When viewed from a long term perspective, every real estate has peaks and valleys – some larger than others.  Our local housing market experienced a tremendous peak in 2005/2006 with home sales doubling (2000-2005), and home prices increasing 66% in just six years (2000-2006).  The valley that has followed that peak has been a rough ride back down, with home sales falling 55% (2005-2010) and home prices falling 11% (2008-2011).  During the last several years (2012, 2013) we have finally seen some strength and stability returning to our local housing market, though many still wondering what will come next.

HOME SALES – Before the real estate bubble began to inflate, there were around 1,000 homes selling per year in Harrisonburg and Rockingham County (through the HRAR MLS).  The population of Harrisonburg and Rockingham County increased 16% between 2000 and 2010, so we might expect that 1,160 home sales per year may be the norm moving forward.  While last year (2012) there were only 864 home sales in our local market, this year we seem poised to see around 1,050 home sales, based on the 22% year-to-date increase in sales activity.  If we do indeed seen 1,050 home sales this year, we should be encouraged to observe that home sales likely could increase even further in 2014 towards that expected 1,160 – 1,200 range.

HOME PRICES – Despite seeing a 66% increase in home prices from before the bubble (2000) to the peak of the bubble (2006) we have only seen an overall 8% decline in prices between that peak (2006) and today (2013 YTD).  Furthermore, 2012 showed a 1% improvement in median sales prices, and this year we are seeing a 2% improvement in prices.  Thus, it seems likely that the worst is behind us as far as price adjustments related to the housing boom and bust.  That said, every neighborhood and price range is a bit different – there are still some price ranges (particularly high end homes) that are not yet seeing price recovery.

INTEREST RATES – Arguably, the recent historically low mortgage interest rates have helped to spur on our local housing market over the past several years.  The average mortgage interest rate for a 30 year mortgage dropped below 5% in late 2009, and then down below 4% in late 2011.  After hitting an all-time low of 3.32% in late 2012, this average mortgage rate has risen to around 4.5%.  Over the next year or two it seems safe to assume that we probably won't see rates as low as 4%, but we also probably won't see them rise as high as 6%.  These rising interest rates have encouraged many buyers to go ahead and make a purchase if they have been considering doing so with an open ended time frame.  Even if interest rates continue to rise to 5%, or even a bit beyond that, they will still be offering a great opportunity for buyers to lock in their housing costs at historically low levels.

FORECLOSURES – Thankfully, our local area usually only sees 50 – 100 foreclosures per year based on what we were seeing between 2000 and 2007.  After the real estate boom and bust, local foreclosures increased quite a bit, to a high of 270 in 2010.  We are seeing significantly fewer foreclosures this year (141 YTD) which marks a decline from the highs of the last few years, but still a higher than normal level for our local area.  A lower number of foreclosures in 2013 will help prices to stabilize in our local market, and with home sales and prices increasing, there are likely to be even fewer foreclosures per year as we move forward.

Our local market is fortunate to have only seen small declines in home values as compared to many other housing markets across the country.  Our diverse local economy has certainly helped to keep our local housing market relatively stable.  Over the next few years, we are likely to see continued increase in the pace of home sales in our local market, as well as slow and steady increase in home values.

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