Archive for May 2021
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The Housing Inventory Shortage Is Not Likely To Quickly Work Itself Out |
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 Did you hear that...
It's not happening on every house in every price range in every location -- but it (lots of showings, multiple offers) is happening very frequently these days. Clearly, there are waaaaaay more buyers in the market than there are sellers. And, sadly, it doesn't seem that this housing inventory shortage is not likely to work itself out anytime soon. After all...
So, alas, for the foreseeable future...
I wish I saw an easy or fast or near-term way out of this situation, but I'm not currently seeing it on the horizon. In theory, the answer is new construction of "for sale" homes at scale, but we're not there yet... | |
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Theory: Low Inventory and Low Interest Rates Are Causing Some Overqualified Buyers To Willingly Overpay For Properties |
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 ALERT: Anecdotal Evidence Only! I like data. I use data quite a bit to better understand the dynamics of our local real estate market. But, sometimes I can't figure out a way to (easily) obtain data that would help to prove or a disprove a theory. So, from time to time, I'll propose theories of a current dynamic in our local market based solely on anecdotal evidence. This is one of them. Low Inventory and Low Interest Rates Are Causing Some Overqualified Buyers To Willingly Overpay For Properties I have seen this happening quite a few times on recent listings -- often where I am representing a buyer who has made an offer on a property, and misses out. Here's how that might play out, theoretically...
Two quick caveats...
So, why is this happening!? LOW INVENTORY - This problem (overqualified buyers overpaying for houses) is at least partially brought on by low inventory levels. If there were plenty of homes on the market between $350K and $400K then perhaps this buyer who can pay up to $400K wouldn't be making an offer on a house listed for $250K. LOW INTEREST RATES - The extremely low mortgage interest rates (3% on 30 year fixed as I type) are allowing buyers to afford more house than ever. This has lots of buyers able to higher on price than they could have in some past years when interest rates were higher. So long as we have overqualified buyers in the mix -- willingly overpaying for houses -- it will be hard for appropriately qualified buyers ($250K buyers wanting to pay $250K for $250K houses) to buy homes. OK, I'll stop there for now. It's a theory, after all -- overqualified buyers willingly overpaying for houses. What do you think? Have you seen it happen? Heard about it happening? Have you been a participant in such a transaction? :-) Drop me a line at scott@hhtdy.com with some details. Or, yes, if you disagree and think I'm totally wrong, email me with that feedback as well. :-) | |
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Does The Current Rise In Home Prices Mirror The Last Real Estate Boom? |
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 At first glance, yes, the current increase in median sales prices DEFINITELY mirrors the last run up in prices.
But, let's look a bit closer... Last Time...
As an important side note -- the median sales price then flattened out (2006-2008) and next declined 13% between 2008 and 2011. This Time...
So... Yes - median sales prices are currently increasing much faster than normal from any historical perspective and it seems unlikely that they could keep going up like this forever. But - the current increases in median sales price (+24% over three years) are only about half the size of the last time we saw a real estate boom (+51% over three years) so it's not quite as severe of an increase as last time. Certainly, though, many wonder if median sales prices will flatten out (seems possible) or decline (seems less likely) in the coming years. | |
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City of Harrisonburg Considers 5% Increase In Real Estate Tax Rate |
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 Here's the current lay of the land as it relates to real estate taxes in the City of Harrisonburg...
Harrisonburg City Council is considering an increase in the real estate tax rate...
Stay tuned for further news of decisions from City Council as to changes in the real estate tax rate! | |
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Home Sales Up 19% In Harrisonburg, Rockingham County In 2021 |
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 Happy bright, sunny, soon-to-be-hot, Wednesday morning to you! Curious about how things are going in our local real estate market? Here's a snapshot of what now just seems like a typical day in the local real estate market... Driving To Work In The Morning: "Oh, look, that house was just listed for sale!" Driving Home From Work In The Evening: "Wait!? What!? Already under contract!?" Indeed, homes are selling FAST right now - often with multiple offers - often selling over their asking price. Feel free to download a PDF of my full market report or keep reading as I dive into the data to take a closer look at the latest trends...  As shown above...
