The Drop Off In Real Estate Activity Has Not Been Drastic |
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In talking to my dad yesterday, he reflected that it seemed like the drop off in real estate activity had not been drastic. I agreed. We have seen somewhat of a decline in real estate activity (buyers buying, sellers selling) but it has not been nearly as significant as I thought it would be a few months ago when COVID-19 started having more of an impact on our daily lives. I've been taking a look at cumulative buyer activity each week for the past month or so to see how local market dynamics are changing. As shown above...
So, yes, buyer activity has dropped off a bit in 2020 - but it has not been drastic. | |
All 2400 Square Foot Homes Are Not Equal, Per Buyers and Appraisers |
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So -- if your neighbor's 2400 SF, circa 2000, 4 BR, 2 BA home just sold for $300K... Then it's probably reasonable to think that your 2400 SF, circa 2000, 4 BR, 2 BA home will also sell for $300K, right? Well, maybe -- but maybe not! Consider the possibility that....
These two homes will not be seen as having an equivalent value -- not by potential purchasers and not by an appraiser. Above grade square footage has a higher value attached to it -- both specifically by appraisers, and generally by purchasers. Even if all of the other factors (condition, age, location, bedrooms, bathrooms) are the same between two houses, if one has a significant portion of the square footage in the basement then it will be seen as less valuable than the home that has all of its square footage above grade. | |
Homes Have Never Sold Faster Than They Are Selling Right Now! |
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OK, admittedly, I was only able to look back 20 years -- but still -- I think it is fair to say that... Homes Have Never Sold Faster Than They Are Selling Right Now! As you can see after the real estate boom of 2003 to 2006, the time it took for homes to sell (median days on market) got to be as high as four (plus) months and stayed there between 2008 and 2011. Since that time, homes have been selling faster and faster -- largely due to the demand for housing increasing steadily and the supply of homes declining steadily. In 2018, the median days on market dropped below one month -- and it has continued to decline in 2019 and 2020. The current "17 days" in 2020 means that half of the homes that sell in Harrisonburg and Rockingham County are under contract within 17 days of being listed for sale -- and the other half of the homes that sell take longer than 17 days. It is certainly a fast paced world we live in these days! Buyers have to be ready to move quickly when a new listing of interest hits the market! | |
Monthly Housing Costs Decline A Bit In 2020 Thanks To Record Low Mortgage Interest Rates |
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The monthly cost of a mortgage on a median priced house has actually declined a bit this year! For this analysis, I am measuring "monthly housing cost" by determining the mortgage payment amount (principal, interest, taxes and insurance) for a median priced home in Harrisonburg and Rockingham County, if a buyer were financing 80% of the purchase price and paying Harrisonburg real estate taxes. Over the past year...
So, even though prices are higher now than over the past two years, the monthly housing cost for financing 80% of the purchase of a median priced home has actually declined. | |
How Do Home Inspection Negotiations Usually Proceed? |
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A buyer agrees to pay a price for a house based on what they know about the house at that time. The home inspection process allows them to learn more about the house to confirm that it is the house that they thought. But sometimes, they discover problems with the house that they'd like the seller to address....
