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Slightly Fewer Homes Are Selling At Ever Higher Prices |
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![]() Happy Monday morning, friends! What a delightfully warm fall we had this year! I hope you have taken advantage of the beautiful weather and explored some of the many outdoor adventures the Shenandoah Valley offers us. Late last month, Shaena and I, with several other family members, enjoyed a 30 mile bike ride on the Greenbrier River Trail in West Virginia and took in many beautiful sights along the way. I highly recommend it as a day trip! ![]() Before we get to latest happenings in our local real estate market, each month I offer a giveaway, of sorts, for readers of this market report, highlighting some of my favorite places (or things) in Harrisonburg. Recent highlights have included Bella Gelato, the JMU Forbes Center and the Harrisonburg Half Marathon. This month, I encourage you to go check out Walkabout Outfitter in downtown Harrisonburg where you will find plenty of awesome gear and apparel for your next outdoor adventure! As a bonus, click here to enter to win a $50 gift certificate to Walkabout Outfitter! Also, take a few minutes to check out this month's featured home... a spacious, five bedroom home in Highland Park located at 3658 Traveler Road! Now, then, let's dig into the data. I'll preface it by saying that the trends you might read regarding significant changes in housing markets across the country don't necessarily seem to be showing up in our local housing market at this time. Read on to see what that means from the latest available data... ![]() A few things stand out to me as I look at the latest overall numbers in our local housing market above... [1] We saw fewer home sales in October of this year (147) compared to last year (166) which marked an 11% decline in monthly sales activity. [2] This decline in October sales piles onto January through September sales to show a tiny decline in home sales (-0.43%) when looking at the first ten months of this year compared to the first ten months of last year. [3] Homes are still selling for quite a bit more now than they were last year. The median sales price of homes sold thus far in 2022 has been $299,900 -- up 11.5% from last year when the median sales price was $269,000. [4] Homes are still selling (as a whole) just as fast now as they were last year. The current median days on market is five days... just as it was a year ago at this time. This means that half (or more) of homes that sell are under contract within five days of being listed for sale. So... a slower than expected October, but otherwise still quite a strong year of home sales activity. That theme will continue as we work our way through the rest of the data, with only a few exceptions. It is interesting to note the slight difference in performance of detached single family homes compared to attached homes, which includes duplexes, townhouses and condos... ![]() [1&2] Detached single family home sales are shown in the first two green tables above and you'll note that there were just about the same number of sales this year (939) as last year (937) and that the median sales price has increased 13% over the past year. [3&4] In contrast, we have seen a slightly decline (-2%) in attached home sales over the past year and the increase in the median sales price (+8%) is slightly lower than that of single family homes. So, the "detached" portion of our local housing market has outperformed the "attached" portion of the market, but not significantly. Looking at the last few months graphically, it seems the lower month of home sales in October was actually... the fourth month in a row of fewer sales... ![]() During each of the past four months (Jul, Aug, Sep, Oct) we have seen fewer home sales this year than during the same month last year. Looking ahead, it seems very likely that we will see fewer home sales in November and December as well, especially once we consider the number of contracts signed (or not signed) in October. Read on for more on that... Here, then, for the first month in quite a few years, I am reporting that the pace of home sales (the number selling) is declining... ever so slightly... ![]() Don't get me wrong, it's been exciting to report each and every month for the past few years that there have been more, and more, and more home sales. But perhaps this rapid increase in the number of homes selling could not go on forever. This year and last are now relatively even when looking at the first ten months of the year, but 2022 is falling slightly behind. At this point, I am predicting that we'll see 2022 fall a bit further behind as we finish out the year. But despite fewer sales, prices are... ![]() Yes, indeed, home prices are still rising. The orange line above shows the number of homes selling in a year's time. The last four months of declines in the annual pace of sales is a result of those four months of fewer sales shown in the previous graph. We have now seen a decline from a peak of 1,726 sales per year down to 1,667 sales per year. But despite fewer sales... home prices keep on climbing! The median sales price of homes sold in Harrisonburg and Rockingham County over the past year has now risen to $295,000. As one of my past clients once pointed out... most homeowners don't care how many homes are selling... they care about the prices of those homes that are selling. So, from an overall market perspective, things are still looking rather bright in the local housing market as prices seem to still be on the rise, even