There are other ways we can approach this issue as well, but the main thing to remember is that it is important (in any market, but especially now) to understand the value of the home that you might purchase.  The listing price alone won't provide a full picture of the value of the home.

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A credit line deed of trust with a maximum amount of $1,600,000 is being foreclosed on.  The trustee sale will take place on July 9th at 2:00 p.m. on site (5639 Thomas Spring Road, Bridgewater, VA). 

The site looks pretty interesting --- a river runs through it!

The current assessed value $413,980. 



A bidder's deposit of up to $25,000 in cash or certified funds may be required.

Trustee:  Doug Stark, 540-512-1800
Source:  Daily News Record, June 23, 2008

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One problem with tracking median home sales prices in a relatively small market is that median home sales prices can easily be swayed if a large number of small (or large) homes sell in a particular month or quarter.

To try to account for the size of the home, I decided to take a look at how the median price per square foot has changed over the past six years.



This graph has a few irregularities, but overall seems like it might be a reasonably trustworthy indication of how home values are adjusting over time.

Do bear in mind that while I have removed the size factor, I have not accounted for some other factors such as age. The first quarter of 2004 showed a sizable decrease in median home sales price --- this could be explained by a large number of older homes selling, or by some other factor that would affect the price per square foot of homes that sold.

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Many things in real estate aren't exactly self explanatory. 

Over the past month I have had conversations with three first-time home buyers who didn't realize that I could show them any house listed by a Realtor in the Harrisonburg and Rockingham County area.

As I stopped to think about it, I realized that many people who have never bought a home may not realize that fact.  So here's how it works...

• When a homeowner works with a Realtor to market and sell their home, the homeowner and Realtor negotiate and agree upon a "brokerage fee" -- the amount of money that the homeowner will pay the Realtor upon the successful sale of the property.  This is often a percentage of the sales price. 
  
  
• Almost always, the homeowner and Realtor agree that if a different Realtor finds and represents the buyer for the home, that the brokerage fee will be split between the Realtor representing the seller, and the Realtor representing the purchaser.
  
  
• As a result, systems exist (MLS, lockboxes) to allow Realtors representing home buyers to be aware of and have access to all homes on the market.
  
  
• So -- while many contextual clues (for sale sign, brochures, other advertising) might suggest that you MUST call the Realtor, representing the homeowner, in fact, that is not true at all.  You can call any Realtor.
  
  
• To bring it all together --- I can show you any house that you see that is for sale.
  
  
• And, of course, any other Realtor can show you those houses, including my listings.

Clear now?  Any questions?

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I recently posted a six year trend graph of median home prices, measured each quarter, and concluded that median home sales price analysis is not wildly significant.

However, several people mentioned to me that they would be interested to see how the trend lines changed if I broke out single family homes, as compared to townhomes/duplexes/condos. Here's what we get...



As you can see, the trend lines aren't wildly different than the trend line that included both data sets together.

Also, both trend lines seem to indicate an increase in median sales price. This could either mean that:

• Home values are declining in Harrisonburg and Rockingham County, or
  
  
• Less expensive homes are selling more often these days than more expensive homes.
  

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Each month I post a graphical representation of Harrisonburg and Rockingham County home sales within the context of the prior five years. (2003-2008)

My monthly home sales report includes the data behind this graph, which (in the most recent month) showed a 23% decline in home sales this year as compared to the prior year (Jan-May 2008 versus Jan-May 2007). But, as a friend of mine pointed out, this doesn't show how far the rate of home sales has fallen compared to when our market was at its fastest pace.



The graph above illustrates the 38% decline that we have seen in Harrisonburg and Rockingham County between the peak of buyer activity (2005) and the current year (2008). Please do remember, this is a decline in market activity (properties being sold/purchased), not a decline in home values.

So where did all of those home buyers go? Why did 364 buyers close on properties during January - May 2008 as opposed to 591 buyers during January - May 2005? I have some ideas...

• There aren't as many investors buying anymore. There were significantly more investor buyers in our market in 2005 as compared to this year. Low sales prices, low interest rates, high appreciation, and high loan-to-value opportunities, and high return on investments all contributed to many, many investor buyers closing on properties during our most active years (2004-2006).
  
  
• Increases in home values have priced many buyers out of the market. Back in 2005, when home values were significantly lower than they are today, many more buyers were qualified to purchase (as opposed to renting). Income levels have risen at a slower pace than housing costs over the past three years.
  