So, if April 2021 home sales were way above April 2020, how did they compare to other recent months of April?  As shown above, this month of April -- with 117 home sales -- was the strongest recent month of April. The next strongest month of April was in 2019 when we saw 112 home sales. Looking ahead, it seems likely that we'll see somewhere between 130 and 160 home sales in May, if 2018 and 2019 are a good guide. It seems unlikely that we'll sink as low as the 111 home sales we saw in 2020 during the start of Covid. Slicing and dicing things a bit differently, this year has stacked up quite nicely compared to past years...  With 442 home sales in the first four months of this year, this is a very strong start compared to the past few years, and even most/all of the years prior that are not shown! Here's another visualization of the surge of home sales activity we have been experiencing over the past year...  The orange line above is the one that looks a bit odd right now - largely due to Covid. After seeing the annualized pace of home sales steadily increase for several years, things dropped off quickly between April and July of 2020 due to the onset of Covid. But then, things started heating up -- quickly! Home sales have been flying high, increasing ever further and faster, for the past nine months and aren't showing any signs of slowing down. Sales prices, on the other hand, didn't take a nose dive last spring -- they have been "slowly" and steadily plodding along and upward. I say "slowly" because the increase has not been at the same breakneck speed of home sales -- but we have seen a much higher than normal (9%) increase in sales prices over the past year. What should we expect over the next few months, you might ask?  We have seen many more contracts over the past two months (143, 140) than we saw during those same months last year (116, 120) though - to be fair - last March and April were an uncertain time due to Covid. The number of contracts signed over the past two months does, though, indicate that we'll see strong months of closed sales over the next two months -- and we're still at the front end of the strongest six months of the year as far as the number of homes that sell in Harrisonburg and Rockingham County. So, don't expect things to slow down or calm down anytime soon! Several folks have asked me over the past month -- how can so many homes be selling when inventory levels are so low!?  Indeed, a confusing phenomenon, at first. There are fewer houses on the market right now than at any time in the past several years. Buyers today have less than 100 homes to choose from in all of Harrisonburg and Rockingham County. But -- that doesn't tell the whole story. Quite a few new listings come on the market each month -- giving buyers quite a few choices over a month long period -- but because so many of those new listings are going under contract so quickly, the influx of new listings never has a net impact on the number of houses remaining actively for sale at the end of each month. So - you won't have many options of homes to buy in a single day, but if you can give it a few weeks or months, you should have plenty of options over time. Did I mention that homes are going under contract quickly?  Over the past year, 72% of homes have gone under contract within 30 days -- and half of homes have gone under contract within 7 days!?! This rapid pace of buyers signing contracts on homes is what is keeping inventory levels so low. If you're just entering into the market to buy, you'll likely be astonished / disappointed by how few options you have right now -- but again -- just give it a bit of time and evaluate those new listings as they come on the market -- but do so quickly, before they are under contract! If you're fortunate enough to secure a contract on a house, you are likely excited about the low interest rate you'll have on your new mortgage...  After having started rising -- above 3% -- the average 30 year fixed mortgage interest rate has dropped (barely) below 3% again. This is an outstanding (and historically low) interest rate that gives current home buyers a unique opportunity to lock in a low long term interest rate on your mortgage. So, there we have it. Lots of homes are selling, quickly, at higher prices than ever. What is a seller to do?
What is a buyer to do?
If you're thinking about buying or selling soon and would like to talk a bit more about your particular situation, I'm happy to meet with you or set up a time to chat by phone or zoom. Simply reply to this email or text/call me at 540-578-0102. Best wishes for a pleasant balance of the month of May, and I'll be in touch again in June! | |
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The Number Of Offers On A Single House Is Sometimes Staggering! |
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 I know that you've heard that it is a strong seller's market and there is lots of competition amongst buyers for many new listings -- but did you know HOW extreme it has become in our local market? Two houses are referenced below that have come on the market in the past month or two. Neither of these were my listings, but I did have a buyer make an offer on each of them -- and the buyers missed out -- their offer was not the chosen one... Anonymous Property #1 Priced between $200K and $250K 16 offers within 48 hours Anonymous Property #2 Priced between $275K and $325K 17 offers within 48 hours Indeed -- 16 offers on one property, 17 offers on the other. I believe each had 30+ showings in the first two days. Wow! A few thoughts...
