A house can sit on the market for months, or even years, without selling or even having an offer.  Then, the list price is reduced by a negligible amount, and an offer quickly comes in, or sometimes multiple offers.  What is it that makes all of the buyers sit on the sidelines at $249,900 but makes several of them jump into the fray when the house is lowered to $239,900?

One of my Realtor colleagues made an excellent observation this week when he pointed out that despite the rather slow real estate market of late, buyers will indeed act, once there is equity on the table.  That is to say that if you expect a house to sell for $250K and it has listed as such, the opportunity isn't quite enough for a buyer.  But when the list price declines to $240K (and the prospective buyer assumes she'll buy for $230K), then the buyer is willing to act.  She thinks the house is worth $250K, you see, but now she believes she can purchase it for only $230K.  The buyer has the opportunity to buy a house $20K under perceived market value, picking up $20K of equity.

Now more than ever buyers must be comfortable with the purchase price they are paying for a home.  After all, while we are starting to see some positive signs in the local housing market (lower inventory levels, more contracts signed), we still aren't out of the woods yet.  Without being able to assume that home values will increase 2% to 3% per year (as they have for many, many decades) many buyers want to make sure they are paying a fair price, or getting a deal on a property.

This pricing phenomenon introduces some challenges for you if you are hoping to sell your home.  In a stable and growing real estate market, if homes like yours were selling around $250K, you might list your home for $259,900 and hope to also sell your home for $250K.  Now, however, if houses similar to your home have been selling for around $250K, you likely need to list it for either $240K or $250K.  If you list it at $250K, buyers will see it as an appropriate price, but not a great price and you may soon be reducing the price to $240K.  

As a seller, bear in mind that roughly one-third of homes that are selling these days sell (close) within three months of hitting the market.  Many other homes stay on the market for ages, so the key is to price your home appropriately from Day 1, not from Day 90 or 180.  As a buyer, you need to be ready to act quickly if you see a house that is being offered at a price where equity will be left on the table.  There are many buyers waiting on the sidelines these days, watching and looking for attractive, well priced properties.

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The median sales price in Harrisonburg and Rockingham County has declined by 11% over the past year from $180K to $160K.  That's a rather significant decline.  But looking closer, it seems that one reason why it has declined as much as it has is because there are more bank owned properties selling this year as compared to last year.



As you can see above, last year (YTD) REO sales only accounted for 8% of all home sales in Harrisonburg and Rockingham County.  This year, however, REO sales account for 14% of all home sales.

The median sales price of the non-REO properties this year is $170,056, whereas the median sales price of REO properties this year is only $129,250.

There are certainly other factors that are causing a decline in median sales price, but the proportional increase in bank owned (REO) sales is certainly contributing to the situation.
 

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The home pictured above, being built at The Glen at Cross Keys, has an exterior shell of SIS board (structural insulated sheathing).  This relatively new product from DOW offers structural support, insulation and water resistance. 

In contrast, most other homes have an exterior shell of OSB (oriented strand board) and house wrap, as pictured below.



If you are building a home, you should consider having your builder use an SIS board exterior to provide greater comfort in your home through a well insulated exterior.
 
You'll also find structural insulated sheathing at Heritage Estates, The Cottages at Stone Spring and Founders Way!
  

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Thanks to Benjamin Meredith with Building Knowledge for the heads up....



You too can make your home more efficient by upgrading your heating equipment, adding insulation, replacing leaking windows, and making any other changes that reduce energy consumption and utility costs!

You may be able to receive a rebate for 20% of the cost of the improvements up to $595.....or up to $250 towards an energy audit.

The program details can be found here.
 

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Per the monthly report published by the Virginia Association of Realtors this past week, home sales across Virginia were the highest in 10 months in May -- thus the highest since the federal home buyer tax credit.



Sales vary in different areas of Virginia, but it is encouraging to know that Virginia's housing market seems to be performing relatively well of late.
  
Read more:

• News report from VAR
• PDF of full report from VAR
  

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Today's Daily News Record is correct -- in more ways that one.   The housing market has indeed contracted (verb) as home sales and prices have declined in recent months.  However, further analysis of the current market reveals that Housing CONTRACTS (noun) are the more exciting part of this storyline.