  
• Buyers have to plan to keep their home longer now. Admittedly, this is just a return to the conventional wisdom of the past --- don't buy unless you plan to stay in your home for 3+ (or 5+) years. However, during 2004, 2005, and 2006 it worked out fine for many buyers who bought, and needed to sell only a year later --- they walked away with impressive gains! That phenomenon, created by high appreciation rates, brought many people into the market to buy when otherwise they would have rented. Today, if someone isn't sure whether they'll be in the Harrisonburg area for more than a year or two, they often choose to rent, as they won't necessarily be able to buy, sell, and make money in a 1-2 year time frame.
  
  
• Loans aren't as easy to obtain any more. For several years, if you had a pulse, you could obtain a mortgage. Lenders didn't care whether you could verify your income or your assets --- a buyers word was good enough, and loans were being written for just about anyone who wanted to buy a home. Loan requirements have now become much more strict, which reduces the number of buyers in the market.

Given these four factors, I don't think we should be too surprised that fewer buyers are buying in 2008, as compared to 2005. I suspect that we will see more people buying in 2009 and 2010, but it may be a few years before it returns to the pace we saw during 2004, 2005 and 2006.

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Yesterday, I wrote an article that talked about the costs and challenges of residential fire sprinklers, given that they may soon be required on all new single family homes and townhomes. Some of the data that I provided was provided by the National Association of Home Builders, who are not in favor of residential code requiring the installation of fire sprinklers.

Today, I received from feedback from two individuals who are advocating for mandatory residential fire sprinklers:

• Ryan Ankrom (email)
  www.IRCFireSprinkler.org
  Report that Ryan provided
  
  
• Ryan Smith (email)
  www.residentialfiresprinklers.com
  Report available on web site
  

These two residential fire sprinkler advocates offer some good perspectives on the great sprinkler debate, such as:

• Fire sprinklers go to work immediately to reduce danger, as opposed to a smoke detector which relies upon human factors.
  
  
• Many people assume a sprinkler system would douse an entire home with water, when in fact only the sprinkler(s) in areas affected by fire would be activated in the event of a fire.
  
  
• Most structure fires in the U.S. take place in residential properties, yet residential properties don't require sprinkler systems.
  

Yet with all of the information that both Ryans provided (strange that they share a name), I have not yet received from either of them some feedback on whether the issues that I raised have merit.  Specifically....

• Is it true that installing a residential fire sprinkler would require different water (more expensive) water lines and water meters?
  
  
• Is it true that it is difficult (or impossible) to use a water softener in tandem with a residential fire sprinkler system without having to add a second incoming water line and water meter?
  

Hopefully we'll get some more feedback from the Ryans --- but I would also be interested in my other blog readers' feedback on residential fire sprinklers:

• Cost aside, would you want them in your home?
  
  
• If they were optional in a new home, would you be willing to pay to have them included?
  

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For those interested in buying fresh, locally grown or produced food, make sure to check out the new Buy Fresh Buy Local Food Directory, posted by Thanh over over at hburgnews.com.

You might also be interested in checking out the Shenandoah Valley's Buy Fresh Buy Local website  at http://www.buylocalshenvalley.org.

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For those of you who regularly read articles on my blog, it is likely apparent that I thoroughly enjoy data, number crunching, analysis, etc. But sometimes my counseling background (Masters of Education in Counseling Psychology, CSPA) slips in, and I give the data some rest to look beyond the numbers.

These three perspectives on our current market were developed through conversations with several clients over the past few weeks, and I believe they offer valuable insight into our current market in addition to what the numbers would suggest.

Place and Space

Most people realize that in our current market, there are some great opportunities to get a good deal on a home purchase. The supply of homes for sale is higher than it has been for several years, and the amount of buyers in the market is lower than it has been for several years. Given this dynamic, some sellers, Realtors, market observers are curious as to why more buyers aren't finding a great deal and moving forward.

I had a conversation recently with someone who isn't even in the market to buy right now --- but who shared a valuable perspective with me. They suggested that for most people, buying a home isn't really about "getting a great deal" or "taking advantage of the current market dynamics" --- it's about buying a place that feels like a home and space that serves one's needs.

That is a keen observation --- because there are plenty of deals to be had, and buyers can definitely take advantage of current market dynamics. But perhaps buyers aren't snapping up homes because they are waiting to find the perfect place and space to call home.


The Psychology of Fear

Just listen to the news, or your neighbor, and you'll soon know that the economy is terrible right now. High gas prices --- a declining national housing market --- higher food costs --- soaring health insurance costs, and on and on. All of these economic conditions can make people (home buyers, especially) fearful for their financial future.

