Archive for August 2020
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When It Comes to The Local Housing Market, The Early Bird Truly Does Get The Worm |
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 I suppose we have all heard of the proverb "the early bird gets the worm" which has a pretty helpful definition on Wikipedia...
That is, indeed, where we find ourselves in the local real estate market for many properties at many price ranges. If a newly listed house in a local and price range with plenty of buyer interest is well prepared, reasonably priced and thoroughly marketed...
So, figure out how you're going to track new listings and let's make sure to go see new listings of interest as quickly as possible when the hit the market - hopefully within hours or a day, instead of within days of a week. | |
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When Buying A House To Rent To Students, Call Community Development First! |
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 With great regularity, potential buyers (either investors or parents of JMU students) will ask if a single family home can be purchased and rented to a group of JMU students -- often an intended group of four or more students. I let them know that it will be no problem at all -- the adjoining property owners in the quaint neighborhood probably won't mind as long as the students aren't too bothersome -- and the City doesn't mind at all if their zoning ordinances are violated, so long as it's just "nice college kids".... WAIT! NOT REALLY! READ ON!!!! It seems that some buyers are really getting that feedback of "sure, it will be fine" -- though I'm not sure if they're getting it from their Realtor, or from someone else advising them in the transaction, or if they just aren't thinking about whether their planned use of a property is allowable. The REAL answer, and the feedback that I ACTUALLY provide to my clients is.... 1. We need to check to see how this property is zoned, and whether that zoning classification allows for that number of unrelated people to live in the property. 2. We need to check to see if there are recorded restrictive covenants for this neighborhood that restrict the number of unrelated people who live in the property. A few notes.... 1. Most single family homes in the City of Harrisonburg are zoned R-1 or R-2 and do NOT allow for three or more unrelated people (students or otherwise) to live in the property. 2. If a property has been used in a non-conforming manner (for example, four students living in it) since before the zoning ordinance was put in place, without a 24 month gap in the non-confirming us, it MIGHT be possible to continue to use the property in that non-conforming manner. And, if #2 above is starting to get confusing, then we arrive at my main reason for writing today.... CALL COMMUNITY DEVELOPMENT TO UNDERSTAND ALLOWED USE OF A PROPERTY! Yes, in fact, there are very helpful City staff in the Community Development department -- who can very quickly help you understand whether a property can be legally used as you intend to use it. And it is imperative that you make this call BEFORE you buy the property, and even BEFORE you make an offer on the property! | |
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So You Are Saying You Are Having A Hard Time Finding A Home To Buy? |
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 So - there are only 186 homes for sale in all of Harrisonburg and Rockingham County. Which, as you can see above, is much lower than the number of homes for sale for most of the past 12 years. Breaking it down a bit further by location...
...and by property type...
...and by price...
Regardless of how you break it down, there are fewer options for buyers today than there have ever been at any other point in the past 12 (plus) years. One important caveat is that the lack of inventory at any given point does not mean that there aren't as many houses selling. There have been 1300-ish home sales per year for the past few years, despite continually declining inventory levels. So, basically, homes are coming on the market - but they are going under contract VERY QUICKLY - so inventory levels have been staying low or getting lower! What does this mean for buyers?
It's not necessarily a totally fun time to buy a home right now because of these low (low!!!) inventory levels -- but it is possible to buy a home. Let me know if you'd like to chat about inventory levels in your particular segment of the local housing market. | |
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Buyers Seem To More Frequently Be Willing To Pay Above Appraised Value For Houses |
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 In today's local housing market we're seeing...
This disconnect (buyers being willing to pay more than appraised value) is likely because of how appraisals are defined and conducted. An appraisal is an indication of the value of a property based on what other buyers have paid for other similar houses in the recent past - often the last six months. What we now seem to be seeing is that today's buyers are willing to pay more for houses than buyers paid zero to six months ago - which can cause an appraisal to come in lower than the price that the buyer had agreed to pay for the house. So, when there is a low appraisal, where do things go from there? It's different in every transaction and it's all negotiable.
If the appraisal on your house comes in low...
Current conditions in your segment of the local housing market will likely ultimately dictate what a buyer and seller will agree to do with a low appraisal. | |
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Sellers Consider More Than Just Price, So Your Escalation Clause May Need To Be Tweaked Accordingly |
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 If you are trying to buy a home in a price range (under $250K) where there are often (usually?) multiple offers on the table, you may find yourself considering the use of an escalation clause. What is an escalation clause, you might ask? An escalation clause allows you to offer one price but then to effectively increase your offer price to be above any other competing offers. Consider the following scenario on a house listed for $225,000
Offer 2 wins, right? Probably so. But if the first buyer didn't want to pay more than the asking price if they didn't have to -- but if they would have been willing to pay up to $230,000 -- then things could have worked out differently...