So, how do these home inspection negotiations usually proceed? The short (and vague) answer is -- well, it depends on the terms of your contract. But, overall, here is how the inspection process typically flows.... As you can see above, after a buyer requests repairs (based on the home inspection) the seller can choose to make some, all or none of the requested repairs. The transaction (and negotiations) can then go in a few different directions based on that response. Learn more about the home buying process at.... | |
Home Buyers Keep On Buying |
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You almost have to squint to see major differences between the trajectory of each of these lines over the past few years. The three lines above are showing the cumulative number of buyers signing contracts at any given point in the year. Looking back to the middle of March, just when we were starting to see effects of COVID-19 on our daily lives, the pace of contract activity in 2020 was ahead of the past two years... Jan 1, 2020 - Mar 15, 2020 = 265 contracts Jan 1, 2019 - Mar 15, 2019 = 242 contracts Thus, as of March 15, buyers were 9.5% ahead of last year's pace. Now, two thirds of the way through May, things have flipped flopped... Jan 1, 2020 - May 20, 2020 = 536 contracts Jan 1, 2019 - May 20, 2019 = 565 contracts Thus, as of May 20, buyers are 5% behind last year's pace. So... 1. Home buyer activity has slowed in 2020 over the past two months. 2. Home buying activity in 2020 is only 5% behind last year! I expect we'll see things start to speed back up at some point -- but it hasn't seemed to have started yet... | |
Mortgage Interest Rates Are Absurdly Low |
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Fortunate are the home buyers who happen to be buying right now -- and locking in super low mortgage interest rates! Over the past year, interest rates have been at an average of 3.62% -- but that has varied widely from being over 4% a year ago, to now being right around 3.25%. Rates have never (ever, ever, ever) been this low! If you are buying right now, you are fortunate to be locking in a very low mortgage interest rate, and it will likely never make sense to refinance! | |
Inventory Changes Can Reveal Reasons For Fewer Home Sales |
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Contract activity is slowing, a bit, and that will likely eventually lead to fewer sales -- that is to say fewer sales in 2020-YTD than in 2019-YTD. So, if we get to that point, perhaps in July 2020, what shall we conclude about the state of our local housing market if we're seeing fewer home sales this year than last? After all, we have been seeing relatively steady increases in the number of homes sales for almost 10 years now! I think inventory trends (at such a future date) will help reveal the reason for fewer home sales. If fewer home sales are accompanied by rising inventory levels... that will indicate that more sellers want to sell their homes than there are buyers who want to buy homes. That will mean that the market is softening and it will become less of a seller's market than in the past. If fewer home sales are accompanied by steady or declining inventory levels... that will indicate that fewer sellers want to sell their homes and the buyers are still there wanting to buy homes. That will mean that the market is staying strong with sustained buyer interest despite an interruption in the flow of sellers willing to sell. So -- fewer home sales could mean two very different things -- and thus far, it's seeming that it's the second scenario -- fewer sellers willing to sell despite a consistent pool of buyers ready to buy. | |
Home Sales and Prices Still Rising Despite Declining Contract Activity |
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I just published my monthly market report, which you can download as a PDF here, or read on for the highlights of what is happening these days in our local housing market. But first, check out the details of the house shown above, located adjacent to the JMU campus, by visiting 80MaplehurstAvenue.com. Now, let's dive into the housing data and see what we can learn about the latest trends in the Harrisonburg real estate market... As you can see above, the pace of home sales dropped off a good bit in April 2020 (see #1) as there were only 91 closed sales as compared to 112 last April. This is not altogether surprising, as we had seen contract activity starting to decline slightly in March. The year-to-date pace of sales (see #2) is actually still quite a bit higher (8.36%) this year as compared to last year. There was a surge of home sales in January 2020 which has kept us ahead of last year when it comes to year-to-date sales despite slower sales in April. The median sales price is still on the rise (see #3) over the past year -- having risen from $214,900 a year ago to $229,250 at the end of April. Homes are selling faster and faster and faster (see #4) with a 33% decline over the past year in the median days on market. And now, let's look at how sales have bounced all over the place thus far in 2020... If you're feeling dizzy in 2020 trying to keep track of how the housing market is doing, you're not alone...