Again, it is staggering how much unmet buyer demand exists in the market these days. It's a great time to be a home seller. It's a rotten time to be a home buyer. :-/ | |
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I Would Love To Sell My Home, But Where Would I Go? |
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 I don't have a universally applicable answer to this question... but it's a question and sentiment I hear from many these days... I Would Love To Sell My Home, But Where Would I Go? Why wouldn't a homeowner want to sell? Home prices are higher than ever, buyers are entering into bidding wars to try to secure a contract, buyers are waiving inspection and/or appraisal contingencies, and on and on... It is, truly, a great time to sell your home! But... ...presumably you still need a place to live. If you're selling and then will have to buy a home, you'll be right over on the opposite side of the table -- paying a higher price than ever, entering into bidding wars, waiving inspection and/or appraisal contingencies -- all to try to secure a contract on a house to buy. As such, many of my recent conversations with folks who want to sell but need to buy is all about what they would buy. We are often much more confident that we'll be able to sell your house than we are that we will be able to find a house for you to buy. So, if you're excited about selling your home and buying a new one -- great! Let's meet soon to talk about selling your home -- but even more importantly, devising a strategy for buying your next home! | |
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Nearly 500 Buyers Secured Contracts On Homes In First Four Months of 2021 |
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 As shown above, for three of the past five years, around 430 - 440 buyers signed contracts to buy homes between January and April. Two years ago, in 2019, there was a bit more contract activity than normal with 466 buyers signing contracts to buy homes. But this year -- in 20201 -- we set new records! Nearly 500 (499) buyers (and sellers) signed contracts to buy (and sell) homes between January and April 2021. You might ask -- how is this possible -- I heard inventory levels are super low!? It actually works the other way around. It is not remarkable or mysterious that this many buyers secured contracts to buy homes despite low inventory levels... The inventory levels are so low because so many buyers secured contracts to buy homes! Buckle up - this seems bound to be a fast paced year in the local real estate market! | |
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Inventory Levels (# Of Houses For Sale) Hits New Low In Harrisonburg, Rockingham County |
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 Never have there been fewer homes for sale in Harrisonburg and Rockingham County! Indeed, there are now fewer than 100 homes on the market in all of the City and County. We have never seen that few homes on the market at the end of the month in our area. As you can imagine, this means that buyers have very, very, very few choices for what they might buy at any given time. Certainly, plenty of homes are coming on the market, but they are almost all going under contract VERY quickly, leaving inventory numbers very low. It's at this time of year that we would typically expect inventory numbers to start rising -- but not in 2021! If you're hoping to buy a home in the next few months, you should...
It's a crazy time out there! | |
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One High (or low) Sales Price Is Likely Not Enough To Justify A Pricing Strategy |
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 It's easy to accidentally focus only on one data point and to then be led astray to incorrect conclusions. "I know my planned asking price seems high... but there was that one house sold for..." Let's think about it a bit more thoroughly using the mostly fictional illustration below...
THE BUYER'S STATED PERSPECTIVE I know that your house is listed for $450K, 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 -- or maybe $375K -- 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 $450K. After all, my friend owned a very similar house and he just sold it in a week, with multiple offers, for $450K! 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! | |
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Monthly Housing Costs Remain Level Despite Rising Prices |
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 The median sales price in Harrisonburg and Rockingham County has increased 17% since 2018 -- rising from $211,750 up to $248,700. Yet, despite buyers paying higher sales prices for homes -- the monthly mortgage payment associated with that rising purchase price has barely risen at all. If a buyer financed 80% of $211,750 back in 2018 they would have had a mortgage payment of around $1,056. If a buyer finances 80% of $247,700 today, they are likely to have a mortgage payment of around $1,061. This has, of course, been possible because mortgage interest rates have generally declined over the past few years while home sales prices were rising. So, the good news is that even if you are paying a higher price for a house today then you would have over the past few years you likely will not see a corresponding comparative increase in the monthly housing cost associated with that higher purchase price.
This won’t necessarily last forever as interest rates will at some point start to drift upwards… or even if interest rates stay where they are now, if prices continue to climb over the next few years the corresponding monthly housing costs will start to increase as well. So everybody should just buy a house now, right? Easier said than done - as a result of a tremendous amount of competition in the market. Perhaps these steady monthly housing costs due to lower mortgage interest rates are what have drastically increased the amount of buyer demand in the market? | |
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Please, Oh, Please, Will You Sell Your Rental Property? |
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 If you own a rental property in the city of Harrisonburg, perhaps a townhouse or duplex or small single-family home, perhaps you are interested in selling it? :-)
I understand, there are plenty of reasons why you would not want to do so. Your long-term strategy may be to continue to rent out that property for many years to come, and perhaps you would not want to tax liability that might arise from selling the property, but maybe you have been thinking about selling the property for the past few years. If you have had any thought at all about perhaps selling such a property, now is an excellent time to do so. There is an extreme shortage of available lower-priced homes in the City and owner occupant buyers are pursuing such properties quickly and making very competitive offers when they do come on the market. If you would like to explore the possibility of selling a property that you have been renting out for the past few years, let’s talk about timing and logistics. You will likely be selling the property at a very favorable price with very favorable contract terms and you will be helping out the backlog of owner occupied buyers who are desperate to buy a home and settle down in Harrisonburg. | |
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Strategies For Securing A Contract WITH A Home Inspection Contingency |
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 Some would-be home buyers are, reasonably, not comfortable entering into a contract to purchase a home without an inspection contingency. But...in a competitive market where there are often multiple offers, it is harder to compete as a buyer if one or several of the competing offers does not include an inspection contingency. Of note, we won't really know if competing offers do or do not have inspection contingencies, but when there are multiple competing offers in the current market, it seems that there will often be at least one without an inspection contingency. So, how can a buyer who desires an inspection contingency compete in such an environment? Here are a few ideas... 1. SHORTEN THE TIMELINE Proactively get on a home inspector's schedule so that you can include a shorter timeline in your offer for the inspection contingency to be resolved. 2. REMOVE YOUR OPTION TO TERMINATE The standard home inspection contingency gives you the option to either request repairs or terminate the contract after completing the inspection. Give the seller a bit more peace of mind that you won't just terminate the contract even if the inspection goes reasonably well by removing that second option from your inspection contingency. 3. SACRIFICE YOUR DEPOSIT Consider offering to give the contract deposit to the seller if you cannot work your way through the inspection contingency. This will show that you are committed to making the deal work and successfully getting through the inspection contingency. 4. RAISE THE STAKES If you are including an escalation clause to make your offer $1K above any other offers -- consider raising that threshold, If your escalation clause takes your offer to $276K with an inspection contingency compared to another offer at $275K without an inspection -- the seller will probably choose the offer that is $1K lower without an inspection contingency. But if your escalation clause made your offer $5K higher than other offers, the seller might decide to accept your $280K offer with an inspection contingency instead of the $275K offer without. In the end, it can be a challenging time to secure a contract on a house regardless of the contingencies you want to include -- but including an inspection contingency can make it much more challenging to be successful. If you definitely want that inspection contingency in place, consider any or all of the strategies above to increase your odds of securing a contract to buy a house. | |
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Should You Skip A Radon Test In The Current Competitive Housing Market? |
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 Radon is a colorless, odorless gas that can cause cancer -- in fact, it is the second leading cause of lung cancer after cigarette smoking! Radon quickly disperses in air, reducing its danger, but if it accumulates in a basement or other living space, it can be quite problematic. As you'll see on the map that I have included below, Rockingham County is in Zone 1 -- which means we are in an area that is likely to have high radon levels. I typically always recommend that buyers who are buying a home with a basement test for radon during the home buying process. Furthermore, sellers should expect that if a buyer discovers high radon levels that the buyer will request a radon mitigation system be installed. But we find ourselves in an unusual market right now with a tremendous amount of competition amongst buyers and often times buyers are reconsidering which contingencies to add to their offers. I have never seen a home with a high radon level where a radon mitigation system cannot cure the issue. Radon mitigation systems typically cost between $1500 and $2000 to install. Thus, in the current market, some buyers might want to consider not including a radon test contingency in their offer and not testing for radon during the home purchase transaction and instead conducting a radon test after they close on their home purchase and installing a radon mitigation system at that time if needed. Just a thought, given current market dynamics. Feel free to chat further with a radon mitigation specialist about all of this to best inform your decisions. Here's the map...  Here's some further info from the EPA about radon... Radon is a radioactive gas that comes from the natural breakdown of uranium in soil, rock and water and gets into the air you breathe. Radon typically moves up through the ground to the air above and into your home through cracks and other holes in the foundation. Radon can also enter your home through well water. Your home can trap radon inside. Learn more about radon and real estate here.
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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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