In this situation, Offer 1 becomes an offer of $228,000 and likely is the chosen buyer instead of Offer 2 which is then $1,000 lower. But let's add a layer here -- the financing contingencies...
I see this type of scenario play out quite regularly. In many cases, the seller is will choose to move forward with Offer 2 - even though it is $1,000 less than Offer 1. Why, you might ask? Buyer 2 seems to be better qualified to buy the home, with a larger down payment. This will likely be to the seller's advantage when it comes time to negotiate the home inspection (a buyer with more cash available is less likely to be worried about small repair items) and the appraisal (a buyer with more cash available is likely more willing/able to come up with an extra $1K if the appraisal is slightly low). So, if a buyer has some other terms (financing, inspection, timing, etc.) that are possibly or likely to be less favorable to the seller, said buyer might consider leveraging their escalation clause a bit, such as the following...
In this scenario, Offer 1 becomes an offer of $229,500 compared to Offer 2 which is an offer of $227,000. This will cause the seller to think a bit longer and harder about whether they really want to go with Offer 2 that has the more favorable financing contingency. Think strategically when you are crafting your offer -- and your escalation clause -- knowing that a seller is looking at all of the terms of your offer, not just the offer price. | |
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Should You Be Surprised If Your Home Sells At Or Above List Price? |
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 No. You should not be surprised if your home sells at or above the list price. As shown above, 53% of homes that have sold thus far in 2020 have sold at or over their list price. It's a sign of the times, I suppose. There are LOTS of buyers fighting over very few homes for sale and this often leads to...
Just to put this in context, let's see how things looked three short years ago...  Things were quite a bit different in 2017, it seems! Way back in 2017 only about a third of homes sold at or above their list price! As with many other recent market indicators, this is great news for sellers and rather unexciting news for buyers. | |
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Home Buyers And Sellers Made Up For Lost Time In June, July |
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 Well - hello June and July! The red line above shows the number of contracts signed for each of the past five months. The blue line shows the average number of contract signed in that same month during 2017, 2018 and 2019. Basically, comparing the monthly pace and pattern of 2020's contract activity to the three most recent years to see if this is what we should have expected. It's not what we should have expected. Typically, contract activity peaks in May and then slowly declines in June and July. But not this year. During 2020, contract activity was lower than would have been expected in March, April and May -- but then -- wow! Thinks really started to move in June and July. All in all, I think this is the impact of COVID. It slowed the local housing market down for a few months, but things are speeding right back up to likely eventually catch up to where we were last year. Stay tuned to see what happens come August... | |
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Local Home Sales Slow Slightly But Prices Are Up 10% in 2020! |
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 Happy Tuesday Morning! Summer is winding down, and it's been a bit of an unusual one...
As your summer comes to a close, I hope you have found some ways to relax and take a break, despite everything going on right now. Go for a run! Head out on a bike ride! Plan a day hike! In the latest adventures of the Rogers family, I took Emily zip lining and Luke water skiing this past weekend. :-) Whatever your version of fun and relaxation, I hope you can find some of it in these last weeks of summer. And now, if you have been looking for a distraction from the craziness in your everyday life, read on for some crazy news about our local housing market. :-) But first -- check out this beautiful home (shown above) in Chatham Square by visiting 2378AlstonCircle.com. Also, feel free to download a full PDF of my market report here. OK, OK, now, on to the data...  Quite a bit to note above...
To pick up on a few nuances, let's break things down by detached homes (single family homes - shown in green below) as compared to attached homes (townhomes, duplexes, condos - shown in orange below)...  We start to see some differences when breaking things down by property type...