if we are seeing slightly fewer home sales. Another trend that is interwoven into this equation is housing inventory... how many homes are on the market for sale at any given point... ![]() Over the past several years we have seen extremely low inventory levels at any given point in time. Plenty of homes have been listed for sale, but they have gone under contract very quickly given very strong buyer demand in almost all price ranges and locations. During much of 2022 we started to see an increase in the number of homes listed for sale...rising to 163 homes for sale in July... compared to only 129 the previous July. So, yes, the market seems to be transitioning a bit... perhaps we won't see super low inventory levels forever. But despite signs of a slowly transitioning market during the spring and summer of 2022, we are now seeing a normal seasonal decline in inventory levels as we work our way into the fall. The place where the rubber meets the road is when we combine buyer activity (demand) and housing inventory (supply) to see what balance does or does not exist in the market... ![]() As shown above, we may be starting to see a slight, modest, tiny transition in the balance of the market. We are starting to see buying activity slow... slightly. We are also starting to see inventory levels rise... slightly. Do keep in mind, though, that this is likely a transition from an extremely strong seller's market to a very strong seller's market. There is still very strong demand in the market for most properties at most price points and in most locations. To get anywhere close to being a balanced market we would need to see much more significant declines in buyers who want to buy homes and much more significant increases in sellers who want to sell homes. I'm realizing now that my preceding paragraph might now seem like it was leading up to this next graph. Digest the next graph... don't fall off of your chair... and then keep reading below... ![]() Somewhat surprising, right? There was a significant, large, drastic, huge decline in contracts being signed this October as compared to last October. Why? What happened? Does this mean the market is turning on a dime? Is buyer demand dropping off a cliff overnight? I'd point out a few things... [1] Mortgage interest rates did jump up again, significantly, in September and October - which likely played at least some role in slowing down buyer enthusiasm. Which, side note, was the intended effect -- or at least an understood side effect -- of the interest rate hikes. [2] If we're surprised by the low number of contracts signed this October we should probably be equally (or even more) surprised by the ridiculously high number of contracts signed last October. Last October was the peak of contract signing in all of 2021, which is odd -- that doesn't usually happen in October. All that is to say, the number of contracts signed in October (94) leads me to believe that we will see slightly slower months of home sales in November and December, but it does not cause me to conclude that the market changed drastically sometime in October. Clearly, though, only time will prove me right, wrong, mostly right or mostly wrong. ;-) So... with this big (but perhaps temporary) decline in contracts being signed... and with the slight decline in homes selling... it's probably safe to say that homes are not going under contract as quickly, right? ![]() Ummmmm... nope! The "median days on market" metric continues to hover at five days on the market. Homes are still going under contract very quickly. To be clear, this data point above is looking at home sales over the past 12 months to arrive at this "five days" metric. You might then wonder if we would start to see higher "days on market" results if we looked only at the past six months, or three months or one month. Let's take a look... Median Days On Market Past 12 Months = 5 days Past 6 Months = 5 days Past 3 Months = 6 days Past Month = 6 days So, yes, it's taking... one extra day for homes to go under contract. ;-) Now, for our monthly opportunity to point the finger of blame... ![]() Why oh why are home sales slowing down? Why is contract activity slowing down? What in the world could be causing these changes? ;-) Well, could it be higher mortgage interest rates? We started the year with interest rates below 4% and then proceeded to fly past 4%, 5%, 6% and now 7%. Home buyers will keep on buying as prices rise 10% (or more) per year when mortgage interest rates are between 2% and 4%... but when mortgage interest rates get to 6% or 7% that can start to impact buyer decision making... either because they can no longer afford the monthly mortgage payment... or because they don't want the higher monthly mortgage payment associated with current mortgage interest rates. Just as a bit of context (that is sure to make me sound old) back when Shaena and I bought our first home (a townhouse in Beacon Hill in 2003) our mortgage interest rate was... 6.25%. So, these mortgage interest rates of 6% or 7% aren't absolutely crazy from a long-term context, but after experiencing abnormally low mortgage interest rates for years, and years, and years... a 6% or 7% rate certainly sounds and feels high! Now then, where does all of this leave us? Lots of homes are still selling... rather quickly... at higher prices than ever before... but buyer activity is slowing a bit... at least partially related to high mortgage interest rates. Thus, my advice is as follows, depending on where you fit into our local market... SELLERS - Consider selling sooner rather than later in case mortgage interest rates keep climbing, or in case prices start to level out. BUYERS - Consult with an experienced lender to understand your best mortgage options to make sure you are buying at a reasonable and comfortable price point. HOMEOWNERS - Enjoy your (likely) low mortgage interest rate, and your still-increasing home value. If you're considering buying or selling yet this year... or in early 2023... let's chat sooner rather than later to formulate a game plan. The first step? Email me or text/call me at 540-578-0102. I'll provide another market update next month, but between now and then I hope you have a wonderful Thanksgiving and that you are able to let those dear to you know how thankful you are that they are a part of your life. Happy Thanksgiving! | |