And thus, even though home values in Harrisonburg and Rockingham County haven't seen declines like some areas of the country, many buyers are hesitating to purchase --- and some of them are doing so out of fear for what the economy may look like over the next few months and years.


The Power of Hope

Beyond the effects of feeling fearful about the future, I would also suggest that home buyers need to feel positive and hopeful in order to be excited about buying a home. Sometimes this can be a self-contained hope --- hope for how a home will make life better for their family. But sometimes those outside influences (such as our current economic situation) can sneak in and steal the hope away.


To truly understand our current market, it is essential to not only consider the data but also current market psychology --- as either can have the upper hand in shaping our real estate market now and into the future.

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You can certainly e-mail me (scott@cbfunkhouser.com), or call me (540-578-0102), but now you can also chat with me from my blog. Just look for my chat "widget" in the right column on my blog (similar to the image in this post).

I'm not always online, but when I am, I'd be happy to talk to you about the Harrisonburg real estate market, the buying or selling process, or anything that would be helpful to you.

I have already had a few great conversations with people over the past few weeks since I have added this functionality. One such person enjoyed that they could ask me a question rather anonymously. You can type your name in the bottom of the chat box (where it says "Your nickname") if you'd like, but you certainly don't have to.

Sometimes we'll agree that it makes more sense to continue the conversation by phone or e-mail, but I hope you will feel welcome to use this chat functionality to get a quick answer to a question or to strike up a conversation about the market.

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In its September meeting, the International Code Council will be considering a change to the International Residential Code which would mandate the installation of sprinklers in all new single family homes and townhouses.

At first you might think "why not mandate sprinklers, if they'd make our families and our homes safer!?"

But before we encourage our local building inspectors to vote for this change to the IRC, let's take a look at some of the technical and cost issues involved:

1. Water Supply
   The typical domestic water supply does not provide adequate water flow rate for a residential fire sprinkler system. A larger incoming water line will have to be installed, and the water meter and pressure regulator will likely need to be modified as well.
   
   
2. Water Softeners
   Typical residential water softeners are designed for low flow rates, and the drop in water pressure as it passes through the water softener would cause most fire sprinkler systems not to function.
   
   
3. Malfunctioning Systems
   The fire sprinkler piping is always full of water in a "wet" system, which if the pipes freeze can cause significant damage. The alternatives to wet systems (multi-function, dry) have limitations relative to cost, approval by the IRC, and dependency on electricity.
   
   
4. Increased Cost To Home Buyers
   In 2007, a survey was conducted of residential builders to gauge the cost of adding a residential sprinkler system. The media cost of a fire sprinkler system with a public water source was between $3500 and $5000. On a private water source, the media cost was between $8000 and $9000.

With all of these issues, could homeowners really want sprinklers in their home?

• According to a national poll conducted by sprinkler advocates, 63 percent of those surveyed indicated that they were aware that residential sprinkler systems are available, but the number of homes built annually that are equipped with sprinklers continue to be less than 2 percent, many of which are required by local ordinance and not as an option elected by the home buyer.
  
  
• When asked in a 2007 survey of 800 likely voters by Public Opinion Strategies if fire sprinklers should be required in new homes, an overwhelming 89 percent of consumers said that smoke detectors already do an adequate job of protecting them in their homes and 28 percent would not want sprinklers at all, even if they were provided free of charge. Survey results show that only 15 percent of consumers in the sample were willing to pay $4,800 or more for a residential fire sprinkler system.
  

Mandating sprinkler systems in single family homes / townhomes seems like a bad idea to me.

What do you think?

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I was showing a house last evening and as I pulled up, the homeowner was hurrying out of the house to let us view his home.  His departure immediately upon our arrival didn't seem too out of the ordinary, until we walked into the house... and smelled... freshly baked chocolate chip cookies!

On the counter we found some fresh-out-of-the-oven cookies and several ice cold bottles of water, along with a note inviting us to enjoy the treats as we looked through the sellers' home.  We really did partake of the cookies, and they were great! 

Many people would suggest that viewing a home is an experience taken in by all of the senses.  Thus, if the smells (and tastes) that a prospective buyer encounters while they are viewing a home are pleasing, they will be more likely to have a pleasing assessment of the home.  In contrast to our delight upon smelling still-warm chocolate chip cookies, think about how you would experience a home that has a heavy smoke or pet odor!

So --- did the cookies and bottled water convince these prospective buyers to buy this particular house?  This remains to be seen, but we do have a hunch that the cookies may have been laced with a strong aphrodisiac, as we all fell in love with the house!

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In my June 2008 home sales report, I noted that the median sales price of single family homes and townhomes in Harrisonburg and Rockingham County had declined by 3.13% between May 2007 and May 2008.