It was Carey Keyes that made the exciting discovery today....last June 54 contracts were written during the entire month.  But in the first 14 days of this June, there have already been 51 contracts!

If we project out until the end of June, here's how last June and this June would compare....



OK, OK, I realize this is extrapolating from June 1 - 14 data....so for those of you who only want to deal with actual data (not projections), let's look at the total number of contracts written thus far this year (Jan 1 - June 14) as compared to last year during the same time period).....



So, it turns out that there might still be hope for 2011 to be the year that the housing market stabilized in Harrisonburg and Rockingham County.
 

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Thanks to Tom Barnum for pointing out this interesting contrast in values....



The two houses above seem relatively similar, right? 

• House #1 features 2,020 SF and was built in 1940 for $244,900.
  
• House #2 features 1,862 SF and was built in 1930 for $99,900.

WAIT A MINUTE!  How could there be a $145,000 difference in value here?

The value difference is at least partially based on location.  House #1 is located on Monument Avenue adjacent to Purcell Park in Harrisonburg.  House #2 is located on Main Street in Timberville.
 

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For each of the past five years, there have been fewer and fewer home sales in Harrisonburg and Rockingham County.  First 1669 (2005), then 1438, then 1248, then 936, then 816, then 758 (2010).  After this 55% decline in home sales, I know that we haven't seen a bottom to the local real estate market until we see the number of home buyers start to increase again. 

I am certainly rooting for 2011 to be the year that we see a reversal -- when we'll finally see an increase in home sales.  The graph above, however, shows that we'll need to see a strong second half of 2011 in order for my prediction to come true.

Of interest, you might note that:

• April and June were the strong months last year, two of the deadlines for the federal home buyer tax credit.
• This July should be a strong month of sales -- it was the highest month of sales in 2009, and was only a slim month of sales in 2010 because of the June 2010 expiration of the federal home buyer tax credit.

Stay tuned --- the magic number for 2011 is 759 --- one more home sale than in 2010.  Can it happen???  I'm still voting YES!
 

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I just completed my monthly analysis of the Harrisonburg and Rockingham County real estate market.  Click here for a PDF of the 24-page report or read on for some highlights.

While there are several indicators that Harrisonburg and Rockingham County might be starting to see a recovery in the housing market, there are still plenty of trends that are not as hopeful.



Above you will note that sales are still lower this year than in 2010, with a 6% decline in May 2011 sales (compared to May 2010) and a 6% decline in year-to-date home sales.  Median prices also continue to decline, with a rather steep 10% decline in median sales price over the past year (Jan-May 2010 vs. Jan-May 2011).
 
 


Despite a downward trend in the pace of home sales and in median prices, we are still on a several-month run of lots of buyers committing to buy homes in Harrisonburg and Rockingham County.  This should, in theory, help to stabilize the pace of home sales over the next few months.  May 2011 contracts exceeded both May 2010 and May 2009!
 
 


The graph above (inventory) is one trendline that we're happy to see decline.  There are currently 13% fewer homes on the market as compared to a year ago!  This helps to balance the market, though there are still many more sellers in the market than buyers.
 
 


Over the past five years, the pace of home sales has declined almost 50% in Harrisonburg and Rockingham County.  Despite this tremendous decline in the number of home buyers in our market, the median price did not start declining until 2008, and even then, only had a slight decline (8%) through the end of 2010.  As 2011 finishes out, we'll get a better idea of how these two trends (pace, price) will perform.

For more reading, click here to download the full Harrisonburg & Rockingham County Real Estate Market Report as a PDF.

As always, if you have questions about this report, or if I can be of assistance with real estate that you own, or that you'd like to own, please be in touch.  You can reach me most easily at 540-578-0102 or scott@HarrisonburgHousingToday.com. 
 

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The Friendly City Food Co-op opened this week, and it is a fantastic addition to Downtown Harrisonburg!  Learn a bit more with me via some excerpts from their web site:

What can I buy at the Friendly City Food Co-op?
The Friendly City features dry grocery, meat, produce, frozen food, dairy, a deli, a grab & go section, coffee and salad bar, and a cafe-style seating area.



