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Median Sales Price Up 10% In 2023 Despite 19% Decline In Home Sales |
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 Happy Tuesday morning, friends! We are now -- wait for it -- more than a third of the way through 2023!? How can it be!? And how's the market you might ask? Fewer homes are selling this year, but at higher prices than last year!? Again, how can it be!? -- This whirlwind of a start to 2023 has involved a rather busy few months in the Rogers household -- with a soon-to-be-graduating high school senior (Luke) attending a Junior-Senior banquet and playing in his last few baseball games, and an ever-speedier ninth grader (Emily) running (and jumping) in multiple events on the track team. Whatever is keeping you busy and running all around town this Spring, I hope it is just as fun and fulfilling as it has been for Shaena and I to see our kids growing up over these recent years. Time surely does fly by quickly! -- But, back to real estate. Below I'll delve into all the juicy details of the latest happenings in our local housing market... after I make you hungry... Each month I offer a giveaway, of sorts, for readers of this market report, highlighting some of my favorite places, things or events in Harrisonburg. Recent highlights have included Cuban Burger, Taste of India and A Bowl of Good. -- OK, now, I'm really getting to the real estate. Jumping right in to where my headline began... home sales (not prices) are declining, rather significantly in Harrisonburg and Rockingham County right now...  As shown above... [1] There were 17% fewer home sales in April 2023... which I suppose isn't too much of a surprise given several other recent months of slower home sales. [2] Looking at the year thus far (Jan - Apr) home sales have declined 19%. During the first four months of 2022 we saw 461 home sales in Harrisonburg and Rockingham County while there have only been 374 home sales thus far in 2023. Generally, there are two reasons why home sales decline: [1] Fewer buyers want to buy. [2] Fewer sellers want to sell. In our local market, the 19% decline in home sales seems to be almost entirely a result of fewer sellers wanting to sell. I come to this conclusion based on continued low inventory levels, which we'll get to in a bit. Despite the 19% decline in the number of homes that are selling, as the headline referenced, we're still seeing home prices rise in Harrisonburg and Rockingham County...  Indeed, when analyzing multiple different timeframes, we are consistently seeing increases in the median sales price in our local area... [1] The median sales price over the past 12 months ($306,160) is 9% higher than it was in the previous 12 months ($279,900). [2] Looking just at the first four months of the year, the median sales price is 10% higher this year ($324,985) than last ($295,490). Will home prices keep rising forever? I can make no promises, but generally speaking, so long as demand (buyers wanting to buy) continues to exceed supply (sellers wanting to sell) we are likely to continue to see prices rise. Will home prices keep rising at a rate of 10% per year? This seems less likely, especially given higher mortgage interest rates right now... though I've been saying this for at least six months now, and thus far, home prices are still rising at about 10% per year. One metric that is running slightly contrary to most others is the time that it takes for a home to go under contract once listed for sale. We have actually seen a slight increase in this "median days on market" statistic over the past year...  I suppose the "gotcha" headline would be that it is taking homes 40% longer to go under contract now as compared to a year ago. :-) But... this was a change from a median of five days to a median of seven days... and seven days is still mighty speedy. I should also note that this slight (two day) slow down is not much consolation to would-be home buyers who are frustrated by how quickly the market is moving right now. Pausing for a moment, as you may or may not know, I compile a bunch of data that is not highlighted in this monthly market narrative. You can find lots of other data tables and graphs over here. Pulling from the variety of other charts and graphs that I generate each month, let's take a peek at one subset of our overall market... home sales within the City of Harrisonburg.  Home sales actually declined *even more* in Harrisonburg than in the market as a whole. The entire market (City + County) has seen a 19% decline in home sales in the first four months of the year... but the City alone has seen a 25% decline. If you're hoping to buy a home in the City of Harrisonburg, it's a tough time to do so based on very limited inventory of homes offered for sale. Now, moving past these charts, to some graphs, for the visual learners amongst us...  Follow the red line on the graph above to see each month of 2023 home sales in Harrisonburg and Rockingham County and you'll find that it is lower than each month on the blue line, which represents home sales last year. March 2023 came close to March 2022 (101 vs. 113) but the gap widened again in April (123 vs. 149) and I am expecting we'll continue to see slower home sales (fewer home sales) for most or all of 2023. I'll talk more about mortgage interest rates further down in this report, but it's worth noting that higher mortgage interest rates seem to be limiting the number of home sales that we're seeing right now -- but it might be stopping just as many sellers from selling as it is stopping buyers from buying. Many homeowners aren't all that interested in selling their homes with mortgages in place with a three-point-something interest rate, to then be replaced by a new mortgage at a six-point-something interest rate. I can't blame them. This is only one of the factors limiting the number of homes that are selling, but I don't think we should overlook its impact. So long as mortgage interest rates stay high, we are likely to continue to see a lower number of home sales this year as compared to last year. Moving on to the opposing trends of price and pace of home sales...  Many assumed that if home sales started to decline (they definitely have) that home prices would be sure to follow. Not so. It seems that the combination of continued strong levels of buyer demand, paired with a smaller number of sellers willing to sell, has resulted in fewer home sales, but higher prices. Over the past year we have seen 1,480 home sales in Harrisonburg and Rockingham County. Back the clock up a year and we were seeing 1,687 home sales a year. That's a rather significant change in the pace of home sales activity in our local market. Over the past year the median sales price has been $306,160 in Harrisonburg and Rockingham County. A year ago, the median sales price was only $279,900. This is, again, a rather significant change, though in the opposite direction (up) that we're seeing when it comes to the number of homes selling (down). Looking at the change in median sales prices a bit differently, here's a startling change over a relatively short timeframe...  