First time buyers who purchase before December 1 of this year will be eligible for an $8,000 tax credit.  While there are many things a first time buyer could do with that money, one idea might be to apply it directly to the principal balance of the mortgage!

Assuming a $150,000 purchase price, this eliminates 3.5 years of mortgage payments off of the end of your loan!  Even more exciting --- those 3.5 years of mortgage payments (that you won't pay) would have cost you a total of $33,000.

There are many exciting aspects of this $8,000 tax credit to first-time buyers --- if you have any questions about it, feel free to call me (540-578-0102) or e-mail me (scott@cbfunkhouser.com).

This illustration assumes a $150,000 purchase price, with 97% financing at 5.25%. 
Contact a qualified lender for more details!

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My main area of real estate expertise is in Harrisonburg and Rockingham County.  I spend a lot of time assisting buyers and sellers in Harrisonburg and Rockingham County, and I also spend significant time analyzing the real estate market in these areas.  Thus, I am very comfortable representing buyers and sellers in these areas. 

However, once I start venturing outside of Rockingham County, I know significantly less about market conditions, neighborhoods, available properties, etc.  For that reason, if you are looking to buy or sell real estate in Augusta County, Page County, Shenandoah County, etc., etc., I will be helping to connect you to another Realtor in my company.

Here's an example of the value of working with a Realtor in their area of expertise....

About a year and a half ago, my client bought a townhouse for approximately $135,000 that should have been priced around $165,000 or $170,000.  The owner of the townhouse no longer lived in the area, so they didn't understand market conditions.  Furthermore, the agent representing them was also located out of the area (a few counties north, if I recall correctly).  Thus, the pricing was significantly off-base ($30K+ too low) --- AND the agent didn't have the property listed in our local MLS (thus, local Realtors didn't know about it).  As a result, my clients were able to get a fantastic deal on the townhouse.  Two funny points...

• The seller and seller's agent seemed quite surprised and delighted when they received my clients' full price offer. 
  
• The appraiser was very confused, and called me to ask what was going on, and why the property was selling for such a low price. 
  

Again --- if you're buying or selling real estate in Harrisonburg or Rockingham County, I would be delighted to help you with that transaction.  If it's outside of those areas, I will very likely help you connect with another agent that would be better qualified to serve your real estate needs.

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Here's a reminder of the very cool "Search by Square Foot" function on my web site in the Power Search area.  You can quickly find the houses that offer the most house for the dollar by inserting search criteria in the "Price / SF" field.

Here, for example, are the eight single family homes in the City of Harrisonburg with asking prices that equate to $90 per square foot or less.  These are quite possibly some of the best deals available in Harrisonburg right now.

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Construction is flying along at Urban Exchange (196 condos for sale and for lease in downtown Harrisonburg).  Here are a few updates on the progress:

• The courtyard is really shaping up!  The photo above starts to show how large of an area this will be, with raised decking, landscaping, and seating areas.  More courtyard photos here.
  
• The bridges will be installed soon!  As you can see in the photo above, the end segments of the yellow bridge (2nd floor) have been installed.  In roughly 4 weeks, all of the bridges will be installed via a crane!  More bridge photos here.
  
• The apartments in the East Wing (for lease) are moving along quickly, with rough mechanicals and insulation nearing completion and drywall in progress!
• The East Wing is now scheduled to be complete on July 1, 2009.  Completion of the West Wing is scheduled for August 20, 2009.

See the progress at Urban Exchange via these construction photos from earlier this afternoon.

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A gentleman from New Jersey stopped by our office today asking about the area, and trying to get a sense of where the main growth areas of the city and county are located.  I explained to him, as I have explained to many people lately, that most of the growth in the County is focused just south and east of Harrisonburg in an area bound by Route 33, Port Republic Road, Boyers Road and Cross Keys Road.  It's a diamond shape area (seen above), and within that are you will find many of the subdivisions that have been developed over the last 10-15 years. 

Click on any subdivision in the map above to jump to active listings in that neighborhood.

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In making an offer to purchase a home, there are many small and large decisions to make (closing date, home inspection, closing cost credit, etc) --- but the decision that often has a 30-year impact is the offering price.  A few short years ago (2003/2004), most buyers were offering at or very close to the asking price, as homes were "flying off the shelf" they were selling so fast.  These days you'll typically have a bit more time to consider your offering price, which should include thoughts and discussions about...