I was a bit surprised to see this, as home values still seem to be increasing in this area. So....I thought I'd take a closer look at median sales price trends....and here's what I found....



This graph charts the median home sales price on a quarter by quarter basis for the past 25 quarters (6.25 years). The data points of the median home sales price are in gray, connected by the green line. You'll see that the median home sales price goes down (quarter to quarter) almost as often as it goes up.

We could, thus, conclude that either:

• home sales prices (and home values) are almost as likely to go down in any given quarter as they are to go up
• we don't have a large enough number of home sales in this area to make this type of analysis statistically significantly

I lean towards the second conclusion, as I don't think there was a single quarter in 2003 or 2004 when home values decreased, despite the fact that the data would suggest that they did.

The red trend line may give us a better indication of the changes in home values over time --- though suggesting that significant trend data could rise out of insignificant source data is probably a stretch.

Click on the graph to take a closer look.

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A lot of people feel this way right now --- that they have been trying to sell their home for many months (or longer) without success.  This situation is mainly a numbers game ---- closings are down 23% this year, and new listings are up 43%.  Clearly, there are many more sellers in the market than there are buyers, which creates the impatience for selling.

To put your situation in perspective, let's break down the listings that are currently for sale in Harrisonburg and Rockingham County:  This information is showing how many months these sets of properties have been on the market without having sold:


If your house as been on the market for a few months without having been sold, don't despair --- it is just taking a bit longer for these properties to sell.

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A few interesting stats to take note of in this month's home sale report.

The pace of home sales (closings) is increasing. 
Year to date, the closings are down 23.21% compared to last year --- this decrease in sales is an improvement over 23.28% in April 2008, 24.71% in March 2008, and 27.86% in February 2008.

Sellers aren't putting their homes on the market as quickly.
It was rather disturbing to see the increased rate at which sellers were listing their properties for sale in February (+59%), March (+35%) and April (+43%) as compared to the same month the previous year.  In May 2008, however, sellers put their homes on the market at a pace only 17% than during the same time period in 2007.

Median home sales prices are down?
Interestingly, May 2007 versus May 2008 shows a 3.13% decline in median sales prices.  Furthermore, the year to date median sales price trends over the past few months have been headed in the same direction. 

• Jan '07 - Feb '07 compared to Jan '08 - Feb '08 showed an increase of 6.16%.
• Jan '07 - Mar '07 compared to Jan '08 - Mar '08 showed an increase of 5.08%.
• Jan '07 - Apr '07 compared to Jan '08 - Apr '08 showed an increase of 4.27%.
• Jan '07 - May '07 compared to Jan '08 - May '08 showed an increase of only 2.14%.

Next month's report will certainly be interesting to review to see if this "decrease in the increase" of median home sales prices will continue.  Again --- when we look at year to date figures, median sales prices are not decreasing, but as each month has passed this year, the rate at which they are increasing has been decreasing.  How's that for a tongue twister!

For your reference --- the last few monthly reports:  May 2008  April 2008  March 2008

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Click here to view a similar property.

Property Characteristics
Finished SF	1,428
Circa	2006
Bedrooms	3
Bathrooms	2.5
Lot Size	0.053 acres
Pricing
Assessment	$189,300
Original Amount of Deed of Trust	$160,000  (7/2006)
Equity Opportunity	$29,300
Trustee Sale Details
Date/Time	June 11, 2008 at 5:00 PM
Location	Rockingham County Courthouse
Deposit	$15,000

Source:  Daily News Record, June 5, 2008
Trustee:  Samuel I. White, 757-457-1460

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Property Characteristics
Finished SF	1,120
Circa	2006
Bedrooms	3
Bathrooms	2.5
Lot Size	0.051 acres
Pricing
Assessment	$138,300
Original Amount of Deed of Trust	$116,000  (12/2006)
Equity Opportunity	$22,300
Trustee Sale Details
Date/Time	June 24, 2008 at 5:00 PM
Location	Rockingham County Courthouse
Deposit	10%

Source:  Daily News Record, June 5, 2008
Trustee:  Bierman, Geesing & Ward, 301-961-6555, www.bgwsales.com

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Home sales in May 2008 made their annual seasonal increase (91 in May '08 versus 79 in April '08) -- but sales are still well below the levels from the past few years.

Click on the image above for a printable PDF.

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Housing supply keeps increasing, in all price ranges.

"Housing supply" is measured by dividing the current inventory by the average number of home sales per month over the past 12 months.

Click the image above for a printable PDF.

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