If you bought a median priced home four years ago, that home may very well be worth $100,000 more today!?! Now, before you get too excited about this newly discovered six figure pile of equity in your home, keep in mind that these numbers ($223K in 2019 to $325K in 2023) are simply showing overall market-wide trends. Some homes certainly have appreciated by $100K over the past four years -- but not all homes. That said, almost universally, homeowners have been shocked to see how much their home value has increased over the past four years! Now, let's try to guess at where things might go from here over the next few months...  This first graph is showing the number of contracts being signed per month, as compared to previous graphs that showed the number of home sales taking place each month. Over the past two months we have seen 242 contracts signed for buyers to buy (and sellers to sell) in Harrisonburg and Rockingham County. This is quite a decline compared to last year when we saw 337 contracts signed during the same timeframe. Bottom line... this spring (red line) has just not been as active of a "spring market" as last year (blue line)... and it also hasn't kept pace with recent historical trends (grey line). These lower contract numbers have lead to fewer properties being under contract and waiting to get to closing...  One year ago, there were 416 properties under contract just waiting to get to closing. Now, that "pending sales" figure is only at 275. This is the clearest predictor we can get as to the slower months of home sales that seem to be headed our way in May and June. With such a significant decline in contracts signed, and with a much lower number of properties being under contract, are we seeing ever higher inventory levels of homes available for sale?  Mostly, no. Over the past four years (2019-2022) the average number of homes for sale at this time of year (early May) has been 183 homes. Today, that number is 129 homes for sale. So, despite fewer sales and fewer contracts, we are still seeing inventory levels that are well below where inventory levels have been over the past few years. That said, for the first time this month we are seeing the inventory level of homes for sale (129) sneaking past (just barely) the number of homes for sale (127) a year ago. Is this significantly? Give it another month or so to see how things shake out. Keep in mind that to continue this trend (more homes for sale in 2023 than in 2022) we'd have to see inventory levels climb above 152 homes for sale over the next month. Stay tuned. Earlier I mentioned that homes are taking an extra day or two to go under contract right now, as compared to a year ago...  Indeed, after about a year of the median "days on market" statistic hovering right at five days... we have now seen the pace at which homes go under contract slowing, slightly, over the past five months. If I had to hypothesize as to why this number has risen (barely) I would guess it is related to higher mortgage interest rates. I am seeing three things happen when new listings hit the market right now... [1] Slightly fewer showings than we would have seen a year ago. [2] Fewer offers than we would have seen a year ago. [3] Many buyers needing to take a day or two to run numbers with their mortgage lender before making a decision about making an offer. The speed at which homes are going under contract certainly varies quite a bit based on the price range, location and property type -- but as shown above -- it is taking an extra two days (ish) for homes to go under contract right now. This is slightly slower than in 2022, but drastically faster than just about anytime prior to 2021. Finally, mortgage interest rates, which have been mentioned (and blamed) throughout this report...  After multiple years of mortgage interest rates below 4%, we saw them climb quickly through the 5% range (within six months!) and they have stayed above 6% since that time. We are now entering the ninth month of most buyers likely buying homes with mortgage interest rates above 6%. These higher mortgage interest rates, combined with higher sales prices, are significantly increasing the monthly housing cost for any would-be home buyer considering a purchase in 2023. Will mortgage interest rates edge back down below 6%? I think there's a chance they will later in 2023, but it is certainly not... certain. ;-) So... given all of this data, given all of these trends, where does this leave us? Home buyers should still be prepared to go see new listings quickly when they hit the market, and must have their lender on speed dial to confirm a potential mortgage payment given ever changing mortgage interest rates. Depending on the popularity of the home you will be buying, we may very well still be competing with multiple other offers and considering which contingencies you might be willing to omit from your offer. You'll be buying in a challenging market for buyers -- with limited inventory and increasing prices. Buying a home in 2023 is definitely still possible, but it will require patience and perseverance. Home sellers are still in good (great) shape with lots of buyer demand in many or most price ranges... but home sellers should *not* assume that they will definitely have multiple offers, over asking price, with limited contingencies. That might be the situation you find yourself in (hooray!) but if you only have one offer, at the asking price, with some "normal" contingencies - I'll encourage you to still be excited. Pricing your home appropriately, preparing it thoroughly and marketing it professionally are just as important as ever in 2023. That's all for today, friends. I hope you now consider yourself a bit more informed about our local housing market, and a bit hungrier for a delicious meal at The Little Grill. ;-) The next month or so is a busy time for many of us with school years ending, summer beginning, and many other changes. Even as the days inevitably seem to start moving by more quickly than ever, I hope you are able find the time to slow down and meaningfully connect with the people who are important in your life. Send a friend, family member, neighbor or colleague a quick text to check in - or give them a call just to say hello. Make the time to make those connections, and I'm confident you will be glad that you did so. As always, please reach out anytime if I can be of help to you -- with real estate or otherwise. You can reach me most easily at 540-578-0102 (call/text) or by email here. Recent Articles:
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Scott Rogers
Funkhouser Real
Estate Group
540-578-0102
scott@funkhousergroup.com
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Commonwealth of Virginia
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