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Despite Fewer Home Sales, We Are Seeing Higher Prices, And Recently, More Contracts And Lower Inventory Levels |
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 Happy Friday afternoon, Friends! I hope that your week has gone well and that you are looking forward to the next few weeks - presumably with some holiday celebrations, rest, relaxation and time with family and friends! Whether you are staying here or traveling afar, I hope it is a fulfilling and meaningful time for you and that you are able to spend some time with your loved ones! Before I dive into the housing data, I'd like to invite you to join me at a fun concert in January. The Steel Wheels are putting on an album release show with special guest Lindsay Lou on Saturday, January 20th at 7:00 PM in JMU's Wilson Hall. You can buy tickets online from JMU here, or... click here to enter to win the pair of free tickets I'm giving away! Regardless of whether you win the pair of free tickets, or buy your own tickets, I hope to see you in Wilson Hall in January to hear The Steel Wheels and Lindsay Lou! And now, on to the housing data and trends in our local market, starting with a few key indicators for our overall market...  A few observations related to the data above... [1] Looking just at November sales data, we see a striking year over decline from 2021 through 2022 to 2023 when examining the number of homes that are selling each November. Two years ago there were 138 November home sales... last year only 93... and this year just 69 home sales in November. While it's only one month of sales data, that is a 50% decline over the past two years. It was a particularly slow November. :-) [2] When looking at the first eleven months of the year (the year is almost over!?) we see that there have been 25% fewer home sales this year (1,117 in 2023) as compared to last year (1,482 in 2022) in Harrisonburg and Rockingham County. It was markedly slower year this year than last. [3] Despite fewer home sales taking place this year, home prices keep on rising. The median sales price of all homes sold in the first eleven months of last year was $299,900... and this year it was 10% higher at $330,000. So, fewer home sales, but higher prices. Next up, one particular segment of our local market that has seen a particularly striking change... the City of Harrisonburg...  I suppose I should have highlighted one other bit of data on data table above -- the first row. Pretend it is highlighted too... [1] With only 13 home sales in the City of Harrisonburg this November, we have seen a 52% decline compared to last year and a 72% decline as compared to two Novembers ago. Again, this is just one month, but still. If you want to buy a home in the City of Harrisonburg, it has been a tough time to try to do so. Very few homes are selling in the City. [2] A few lines down in the data table you'll see I have highlighted the data for the past six months. Over the past six months of this year we have seen 145 home sales in the City... compared to 296 in the same six months two years ago. Again, a rather striking decline... of 52% over two years. As I alluded to above, this is mainly a supply issue... there aren't enough sellers willing to sell this year to allow the same number of City home sales to take place. [3] In that same two year period I have referenced above, the median sales price of a home sold in the City has increased from $230,000 to $295,500! That is a 28% increase in the price of homes selling in the City... over a span of just two years. Now, let's look at existing home sales only (excluding new home sales) to contextualize the 10% increase in home sales prices in the overall market that I referenced earlier...  All the way at the bottom of the data table above you'll note that when we look at the median sales price of existing homes only, it has risen by only 6% over the past year, not 10%. What does this mean? [1] The value of existing homes has not necessarily risen 10% over the past year in Harrisonburg and Rockingham County as was suggested when looking at the entire market of existing and new home sales. Existing homes (resale homes) prices have only actually increased by 6% over the past year. [2] The increases in new home sales prices over the past year, and the number of new versus existing home sales, have combined to drive the overall median sales price of all homes (new and existing) up 10% over the past year. Let's simplify things... for all you homeowners out there... [1] Don't assume that your home has increased in value by 10% over the past year, because the existing home median sales price has only increased by 6% over the past year. [2] Don't assume that your home has increased in value by 6% over the past year. It might have. Or, that increase might be somewhat larger, or somewhat smaller. The change in the median sales price is a general indicator of changes in the overall market, not a specific indicator that each and every home in a market area has shared that same change in value. Now, let's reflect on a moment on what a slooooooowwww November it was as far as the number of homes selling in Harrisonburg and Rockingham County...  There were fewer home sales in Harrisonburg and Rockingham County in November 2023 than in any other month in 2023... and fewer than in any month in 2022... and fewer than in any month in 2021. But, keep on reading for some signs that perhaps we are seeing a slight reversal of this slow down. First, here's that downward ski slope (blue) of the number of homes are selling in a year's time in Harrisonburg and Rockingham County...  The annual pace of home sales in the City + County has now declined to 1,205 home sales... which is the slowest annual rate of home sales in over five years! But yet, as we have seen for quite some time now... fewer home sales is not causing home prices to also start declining... in fact, the further home sales have declined, the higher sales prices have increased! These two trends are an indicator that while there are certainly fewer buyers buying, it is likely at least partly a result of fewer sellers being willing to sell. If we were seeing a decline in buyer interest and we were seeing the same number of sellers wanting to sell, then we could more reasonably think home prices might start to decline -- but that's not where we are right now in the local housing market. Let's say you sold your house in 2019 and left town and decided to move back just four years later in 2023. Oof. Here's what you'd find...  