I've heard there might be lots of local food at the co-op?
Indeed!  Friendly City actively seeks out relationships with local farmers and producers to highlight a broad selection of natural, organic, and locally-produced food and products.

Why is it so exciting that downtown Harrisonburg now has a grocery store?
Over the past 10 (or so) years there have been major efforts to revitalize downtown Harrisonburg, which has lead to LOTS of places to eat, shop and live in downtown Harrisonburg.  Despite this well rounded city center, however, the absence of a grocery store has been a limitation for those who wanted to be able to live, shop, eat and work downtown.  In fact, when I was marketing Urban Exchange both for sale and for lease (now only for lease), a common question was whether there might ever a grocery store in downtown Harrisonburg.

Find out more about the Friendly City Food Co-op via their web site, or via Facebook or Twitter.

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I received a low (LOW) offer on one of my listings at the end of this past week.  I'll round the numbers a bit to protect the anonymity if my clients and I will suggest that it was equivalent to a $280K offer on a $350K listing.  We were not (surprise, surprise) able to negotiate a contract after starting with such an enormous gap in pricing. 

After it was all said and done, I had a new insight on pricing that hadn't occurred to me before.  I found myself thinking....

Wait, really??  The buyers thought the sellers priced their home $70,000 above a price that they'd really take for the house?

Certainly, if I had clients who wanted to sell at or above $280K, I would never suggest that they list their home at $350K.  Perhaps we list the home at $309,900 at first, and then we might reduce it to $299,900.  But again, this is what it seems that the buyers must have been thinking --- that the sellers had come up with a list price that was $70,000 higher than what they would actually be willing to take.

OK, I know, there are some other angles here:

• It's possible that the $70K lower-than-asking offer was simply to try to warm us up to negotiating down $20K to $25K.
• The buyer was planning to come up some in their negotiations, thus they didn't really expect that the sellers would take that low, low price of $70K under asking price.

But yet, again, buyers need to consider that sellers are trying to price their homes as aggressively (low) as possible.  Don't be surprised (buyers) if sellers aren't able to negotiate too much on a sales price. 

That said, of course, I don't want buyers paying unreasonably high prices for homes.  Thus, if a house should be listed at $300K but is listed at $350K, my advise above shouldn't restrain you from making an offer for what you really think the house is worth.
  

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If you believe in the mantra of buying low and selling high, now is a great time to buy a property at Hunters Ridge.  A variety of factors have led to a significant decline in sales prices in Hunters Ridge over the past several years, including:

• Significant overbuilding of student housing decreased the rental demand for properties at Hunters Ridge.
• Condo financing guidelines became much more restrictive, making it more difficult to finance a purchase at Hunters Ridge.
• Other sources of capital for Hunters Ridge purchases have dried up including equity in a JMU parents' primary residence, money in the stock market, etc.
  

So, how do things look in Hunters Ridge these days?



Condo sales are still extraordinarily slow, with only 6 in the past 2.5 years, as compared to the high of 50 sales in 2005.   Median sales prices have declined from $101K down to $48K.




Townhome sales picked up quite a bit last year with 14 sales, though there have not been any thus far in the first five months of 2011.  Median sales prices dropped from $145K down to $65K.


Here is the full data set for your enjoyment:



Do you need more information about student housing or multi-family housing Harrisonburg?  Call me at 540-578-0102 or e-mail me at scott@HarrisonburgHousingToday.com.
 

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Well, it's hard to say, because we're still in the midst of the first dip....



The blue line above shows the Case-Shiller U.S. National Index Levels, which is a measure of home values across the United States.  As you can see, home values declined between 2006 and 2009, but then started to increase again in 2009 and 2010 -- due largely to the federal home buyer tax credit.  Alas, home values (nationally) have started to decline again, which many are calling a "double dip" in home values.

For better or for worse, Harrisonburg and Rockingham County do not need to worry about a double dip in the near future --- because we're still in the midst of the first dip.  As you can see above in the red line, local home values have only gradually decreased between 2008 and today. 

So, while median home values are still declining in Harrisonburg and Rockingham County, there is some good news on other fronts, for example despite April being a seven month low in contracts across the country, it was a twelve month high for Harrisonburg and Rockingham County!
 
Stay tuned for more market analysis as the May data is compiled and analyzed over the next week. 

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