The Wall Street Journal ran a very insightful article a week ago entitled "How to Tell if Your Housing Market Has Hit Bottom" which points out that there are some communities around the country that are actually doing OK right now in terms of their housing market.  The Wall Street Journal (with the help of Zillow) identified 25 communities whose current home values are no more than 10% lower than their home value peaks. 

Looking at these communities may give us some perspective on how to tell when our own (Harrisonburg/Rockingham) real estate market is ready to start improving.  There are three main factors that are identified, and if any or all of these are present in a real estate market, things may be ready to start improving again.....

#1 - EMPLOYMENT  If employment is stable or on the rise, a real estate market actually has a shot at improving.  Many of the improving communities are college towns, as universities provide excellent employment stability for a community.  Harrisonburg and Rockingham County continue to see very low unemployment rates -- much lower than the national average, so we're doing pretty well based on factor 1 of 3.

#2 - RENTS  The ratio between rental rates and home prices is an important indicator of the health of a market.  If home prices soar out of control well beyond the comparable cost of renting, then fewer and fewer people will buy, as renting will be more affordable.  Many rent vs. buy calculators use a factor of 15 to determine whether a market is balanced.  "...if prices are more than 15 times annual rents, then a market favors renters; under 15 times, buyers."  As a quick example, a two-story city townhouse might rent for $900/month and sell for $150,000.  This shows that our market is (in some sectors) currently favoring buyers instead of rents.  Another factor (2 of 3) in our favor.

#3 - FORECLOSURES  Our community (and any community) needs to see a decline in foreclosure rates before the housing market can really recover.  We seem to be poised to see our first decline in the foreclosure rate this year (2011) after several years of increasing rates.  This would appear to be factor 3 of 3 in our favor.

The article is definitely worth reading in full (here) --- and it is some interesting food for thought that suggests that our local real estate market might see brighter days in the near future.
 

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