So, yeah - the net effect is still an increase between 2019 and 2020 - but that might shift when we include May home sales. We are likely to see fewer than 130 home sales in May based on contract activity in April. Only time will tell whether these short term interruptions of long term trends will impact those long term trends, as shown below... As you can see (in green) the median sales price has been steadily rising over the past year (quite a bit longer actually) to the current median sales price of $229,250. So far, we're not seeing any indications that we'll see a flattening or decline in market values in this area. Over the past year, we have seen an increase (even if choppy) in the pace of home sales, but that dropped a bit in April 2020, and might drop a bit more in May 2020. I think this is mostly related to fewer sellers being willing to sell which is resulting in fewer buyers being able to buy. It's also helpful to look at values over time just for single family homes, as the townhouse/condo market often includes investors which doesn't show owner occupant buying activity as clearly... The figures above are showing the median sales price of detached homes over the past six plus years. The median sales price has risen between 2% and 7% for each of the past five years, and seems to be ready to increase again in 2020, perhaps by around 3%. Part of the reason that prices are going up is because we're seeing steady buyer demand amidst fewer and fewer options of homes for sale at any given moment... Above, we're looking at the number of buyers buying in a six month period -- which has been relatively steady over the past few years -- as compared to the number of homes on the market at any given time. The buyers are consistently ready to buy -- but they're fighting over fewer and fewer homes for sale. All that has made this an increasingly strong seller's market over the past few years. That said, buyer activity has faded a big over the past two months... Last year, April was the strongest month of buyer activity for the entire year -- this year, not so much. We've seen an increase each month this year in the number of buyers buying -- but it has only resulted in a total of 440 contracts, as compared to a slightly higher pace of 466 contracts last year. So, slightly fewer buyers have contracted to buy in 2020, which will eventually result in a slower year-to-date sales figure, though that hasn't shown up yet. And why are fewer buyers buying, you might ask? I think the largest factor is fewer sellers being willing to sell... As shown above, we have seen a 13% decline in the number of homes for sale over the past year. Last year, the number of homes for sale rose to around 270 homes and stayed around that number between March and October. This year, it is not clear that we'll see inventory levels get that high. Those buyers that are able to buy, though, are financing their home purchase at a historically low mortgage interest rate... The mortgage interest rate at the end of April was 3.23%, which is the lowest on record -- ever. If you are buying in today's market, and are able to secure a contract on a house in this low inventory environment, you are certain to be pleased with your mortgage interest rate. OK, well, I'll leave it at that for now. You can review all of the trends and graphs by downloading a PDF of my market report here, or follow my blog at HarrisonburgHousingToday.com where I'll continue to monitor trends in our local market. In summary, the local housing market continues to see more homes selling, faster, at higher prices - but a small slow down in seller (and thus buyer) activity over the past two months will likely start to translate into slightly slower pace of sales, even if prices are not affected. Until next month, stay healthy, stay sane, and be in touch if I can be of any help to you or your family - with real estate or otherwise. | |
Home Buying Activity Continues To Slowly Slow, But Low Inventory Likely A Contributing Factor |
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The pace of buyers signing contracts to purchase homes continues to slowly slow in 2020 -- with year-to-date contract activity in 2020 now 7% lower than during the same timeframe in 2019. A few contextual notes...
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Mortgage Applications, Often A Good Leading Indicator Of Buyer Activity, Rising Quickly! |
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The number of people making applications for mortgages tends to be a good indicator of current and future buyer activity. The graph above shows that mortgage applications in 2020 were a good bit above 2019 through the middle of March and then they took a nose dive. That said, over the past two weeks, the rate of buyers making mortgage applications has started to rise quickly again -- and is nearing the same place it was a year ago at this time. Mortgage applications precede close sales by a month or two (or more) so this may be an early indicator that buyer activity is starting to stabilize and increase again. of note -- this is a national trend - locally, we did not see as much of a drop off in buyer activity in March and April as this graph would suggest. | |
Looking At The Big Picture, Financially, Of Both Selling AND Buying a House |
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If you will be selling your home to buy another, there are a lot of numbers floating around....
Above you will see a spreadsheet I put together to help you think about some of these numbers as you are evaluating if and when you will make a move to a new house. In yellow, are all of the inputs you will need to provide, or that you and I can determine together, such as your current payment, your home's current value, your mortgage payoff, whether you will be putting any additional money into the transaction, etc. In green, I have identified your potential future mortgage payment and the net change in your monthly payment. All of the numbers without a background color will automatically calculate for you. Click here to download this worksheet as an editable Excel file. | |
The Value Of Your Finished Basement Depends On How It Is Finished |
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There are a lot of types of basements - and they have very different values to buyers and appraisers. Here are a few examples, to get you thinking...
You get the idea. :-) To say "this house has a basement!" can mean so many (so many!) different things. And, the value of that basement (to a buyer or an appraiser) will vary quite significantly. | |
Home Buyer Activity Still Slowing, Slowly, in 2020 |
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Are home buyers contracting to buy homes as quickly as we would have expected them to be in 2020? No. Has the pace of home buying activity dropped drastically given the current public health situation? No. As shown above, home buyer activity (this year is the red line) continues to trail off a bit as compared to the past two years.
