My article from this month's issue of the Shenandoah Valley Business Journal...

Change has been the only constant in the housing market over the past five years.  Between 2000 and 2005, our local housing market (and most markets across the country) witnessed unprecedented increases in the number of homes selling, and the prices for which these homes sold.  Then, however, the bubble (as some call it) popped.  Over the past five years, we have seen fewer and fewer homes sell, and the prices for which they are selling have also slowly declined.  Some observe that the local housing market might finally be steadying, with smoother sailing in the near future.  If this is indeed the case, what might we expect as some new norms in the local housing market?

More Renters.  During the real estate boom, home values were increasing by double digit percentages per year.  With such rapid appreciation, would-be renters decided to buy homes instead.  After all, even if you were only going to be in the area for a year or two, with home prices increasing so quickly and steadily, why wouldn't you buy?  These days, the new norm is that many would-be buyers (per recent logic) are now delaying a home purchase.  Unless you will be in the area for 4, 5, 6 or more years, it may make more sense to rent instead of buying.  After all, with home values currently falling a few percentage points per year, and with the cost of getting in and getting out of owning a home, buying for the short term just isn't as prudent.  Thus, as the local housing market moves forward, we'll see fewer first time buyers and thus more renters.

Slow Growth.   Between 2000 and 2005, many new subdivisions were created as the real estate market shot skyward.  Re-zoning after re-zoning created many new neighborhoods of single family homes and townhomes.  Some people even became concerned that new developments were too quickly overtaking farmland in some areas in the Valley.  Alas, these days of rampant and unfettered growth seem to be over.  With the drastic real estate slowdown over the past five years, builders are not building speculatively, nonetheless developing new subdivisions speculatively.  There will certainly be new neighborhoods and subdivisions over time, but they will develop much more slowly.

Slow Sales.   Depending on the price range, there are 12 to 24 months of housing inventory on the market in Harrisonburg and Rockingham County.  Even a stellar month or two of sales won't cut into this excess inventory that exists because of a now persistent imbalance between the number of sellers and buyers in the market.  Thus, with so many homes for sale, it will take a long time for the housing market to return to more normal inventory levels such as when there are six months of homes available for purchase at any given time.

Living Close to Work.  Gas prices spiked a several years ago which caused many people to reconsider how far they lived from their place of employment.  Afterwards, gas prices subsided, and the length of commute lost a bit of its focus, but the home buying public seemed to hold onto a part this new mentality.  Even if gas was cheap, buyers were now also thinking about how their quality of life was impacted by the length of their commute.  Now that higher gas prices are upon us once again, it is quite possible that this concept has been cemented into our home buying perspective – it is important to live close to where you work.

Larger Down Payments.  While there are still low and no down payment programs available (FHA, VA), there are certainly nowhere near as many such programs available to home buyers.  Gone are the days when anyone could obtain a mortgage so long as you had a pulse (as some joked).  Mortgages are still widely available to those with decent credit and some funds set aside for a home purchase, but there will no longer be enormous swaths of the public buying homes without putting any funds into the deal.

These are just a few of the new norms that are starting to emerge in the current housing market.  It seems that we may be through the most turbulent of times in the local housing market, but we are still adjusting as a whole to what buying and selling a home now means given the financial changes that our society has witnessed over the past five years.

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Have any questions? Contact Scott Rogers at 540-578-0102 or scott@funkhousergroup.com