When you (the imaginary you) left town in 2019 the median sales price of homes in Harrisonburg and Rockingham County was only $223,000. Now... just four years later, that median sales price has shot upwards to $330,000. That is a $107K increase in just four years. This is yet another view into some tricky timing aspects of when folks bought or didn't buy a home in this area... [1] If you bought your home in 2020 or prior, and still own it, you're in great shape. You likely paid much less for your home than it is worth now and you likely have a very low mortgage interest rate. [2] If you bought your home in 2021 or 2022, you're likely still in great shape as to how much your home value has increased, and you might have a great mortgage interest rate or not quite as great. [3] If you didn't buy a home and are working on buying one now, you are buying at the highest prices we have seen lately (until 2024 prices) and at higher mortgage interest rates than we've seen in over a decade. If you are thinking about buying a home right now, does #3 above make you want to pause and think twice before buying? If you don't buy in 2023 (yes, I know there are only 16 days left) you'll likely be paying an ever higher price in 2024 or 2025. This is not to say that everyone should buy a home right away, but many buyers who have been waiting to buy for the past few years because prices were increasing (and they hoped they would decline) likely wish they had gone ahead and bought last year, earlier this year, etc. One of the other metrics I follow is how many new versus existing homes are selling, and we have seen a bit of a shift in this break down in 2023...  Last year, in 2022, we saw a decline in existing home sales compared to 2021... but new home sales kept on rising. Not so in 2023. When comparing this year (2023) to last year (2022) we see that existing home sales have declined... and new home sales have declined as well. We have also seen *the highest* mortgage interest rates in many (many!) years in 2023, which is likely a major contributor to this slow down in both existing and new home sales. But... what follows are a few slight changes in direction in our local market as of the past month...  Monthly contract activity in 2023 (red line above) has been below 2022 (blue line) more often than not over the past six months, but in November... contract activity rose above where it was last November. Hmmm... why could that be... I wonder if mortgage interest rates started to decline from their 20+ year peak? And how about the number of homes that are under contract in total...  As shown above, we saw a big jump in the number of pending (under contract) homes through the month of November. There are 262 homes under contract right now, compared to only 201 a year ago. This is a significant improvement from last month when we were even with the prior year, and an even more significant improvement from the prior six (plus) months when pending home sales were lagging significantly behind last year. Hmmm... why could that be... I wonder if mortgage interest rates started to decline from their 20+ year peak? Next up (before we get to mortgage interest rates) let's look at inventory levels...  After four months of big increases in inventory levels in Harrisonburg and Rockingham County -- from 131 homes for sale up to 230 homes for sale -- we have now seen inventory levels start to decline again. Perhaps this is a result of more contract activity (causing inventory levels to drop as homes go under contract) or perhaps it is fewer sellers putting their home on the market during the holidays -- but regardless, November showed at least a temporary reversal in the trend of increasing inventory levels. Now, then, how about those mortgage interest rates...  Indeed, mortgage interest rates are dropping. At this point it seems rates peaked at 7.79% at the end of October. Since that time, as shown, they dropped to 7.22%. Since the end of November, not shown, they have dropped even further... to 6.95%. Certainly, the three years or so when rates stayed below 4% were *not* normal times... and rates below 4% were *not* normal -- but it's been tough for many would be home buyers to afford a home (or to rationalize paying the requisite mortgage payment) over the past year with mortgage interest rates above 6%, and for quite a few months over 7%. The pace of sales slowed the most in Harrisonburg and Rockingham County over the past few months with mortgage interest rates over 7%. The news that they have now broken back down through that barrier to six-point-something is welcome news for home buyers as we head towards 2024. I'll wrap things up there for now, though if you want even more charts and graphs you can review them all here. At this point in our local housing market, we're mostly looking ahead towards 2024, so here are a few thoughts for a variety of positions you might find yourself in... If your home is on the market now but not under contract... You may very well find renewed interest from buyers after the first of the year, especially with slightly lower mortgage interest rates -- but you should make sure your home is priced appropriately. If a price reduction is in order, it might make sense to wait until just after January 1 to make that change since there will be less buyer activity than normal over the next few weeks. If you plan to sell your home in 2024... Let's chat sooner rather than later about pricing, preparation and timing. It's not enough any longer to simply whisper "I'm selling" out your front door to bring on the throngs of eager buyers with 3% mortgage interest rates. We'll want to make sure to price your home appropriately, prepare it well to show best to buyers and market it thoroughly from day one but knowing that the marketing may need to continue on for a few weeks or more. If you plan to buy a home in 2024... It seems very likely that you'll be financing your purchase with a lower mortgage interest rate than would have been available to you over the past few months, which is good news. That said, with home prices continuing to climb, your projected monthly payment might still be higher than you prefer. It's important to talk to a lender early in the process to understand how much you could spend and to consider how much you want to spend on your next home. If you own a home and don't plan to sell it anytime soon... Enjoy your likely increasing home value and your likely low mortgage interest rate. It's been a great few years to own a home... a much better than average, much better than normal, few years! And for any and all of you... if I can be of help to you related to real estate, or otherwise, don't hesitate to reach out. You can contact me most easily at 540-578-0102 (call/text) or by email here. I hope you and your family have a wonderful holiday season and I look forward to connecting with you in 2024! Recent Articles:
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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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