The timing of contracts is different every year, so if we average out the past two years we see a pace of 485 contracts through May 7th. Thus, this year's pace of buying activity is only 4% slower than the average of the past two years. So... Is COVID-19 affecting the pace of home buying (and selling) activity in our local market? Yes. Is it still relatively likely that this year's total number of home sales will be within 5% - 10% of last year? Yes. Stay tuned for further analysis as we progress through this unusual time. | |
More Home Buyers Purchase In The County Than The City |
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Each year, right around twice as many home buyers purchase homes in Rockingham County as compared to in the City of Harrisonburg. That said, the home buyers in the City are much more densely situated -- since the City is comprised of only 17.42 square miles -- while the County spans 849.09 square miles! As a random aside, Rockingham County is the third largest county in Virginia! Not necessarily, as there are more than THREE as many homes for sale in the County as compared to the City. Where will you purchase your next home? In the City or the County? Why? Based on the lot size, privacy, school district, age, property type? | |
Focus On The Big Items When Drafting A Repairs Request |
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After a home inspection, a buyer knows more about the house than when they agreed to pay $X to purchase the house. In order for them to still want to pay $X for the house, they may ask the seller to address some of the deficiencies found during the home inspection. Imagine a hypothetical scenario where the following deficiencies are found:
So - which items should the buyer ask the seller to repair? Some could say ALL of them - the buyer didn't agree to pay $X for the house with all of these large and small issues. But I'd advise most buyers to only request that the seller address a subset of those issues:
All of the other items (3-7) are minor issues that won't cost too much (in time or money) to repair after you buy the house. But why not ask the seller to repair these items?
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Always Look At The Larger Context When Considering House Price As A Buyer Or Seller |
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THE BUYER'S STATED PERSPECTIVE I know that your house is listed for $400K, but this one other home a few streets over sold for $350K last month, and it was a larger, so I'm not paying any more than $350K for your home. THE LARGER CONTEXT Just a few items...
Furthermore, aside from all of these differences in the two houses --- the other ($350K) house is not available any longer --- and there aren't three other houses just like it that the buyer can decide to buy. In this case, by focusing on this one not-actually-that-similar sale, the buyer has put themselves in a situation where they might miss out on purchasing a great home because of how they are viewing the market based on one comparable sale. THE SELLER'S STATED PERSPECTIVE I am confident that I can sell my house for $350K. After all, my friend owned a very similar house and he just sold it in a week, with multiple offers, for $360K! THE LARGER CONTEXT Just a few items...
Again, by focusing on this one not-actually-that-similar sale, the seller has put themselves in a situation where they might miss out on selling their home because of how they are viewing the market based on one comparable sale. The Main Takeaway As a buyer or as a seller -- don't focus on just one comparable sale when deciding on a reasonable price to pay or to ask -- look for the larger context! | |
Homebound and Baking? Put Those Skills To Use When Selling Your Home! |
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When the home buyers walked into the next home, they were greeted by the pleasant, and heart-warming fragrance of freshly baked cookies. They walked into the kitchen and were delighted to find cookies, indeed -- freshly baked cookies -- prepared especially for them. This house already felt like a home, as they started enjoying a tasty cookie while touring the kitchen and beyond. :-) I always have a few clients each year who prepare a large batch of cookie dough when they list their home and they then pop several cookies into the oven to bake before each showing. Full disclosure -- I do love cookies -- so it's a win/win/win if I'm showing the house... | |
Contract Activity Slows In April 2020 But Perhaps Mostly Because April 2019 Was A Wild Month? |
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Contract activity declined 27% in April 2020 -- there were 157 contracts signed last April, and only 115 signed this April. Perhaps this is not surprising given the impact of COVID-19 -- or -- perhaps April 2019 was just a crazy month of contract activity and is not a great month to use for a comparison. When comparing April 2020 (115 contracts) to April 2018 (124 contracts) there was only a 7% decline in contract activity last month. Only time will tell whether this (fewer contracts) is a lasting trend -- but below you'll see how the year has shaped up thus far... As you can see, the 439 contracts thus far in 2020 is 5% lower than in 2019, but 3% higher than in 2018. So, let's keep on moving along and see what May will reveal! | |
Scott Rogers
Funkhouser Real
Estate Group
540-578-0102
scott@funkhousergroup.com
Licensed in the
Commonwealth of Virginia
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