As I regularly mention, even though home sales are down in this area (the number of properties being sold) -- median and average prices are staying steady or increasing slightly. And yet, there is an interesting phenomenon going on that I have observed several times lately in different neighborhoods in Harrisonburg...
Two-story (1300 SF +/-) townhomes in the City of Harrisonburg have appreciated drastically over the past five years. They were selling for around $99k five years ago (Jan-Jun 2003), and they have been selling for around $160k this year (Jan-Jun 2008). If the appreciation were leveled out over the entire time frame, that's about 10% each and every year.
But also over the past six months, I have seen some of these townhouses (a very small amount) selling for around $149k -- $11k under what most would consider to be market value.
Why is it happening?
There are some home sellers who are able to adjust their selling price quite a bit because they bought in several years ago, and have lots of equity in their home. If they bought at $99k, and sell at $149k instead of $160k, they still sell at a profit of $50,000 (before selling costs). They could have (possibly) made a profit of $61,000 (before selling costs), but they were motivated, and had the equity, so they settled for less in order to sell their property.
Isn't this a good thing? It makes townhouses more affordable!
It is indeed good for townhome buyers, but not so good for townhome sellers who bought in the last two years. These sellers would be in a bit of a pickle, because they don't have as much equity to play with, and thus have difficulty competing on price with sellers that bought 5 years ago.
Will this mean a change to the overall townhouse market?
That's the big question -- and so far, I haven't seen an effect of these isolated sales on the market as a whole. Though, appraisals could get a bit interesting if a townhome goes under contract tomorrow for $160k and the first comparable properties the appraiser finds are the few that sold in the high $140's.
Recent Articles:
