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Fewer Home Sales, But Prices Are Rising!? More Contracts But Inventory Levels Are Rising!? |
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 Happy Monday afternoon to you, friends! This monthly market report is one of some enigmas, some contradictions, some puzzlement. Some of these will be familiar, some new, some unrelated to real estate... [1] How can it be that we are seeing fewer home sales, but higher prices!? [2] So, contract activity is increasing, but inventory levels are also rising!? [3] How can I feel so young, yet have a son heading off to college this Friday!? :-)  Indeed, Luke heads off to Wake Forest University this Friday! We are tremendously excited for this next step in his life and educational journey, but we will miss him and his friends greatly as they head off in new directions. Swiveling quickly back to real estate before I spend too much time thinking about the aforementioned major life transition (!!) I'll point you towards a few of my current listings that might be of interest... 9926 Goods Mill Road - A spacious home / farmette on 3.3 acres with wonderful mountain views in the Spotswood High School district. $585,000. 150 Autumn Bluff Drive - A like-new, upscale, custom-built, single-level home in Autumn Breeze on a large corner lot. $445,000. 1210 King Edwards Way - A four bedroom home in the City with an attached two car garage and a large back deck. $389,500. 3211 Charleston Boulevard - An upscale townhouse in Preston Lake with a two-car garage with access to many amenities. $375,000 Congers Creek Townhomes - Three-level, new construction townhomes across Boyers Road from Sentara RMH Medical Center. $306,900 and up. And finally, before we get to the real estate data... 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 Jimmy Madison's, Red Wing Roots tickets and The Little Grill. Now, then, on to the data. You can likely skim this chart of data rather quickly to get a sense of what I'm going to say...  Regardless of the timeframe outlined above... [1] We are seeing fewer homes selling now than in the recent past in Harrisonburg and Rockingham County. Year to date (Jan-Jul) we have seen a 23% drop in the number of homes selling as compared to last year. [2] We are seeing higher and higher sales prices in Harrisonburg and Rockingham County. Year to date (Jan-Jul) we are seeing a median sales price that is 11% higher than a year ago. Here's a month-by-month visualization of those slower sales we're seeing this year...  The grey line above shows the average number of home sales per month between 2019 and 2022. You'll note that a typical trend is to see more and more home sales (closings) as we move from April through June before starting to see things decline a bit in July. The blue line above shows last year, when April, May and June were well above where we might have expected them to be. Then, there's this year... the red line. We just haven't seen the typical boost in home sales during April, May and June that we would usually expect to see. In fact, July was the third month in a row of between 110 and 120 home sales. So, this year is not a typical year. We are experiencing a much lower spring and summer in the local real estate market. Why, you might ask? Likely because of mortgage interest rates -- which are quite a bit higher than over the past few years -- and because there aren't as many homeowners selling their homes. Stacking all of those months on top of each other, you can see how this year compares to previous years, thus far...  Clearly, this year seems unlikely to come anywhere near the level of sales seen over the past few years (2021 and 2022) and we're likely to finish out the year with fewer home sales than in 2019 and 2020 as well. Here's an illustration of that puzzling increase in sales prices and decline in the number of homes selling...  This is, as some of you would undoubtedly point out, both puzzling... and not. Typically, if demand decreases, sales decrease, and prices decrease. But despite fewer home sales (as shown above) we are not seeing prices decline. Which means... we are not seeing a net overall decrease in demand... but rather... a decrease in supply. So long as home prices keep climbing, I think the decrease in the number of home sales can be almost entirely attributed to fewer sellers selling. Given fewer homeowners being willing to sell, we're likely going to need new construction homes to fill in the gap to help meet buyer demand...  Overall, over the past few years, we have seen new home sales (green bars above) increasing. After only 219 new home sales in 2020, that climbed to 405 in 2022... leading to one in four (26%) homes selling being new homes. We are still seeing similar (75% / 25%) numbers this year. During that same timeframe (2020-2022) we saw a decline in existing home sales... from 1,276 existing home sales in 2020 down to 1,159 existing home sales in 2022. I expect we will see even fewer existing home sales in 2023 based on data from the first seven months of this year. Now, here comes a surprise this month...  Last year we saw a month after month decline in contract activity as we moved from May through July. This year we started to follow that same trend as we saw fewer home sales in June that in May. But, then, July. Contract activity was quite a bit higher than I expected it would be in July 2023. In fact, this was the month with the largest number of contracts signed thus far in 2023. And yet, two other indicators keep me scratching by head a bit...  Despite that uptick in contracts being signed in July 2023... the number of pending (under contract) homes followed its normal seasonal trend of declining slightly between May and July. There are (as shown above) 252 homes under contract in Harrisonburg and Rockingham County right now... which is lower than a month ago (261) and lower than a year ago (297). Furthermore...  Despite lots of homes going under contract in July... inventory levels jumped up quite a bit (131 to 177) in a single month's time. This brings current inventory levels to the highest point that we have seen anytime in the past year. I'll take a closer look at some of these overall trends in the coming days to try to dial in whether there is another story to be told and understood. For now, it's clear that there are quite a few more listings on the market now than anytime of late. Moving through the next few months, it will be interesting to watch... [1] Will inventory levels bounce back downward after buyers have a chance to contract on some of these new listings? [2] Will we see more price reductions on listings as sellers have slightly more competition from other sellers in some price ranges and with some property types? [3] Will we see homes staying on the market longer than they have in the past? I don't know that we need to instantly jump to any conclusions about this increase in inventory levels, but the data over the next few months will help color in the picture of whether we are seeing any sort of a transition in our local housing market. Speaking of median days on the market... is it starting to rise?  Mmmm... nope. Most homes (at least half of them) are still going under contract very quickly (in six days or less) in Harrisonburg and Rockingham County. This metric will continue to be helpful to gauge whether buyer enthusiasm is slowing at all in the local market. What could slow buyer enthusiasm, you ask? How about those mortgage interest rates!?  Don't look too far back on the chart above or you'll note that 2.8% mortgage interest rate two years ago. Wow! Even if we ignore the first year (first half) on the chart above, we still see a significant increase in mortgage interest rates over the past year... from 5.3% to 6.8%. We still aren't seeing any relief in sight with mortgage interest rates. Yet. I am hopeful that we move through the remainder of 2023 we'll start to see mortgage interest rates settle down a bit... but I'm guessing they will almost certainly stay above 6%. So, given all of the data above, what should you be thinking about if you are a home buyer, seller or owner? Home Buyers -- Many new listings are still seeing plenty of action... so you very likely may still find yourself in a competitive offer situation... but not always. Understand how current mortgage interest rates affect your potential monthly mortgage payment... and get out there quickly to see new listings. Home Sellers -- You might talk to friends who saw their home go under contract within three days with multiple offers. You might talk to other friends who have had their home on the market for three or four weeks without an offer. Both of those market realities currently exist... and it varies based on price range, property type, location, and many other factors. We need to take a close look at your corner of the local real estate market to devise a reasonable and realistic pricing and marketing strategy for selling your home in a timeframe that suits your needs. Homeowners -- Enjoy your ever increasing home value. If you're talking to a friend who is trying to buy a home, don't mention your mortgage rate, or how glad you are that you already own a home. ;-) And... that's all for today. I hope that the remaining days or weeks of your summer break (if you had one) are enjoyable, and that the start to the school year goes well for you if you are a parent, teacher or administrator. As always, feel free to reach out to me if I can be of any assistance to you as you make plans to buy or sell. 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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