1.  Recent Sales
Perhaps the most important of all factors, at what price have comparable homes recently sold?  You likely won't want to pay too much more that the price for which other buyers have recently paid for similar properties.  This is often much easier thought than analyzed, as there are many homes where it is difficult to find directly comparable home sales.

2.  Competing Properties For Sale
It is also important to reflect on the price you would pay if you bought an alternative house that is also for sale and that is reasonably similar to the house you are actually considering purchasing.  If an owner is asking $250K for their home, even if other homes have recently sold around $250K, it would be important to know if three other comparable homes are currently for sale for $205K.

3.  Seller's Acquisition Cost
This information is not always available, and is not always pertinent, but it can guide conversations about an offering price.  If two owners are both trying to sell their homes for $250K, and one bought their home for $150K and the other bought their home for $220K, the price you might offer on one house would be quite different than the second.  Again, this is not always pertinent, as most owners won't want to sell their home at a price that they perceive to be under market value just because they can based on what they paid for it originally.

4.  Length of Time on the Market
Again, this won't always make an impact on the price that you will have to pay to purchase a particular home, but the owner of a home on the market for a week would see an offer of 85% of the asking price very differently than the owner of a home that has been on the market for two years.

5.  Your Finances
Perhaps the most important factor, you must make an offer at a price that is comfortable for you when it comes to the associated monthly housing costs.  Sometimes this means making an offer which you suspect will not be accepted, but some financial/budgetary rationale must be inserted into the conversation at this point.

There are many other ways to look at the asking price as you determine the offering price --- and indeed, each home sale scenario is different, so beyond this quick guide, determining the offering price warrants an in depth conversation. 

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As referenced in yesterday's "My hope for the 2009 local housing market" post, the quantity of home sales has fallen 44% over the past 4 years (between 2005 and 2008).  At the same time, values haven't significantly fallen, and thus I tried to answer the question of why we haven't seen a big shift in home values.  But one question remains --- why have we seen such a larger decline in the number of home sales!?  Here are my thoughts, though I welcome your insights as well...

• Lower appreciation rates render short-lived buyers powerless.  Home values increased dramatically between 2003 and 2004, and likewise between 2004/2005 and 2005/2006.  That trend drew a lot of would-be-renters into the home buying market, because they saw the opportunity to buy a home with the ability to sell it as soon as 12-18 months later and make a profit.  These buyers would typically rent because it would be too expensive to sell 12-18 months after buying --- but with such rapidly escalating sales prices, this became less of an issue.  With a one percent drop in sales prices between 2007 and 2008, this type of buyer is clearly back on the sidelines again --- it doesn't make sense to buy for the very short-term.
• Higher home prices leave many first-time buyers out in the cold.  With home values increasing so rapidly over the past six years, many buyers who would have qualified several years ago (based on their current income) no longer qualify to purchase.  Just six years ago, brand new two-story townhomes in Harrisonburg were selling for $99K.  These same townhomes are now selling for $160K (a 61% increase) but salary/wages have not increased by 61% in the same time period.  Thus, fewer buyers qualify to buy today because home values increased faster than salaries and wages.
• Home prices and loan programs cripple investors.  Just a few short years ago, there were quite a few real estate investors actively buying real estate in our market.  Most of these investors have lef, or are holding back on their investments right now.  Home values have increased significantly more quickly than rental rates over the past 5-6 years, which affects an investor's bottom line.  Furthermore, loan programs for investors have grown increasingly stringent, creating higher interest rates on an investor's already low rate of return.
• Transplant buyers are stuck in their markets of origin.  Some segment of our buying market has always been those moving from other parts of the state or country.  Many of these "markets of origin", however, have been hit very hard by dropping home values.  Thus, would-be-buyers in our market are often waiting on their other home to sell before they can buy in our market.

What have I missed?  Why else have we seen a 44% drop in real estate activity since 2005?

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I am thankful that we have not seen much of a shift in home values in Harrisonburg and Rockingham County!  However, the extremely slow rate of market activity that we are currently experiencing makes it very difficult for a homeowner to sell their home, and thus I hope that we will soon see market activity pick up in this area.

Of note, we have seen a steady decline in overall residential sales for each of the past four years (shown above), with a 44% overall decline between 2005 and 2008.  The graph and chart represent all residential sales recorded in our local MLS in Harrisonburg and Rockingham County.  Each year the number of home sales has slipped further and further down, with 2008 finishing out with only 931 home sales.

Thus, my hope for 2009 is that we can at least keep pace with 2008 --- with 931 home sales.  I'm not hoping for a miraculous turnaround with 1,200 sales --- I'd just like to see market activity stop sliding downhill. 

How are we doing with this goal so far, you might ask?  So far this year there have been 57 residential sales.  Last year by this time, there had been 72 residential sales.  We still have some catching up to do to hit the 931 mark by the end of the year, but it is indeed still early in the year --- and the stimulus package was signed into law less than 24 hours ago!

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Over the past few weeks I have examined shifts in home values from several perspectives:

• The January 2009 Real Estate Market Report showed that even though sales activity has decreased, average and median sales prices are staying steady.
• I took a close look at "starter townhomes in Harrisonburg" and determined that home values in that segment of the market stayed relatively steady over the past year.
• I explained many different ways that we can evaluate and talk about home value trends.

But no matter how many times I looked at the data, I kept coming back to the fact that our market (Harrisonburg and Rockingham County) has not seen a significant drop in home values such as what has been seen in other parts of the state and country.

Why!????  This is the question that many people are asking --- why aren't we seeing a downward shift in values in this area?  Over coffee today, I was presented with one hypothesis (thanks Ian!) for why this may be occuring.  Ian's conjecture --- we're not seeing a big shift in values because there aren't too many people in our area that absolutely MUST sell, and thus they aren't making huge price drops in order to sell.

I can go along with this theory.  In talking to homeowners with their homes on the market, it seems that while there are many sellers who definitely, positively want to sell, the sooner the better, there aren't a very large number who are absolutely desperate and willing to take desperate measures in order to sell.

What are your thoughts?  Anyone want to refute or defend this theory?

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As the development of Urban Exchange progresses, I will be continuing to post interviews on the Urban Exchange web site to provide you with a glimpse into the excitement taking place in Downtown Harrisonburg.

To start off, take a few minutes to learn more about Urban Exchange via interviews with Barry Kelley (developer), Andrew Forward (developer) and Philippe Jentsch (architect).

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Our company runs over 60 web sites with real estate listings --- the company site, and a web site for each agent.  Over the past year there have been hundreds of thousands of property views on this set of web sites --- with each property view being a web user clicking to view the details of a given property.

The graph above shows a trendline for the number of properties viewed during each of the past 12 months on all of these web sites combined.  The trendline is likely not too surprising, as we see a tremendous amount of activity in March/April/May, gearing up for summer purchases, and we see a rather significant drop through the remainder of the year (August-December). 

January, however, showed a sharp incline --- which leads me to question --- is this simply a seasonal trend coming around again, or will we see a significantly stronger real estate market this spring?

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Just a few hours ago, the long-awaited (by some) stimulus package made its way through Congress, and it will likely be signed by President Obama by the end of the weekend.  The stimulus plan affects many areas of our economy, as described in this AP press release, but one section in particular should stand out for first time home buyers.

Potential first time home buyers will now have an $8,000 reason to buy a house in the next nine months!  Here are a few of the fine details of this new (soon-to-be-finalized) legislation:

• You must buy a home between January 1, 2009 and November 30, 2009 to be eligible.
• Only those who have not owned a home in the past three years are eligible for the tax credit.
• The $8,000 tax credit will be applied to the 2009 tax year --- you'll actually receive the $8,000 financial benefit in Spring 2010 (whenever you file your taxes).
• The $8,000 tax credit does NOT have be re-paid, unless the home is sold within the first three years.

There are certainly several other fine points to know (it is, after all, a 1,000+ page piece of legislation), but those are the main points to remember.  If you are a first time buyer, or if you know one, this makes it a great time to consider buying a house.  (Oh yeah, low interest rates, lots of housing choices, and lots of negotiation power with sellers are also a good reasons to get in the buying market.)

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Fannie Mae's current policies don't allow an investor to finance any more than four properties backed by Fannie Mae.  Thus, if you own the home you live in, you could only purchase three additional properties as an investment.  This has directly affected several of my clients who have had to stand on the sidelines, or seek a commercial loan as they considered recent investment purchases.

THE GOOD NEWS --- effective March 1, 2009, an investor will now be able to finance up to 10 properties through Fannie Mae!

Fannie Mae does, however, put some rather significant limitations on this new policy.  This summary is my interpretation of the new policy, but I encourage you to talk to read the policy yourself as well:

• The highest loan-to-value ratio will be 70%.
• The borrower must have a minimum credit score of 720.
• No bankruptcy/foreclosure during the past 7 years.
• No mortgage delinquencies (30+ days) in the past 12 months.
• Rental income on proposed and current properties must be documented.
• Reserves must be shown for the proposed and current properties.

Again, these changes won't go into effect until March 1, 2009, but if you meet the criteria listed above, you'll soon have significantly greater financing options on investment purchases.  This is great news for the investors who have keyed in on good opportunities in our market but who have been called back to the sidelines due to this financing restriction.

Thanks to Jeremy Hart, a fantastic Realtor in Blacksburg, VA for bringing this to my attention!

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Listen in as Barry Kelley, one of the developers of Urban Exchange, talks about the impact that Urban Exchange will have on Harrisonburg.



Below is a rough transcription, for those of you reading on mobile devices without video capabilities...

I think the impact on downtown Harrisonburg is one feature that it will have, but I'd have to go even deeper and say that the idea of building an urban environment  and creating more functional urban environments is something that we as a society have been doing for hundreds of years.  It was until 1945, after the war and the baby boomers, that gas prices as they were allowed us to change our life and our lifestyles, and I think we've come to the conclusion that we are paying a big cost for that change in lifestyles.  And so, there seems to be a drawing back to the city centers and the urban environments because of increased use and better use of time and quality times with your children, and your friends and your neighbors. 

And so how does that impact Harrisonburg and downtown Harrisonburg, I think that is all part of the revitalization part, because people are coming to the understanding that maybe living 10, 15, 20 miles out into the county, has some downfalls, and so if you can live a simple life, maybe it can be more fulfilling in a lot of different ways.  So, how is it having an impact on Harrisonburg, I think it has a social impact on Harrisonburg and the surrounding areas, that our whole country is going through that is rather profound and we're just a small part of that.

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In 2006, 1438 residential properties sold in Harrisonburg and Rockingham County, with an average of 138 "days on market".

In 2007, it was 1248 properties with an average of 171 "days on market".

In 2008, it was 936 properties with an average of 167 "days on market".

There are currently 808 residential properties on the market with an average of 206 "days on market".

Many people find it hard to believe that the average days on market decreased (ever so slightly) between 2007 and 2008.  This is especially true when they talk to their friends and neighbors who are trying to sell their homes (with an average of 206 days on market).

A few remarkable points:

• If all properties on the market today closed, the average days on market would like be over 300, as they have already been on the market for an average of 206 days.
   
  
• What we need to realize is that there are a lot of properties on the market now (with high days on market) that may never sell.  This, as far as I can tell, is the best explanation of why the average days on market of closed properties is still hovering in the 170 day range.
   
• In this market it is imperative to price right, stage intentionally, market intensively, and follow up persistently.  There are some homes that are languishing on the market, and you must take a pro-active, aggressive approach to selling your home to get it sold, and sold as quickly as possible.
  

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What are the chances that your Realtor (a.k.a. "listing agent") will also represent the buyer of your home?  Or, put another way, what are the chances that the agent you hire to sell your home will be the one who actually sells it (represents the buyer)?

In 2008, there was a 1 in 4 chance that your listing agent would be the one to sell your home.  Of the 1,371 residential properties that sold in Harrisonburg and Rockingham County in 2008, there were 342 transactions (25%) where the seller was represented by the same agent as the buyer.

Statistics aside, however, this brings up the controversial issue of "dual agency" -- a practice in which the same agent represents both the buyer and seller.  Dual agency is commonly practiced (as we saw above, in 1 out of 4 transactions), but it is something that I typically try to avoid.  (Less than 5% of my transactions involve dual agency.) 

A dual agent is significantly limited in how they can represent the buyer and seller in a transaction because they are representing both parties.  It would be akin, in some ways, to one attorney representing both the plaintiff and the defendant.  There are plenty of times when this works out just fine, and an agent is able to fairly represent both the buyer and seller in a transaction, but there are plenty of opportunities for problems as well.

Generally, the only exception that I make for practicing dual agency is when I have a pre-existing buyer client who decides they want to purchase a property where I am already representing the seller.  (I'm in the midst of one of these transactions now.) 

Any thoughts here?  Is the 25% stat (of properties being sold by the listing agent) surprising high or surprisingly low?  Does dual agency seem perfectly acceptable, or remarkably absurd?

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Over the past few months I have been educating myself about green building techniques (for example: What Is An Earthcraft House?), but I have also been picking up some tips on what existing homeowners can do to make their homes more green, and energy efficient.

Here are some low-cost ways to live green around your home:

1. Install CFL lightbulbs (save lots of electricity)
   
2. Install low-flow showerheads (save water too)
   
3. Start a compost pile (save the landfills)
   
4. Plant trees (shade trees around a house can reduce heating bills)
5. Insulate hot water heater (avoid unnecessary energy/heat loss)
6. Weatherstrip and caulk doors and windows (seal those leaks)
7. Collect rainwater to water plants (save tap water for drinking)
8. Paint with low- or no-VOC paint (avoid those toxins)
9. Replace air filters (improve indoor air quality)
10. Install a programmable thermostat (don't heat an empty house)
11. Plant native plants (avoid the need to water heavily)

If you're willing to spend a bit more, here are some medium-cost ideas:

1. Conduct an energy audit (find the problems)
2. Tune up the HVAC system (efficient heating systems heat efficiently)
3. Install a tankless water heater (stop heating water endlessly)
4. Insulate attic and other areas (stop needless heat loss)

Do you have other ideas of how to live greener in your current home?  Please share!

I'll be posting even more information that I have learned from these Green Building courses over the next few weeks, but if you have specific questions before then, feel free to call (540-578-0102) or e-mail (scott@cbfunkhouser.com) me.

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Click on the photo above to view updated Urban Exchange construction photos, showing the dramatic progress that is taking place just one block from Court Square. 

Also, if you'd like to take a tour of Urban Exchange, please either stop by during our office hours, or also feel free to call or e-mail to make an appointment to meet on site:

Condo Sales
Scott Rogers
540-578-0102
scott@LiveUE.com

Apartment Leasing
540-421-9341
info@LiveUE.com

Are you interested in living in downtown Harrisonburg?

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A common question I am asked is how costs compare in buying versus renting a "starter townhouse" in Harrisonburg.  This changes over time, but here's how the costs compare now, assuming that you stay in the property for three years....

Buying a townhome at $156K  (example)

With a 3% down payment, you'll be financing $151,320, and at current interest rates (5.00%), this will equate to a $922 monthly mortgage payment.  This $922 will include the principal, interest, taxes and insurance.

You will likely pay $4,000 of closing costs to buy the townhome.

During your three years of ownership you will have saved approximately $5,000 on your taxes because of the mortgage interest you have paid.

After three years you will have paid off approximately $7,000 of principal on your mortgage. 

Thus, you have a net (unrealized) gain of $8,000 ($5k tax savings + $7k principal reduction - $4k closing costs).

Renting a comparable townhome

To rent a comparable townhome, you will likely be paying $900 per month.  You will have no up front costs, no tax savings during your time of ownership, and no financial return at the end of the three year time frame.

Three Year Conclusion

If you are only going to live in your townhome for three years, you will still need to carefully consider whether you should buy vs rent.  Even though you will have $8,000 of savings, you will burn through much of that in the transaction cost of selling your townhome.

Five Year Conclusion

If you're in the townhome for five years, it becomes a much better opportunity to have purchased.

In the five year analysis, you will have a net (unrealized) gain of $17,000 ($9k tax savings + $12k principal reduction - $4k closing costs).

Deciding whether to buy or rent is a big decision, but it can be made wisely with some basic financial analysis.  Feel free to call (540-578-0102) or e-mail me (scott@cbfunkhouser.com) if you'd like some guidance for your personal situation.

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