Now, let's contextualize those 150 home sales we saw in July...  As shown above, home sales often or usually peak in May or June with sales then slowing down as we roll into July. But not this year! Home sales seem to be accelerating month by month as we have seen steady increases between April, May, June and July. In fact, the 150 home sales see in July was the third strongest month of home sales we have seen since at least 2017! This next graph might be a bit confusing, but let's see if we can make sense of it...  OK - starting with the orange line at the bottom of the graph... The annual pace of home sales had risen all the way up to 1,374 home sales per year by the end of March 2020. This was a slow and steady increase over several years -- but that all started to shift downward once we started incorporating April and May data into the mix. Home sales did decidedly slow down for several months, causing the annual pace of home sales to slide. It seems we may now be seeing that trend line stabilize in July as the annual pace of sales is no longer declining. But yet -- as noted next to the green line -- home prices have continued to go up, up, up. Back in March and April I wondered whether we'd see a slow down in sales and whether we would see a slight downward shift in home prices. It seems I was half right. Sales slowed, but prices have continued to rise! These two contradictory trends may best be understood by realizing that sellers drive trends during a seller's market. Fewer sellers wanted to list their homes for sale during the "time of COVID" and thus fewer sales happened in April and May (if the houses aren't listed for sale, they surely won't sell) but there were seemingly just as many (or more) buyers ready to buy. An unusual (and temporary) decline in sellers combined with just as many (or more) buyers caused home prices to continue to climb, perhaps even higher and faster than they would have otherwise! OK - thanks for sticking with me on that one. Now, let's predict the future by looking at contract activity...  First, the big, red, handwritten numbers will quickly show you that the pace of contract signing this year (916 between Jan and Jul) is quite a bit higher than last year (860 between Jan and Jul), but there's more! Last year in June and July we saw 247 buyers (and sellers) sign contracts to buy and sell homes. This year there were 337 contracts signed during that same timeframe! It is almost as if buyers (and sellers) are trying to make up for lost time -- as contract activity has been ramping up for the past few months after a slower than expected spring market. OK, I told you I'd circle back to it...  OK - so - about those home prices. As shown above, you'll note that the median sales price of detached homes (not townhouses, duplexes or condos) has increased 7% between 2019 and 2020. That's more than the 4.8% average over the past five years -- though we did also see a 7% increase between 2015 and 2016. So, should we be concerned about prices increasing this much? After all, didn't prices skyrocket back in 2004 and 2005 leading to eventual declines in housing prices? Why yes, you are correct - we did see significant increases in the median sales price in 2004 (+16%) and 2005 (+24%) and those increases were unsustainable -- prices eventually came back down, slowly, between 2006 and 2011. But this time, perhaps it's different? It's hard to say for sure whether the price increases we are seeing are "too fast" or "too much" to be sustainable. We'll only really know a year or two from now, looking backward. I suppose it is important to note that while a 7% increase is much higher than any long term average, it is also not as crazy as we were seeing back in 2004 and 2005. One of the things that is driving these prices up is the vast number of would-be buyers competing over an ever-shrinking number of homes for sale...  Yes -- you're reading that correctly -- there are currently 30% fewer homes for sale now as compared to a year ago. Further -- the current inventory level (189 homes for sale) is actually lower than this past winter, which is rather unusual for July/August! There are many things causing so many buyers to want to buy, and buy now, which is driving down the inventory levels, but one of those motivators for buyers is...  ...super low interest rates! Mortgage interest rates have been below 3% for the past few weeks -- yes, the 30 year fixed mortgage interest rate -- below 3%! I have had a few clients lock in at 2.65% and 2.75% which is rather hard to fathom. So, not to encourage you to jump on the bandwagon if you're not ready to do so, but if you're thinking about buying soon, these interest rates sure do make it compelling to try to buy sooner rather than later. OK - that wraps it up for now. A few closing notes... SELLERS - Even though it is a seller's market, it is still essential that we prepare, price and market your home well! Read more about that here and shoot me an email if you want to meet to start talking about getting your house on the market in the coming weeks or months. BUYERS - Be prepared to be patient, as you'll likely be competing with plenty of other buyers. Make sure to talk to a lender ASAP (ask me if you need a recommendation) so that we have a pre-qualification letter in hand when making an offer. HOMEOWNERS - Yes, certainly the vast majority of those who receive this market report won't be buying or selling next month. So, for the rest of you, enjoy the fact that your home's value has likely increased over the past year! If that makes you want to think about selling - let's chat. Otherwise, just enjoy knowing that your home's value has likely increased. :-) That's all for now, folks. If there is any way that I can help you or your family with real estate, or otherwise, let me know. Otherwise, enjoy the balance of August and I'll be back to crunch the numbers all over again in mid-September. | |
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Will COVID Cause Local Home Prices To Decline? |
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 I still get this question from time to time and my general thought, at this point, is that it is quite unlikely that COVID will cause home prices to decline locally. Home prices are typically most directly affected by supply and demand. If supply is high (lots of sellers want or need to sell) and demand is low (fewer buyers want to buy) then home prices are likely to decline. This is called a buyer's market. If supply is low (fewer sellers want or need to sell) and demand is high (more buyers want to buy) then home prices are likely to increase. This is called a seller's market. Anyone want to guess which market we're experiencing these days? We're definitely in a seller's market! Over the past five years, there have been fewer and fewer (and fewer) homes on the market for sale at any given point. During those same five years, buyer demand has increased -- not by as much as seller supply has decreased -- but buyer demand has increased nonetheless. So, back to the original question - will COVID cause local home prices to decline. I still say that it is unlikely, because that would almost certainly require both...
I'm not seeing either trend (increase in sellers, decrease of buyers) on the horizon at this point. That said, here are two important caveats...
So, for now, it does not seem at all likely that COVID will cause local home prices to decline - but stay tuned to see how new construction and employment/unemployment could play into that in the months to come. | |
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If You Have Not Heard, Mortgage Interest Rates Are SUPER Low Right Now |
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 If you had asked me a year ago whether we'd see interest rates get as low as 3% - or lower than 3% - I would have said "no, definitely not, they couldn't get that low!" But, it seems I would have been wrong. The average mortgage interest rate (for a 30 year fixed rate mortgage) has continued to decline over the past four months from around 3.5% all the way down to the current rate of 2.88%. It seems likely that interest rates will continue to stay rather low in the coming weeks and months -- though I don't know if they will / can really stay below 3%. If you happen to be buying a home right now, PLEASE lock in your interest rate this week!! :-) | |
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Housing Inventory Levels May Have Peaked For The Year |
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 The number of options that you have today as a buyer (hint = not many) may be the most options you'll have at any given point between now and the end of the year. As shown above, inventory levels (the number of active listings in the MLS at the end-ish of each month) climbed through the first four months of the year, but seemed to peak in April and have been declining since that time. Surprisingly, the inventory level at the end of July was lower (!!??) than in January and February! Now, certainly, there will be some new listings over the next five months of this year -- so there will be some new inventory options -- but the total inventory available at any given point is not likely to increase again until next Spring. | |
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Price Per Acre of Land Sold in Rockingham County |
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 As shown above, the price per acre of 5 - 10 acre tracts has mostly stayed between $13K and $14K over the past four years, with the exception of last year (2019) when it dipped down to $11K. We have seen a steady increase in the number of 5 to 10 acre land sales over the past several years.  The number of 10 to 20 acre tracts selling per year has stayed much more consistent over the past four years (2016 - 2019) with 11, 12 or 13 parcels selling -- though there have already been 10 such sales in the first 7-ish months of 2020. The median price per acre has been generally trending up for this size of parcel, and seems poised to remain around $11K per acre this year.  The median price per dipped down rather low ($4K/acre) in 2018 for parcels of 20+ acre but then rose quite significantly in 2019 to $7K per acre. We have seen around 15 to 20 such sales per year for the past several years but it seems we might surpass that in 2020.  Finally, this (above) is a compilation of the price per acre for each parcel size. As you might expect, the larger the parcel, the lower the price per acre. | |
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The Floor Plan Or Layout Of Your House Can Make Or Break The Sale |
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 If a buyer is buying over $400K, or even over $300K, the layout of the home becomes very important to them. That is not to say that it is unimportant for a $200K buyer -- but someone buying a more expensive home oftentimes plans to stay in it for a longer time frame. If not the #1 feedback, then perhaps the #2 feedback I receive from showings of homes priced over $400K is that the layout just didn't work for the buyers....
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How To Run The Numbers On Upgrading To A New Home |
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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. | |
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Detect A Leak At Your Water Heater (sump pump, etc) Before It Causes Major Damage |
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 Where is the water heater located in your home? In a closet somewhere? In the basement? Under the stairs? It is likely tucked out of the way, which means that if it starts to leak (they often will as they get older) it could be hours or days before you realize you have a problem. In that time, the leak may have caused water damage to your floors or personal belongings. Do you have a sump pump in your basement? What would get wet if it stopped working? How often do you check to see if your sump pump is working properly? There are all sorts of reasons why it would be helpful to know about a water leak early - and with Honeywell's Wifi Water Leak and Freeze Detector you can know about it early! This handy device...
Consider purchasing a water leak detector to give you a bit more piece of mind that you will know about a potential water leak early and before it causes damage to your home. | |
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Preparing To Sell? A Messy (aka normal) House Is Just Fine When We Meet! |
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 So, you're thinking about selling your home? And we're getting ready to meet? I'm swinging by your house tomorrow morning to walk through it together and to talk about the process, the market, etc.? Don't stay up all night cleaning on my account! There are plenty of times when I will want your house to be absolutely spotless, 100% organized, de-cluttered, picked up, minimalized (probably not a word), etc. For example...
But did you notice what is not on that list?
Some sellers feel pressure to have their house in absolutely tip top shape before we set up our first time to meet at your house to discuss your house, the market, the selling process, etc. You do not need to feel that pressure. I can look past the way that you (and most people) live everyday life - which is just not quite as 100% polished and put together as when your house is on the market. So -- if you want to get your house all the way to the point where it is ready for photos and showings before you have me over to start a conversation about your potential home sale, that is just fine -- but it is not my expectation that you do so. Talking early and often about selling (When should we list? What should we do before listing? What price expectations should we have?) can be very helpful for most home sellers. | |
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Scott Rogers
Funkhouser Real
Estate Group
540-578-0102
scott@funkhousergroup.com
Licensed in the
Commonwealth of Virginia
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