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Contract Activity Seems To Be Slowing Down (Quite A Bit) In October 2022 |
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![]() It's best not to get your face too close to the data. The closer we look at the data, at a smaller and smaller data set, the more likely we can find ourselves concluding one thing when another is actually true. So, as you ponder the meaning of the graph above, keep in mind that the last set of data (October 1 - 15) is a rather small set of data... from just two weeks in our local market... so it may or may not be indicative of an overall trend. But... with that length disclaimer having been thrown out there... After seeing modest declines in contract activity in August (-13%) and September (-15%) it seems that contract activity might be REALLY slowing down (-51%) in October. Last October, in the first half of the month, a total of 81 contracts were signed for buyers to buy and sellers to sell houses in Harrisonburg and Rockingham County. This year in those same 15 days, only 40 contracts have been signed. It's hard to say if this significant decline in contract activity will continue as we move through October and into November, but if things were slowing down slightly in August and September, they seem to be slowing down more quickly in October. | |
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Harrisonburg Area Home Sales Slowing Slightly But Prices Keep Rising |
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![]() Happy Thursday afternoon, friends! Fall is upon us... with cool mornings and evenings, but often still reaching pleasant afternoon temperatures... and beautiful colors on trees throughout the Valley! Fall is my favorite season for the reasons above, and because it's volleyball season. My daughter plays JV volleyball and I coach middle school volleyball, both of which bring a lot of fun, excitement and joy to my life each fall. I hope that your fall, likewise, is full of fun, excitement and joy! Before we get to real estate... Each month I offer a giveaway, of sorts, for readers of this market report, highlighting some of my favorite places (or things) in Harrisonburg. Recent highlights have included Black Sheep Coffee and the Harrisonburg Half Marathon and the JMU Forbes Center. I'm bouncing back to another of my favorite spots to grab a cup of coffee... Bella Gelato, located on West Water Street in downtown Harrisonburg where you can enjoy delicious gelato that is made by hand on site, plus a pastry case of baked goods, and an espresso and coffee bar where you'll often find me ordering a caramel latte. Interested in checking out Bella Gelato? Click here to enter to win a $50 gift card to Bella Gelato! ...and this month's featured home is... The beautifully renovated home on the cover of this month's market report is located on the corner of Franklin Street and Myers Avenue, just a short walk from the many restaurants and shopping destinations in downtown Harrisonburg... such as Bella Gelato. ;-) Check out 400 Franklin Street here. ...and now, the real estate market update... First, before we get to the numbers, let's start with the big picture...it feels like the local housing market is changing or transitioning in some ways. Mortgage interest rates have increased drastically over the past six months and that seems to be impacting the amount of buyer activity and enthusiasm in our local market. Most sellers are experiencing fewer showings and fewer offers in the first week or two of their homes being on the market. But yet, we are still seeing relative stability in the number of homes selling in this area, combined with continued increases in the prices for which homes are selling. ![]() As shown above... [1] Home sales were 7% slower this September than last, with 140 home sales this year compared to 150 home sales last year. [2] Thus far this year we have seen 1,234 home sales in Harrisonburg and Rockingham County, which is 1% more than we saw in the first nine months of last year. [3] The median sales price has increased 11% over the past year in Harrisonburg and Rockingham County, from $269K to $300K. [4] Homes are still selling very quickly, with a median days on market of only five days. More on this later. So if things feel slow lately, how are things still stable? Good question... see below for a month by month breakdown... ![]() As shown above, we saw much higher numbers of home sales this year during April, May and June, followed by lower numbers of home sales this year during July, August and September. So, we had a very strong second quarter of the year, followed by somewhat weaker third quarter. What, then, will the fourth quarter of the year show? Given that mortgage interest rates keep creeping up higher and higher, I am anticipating that the fourth quarter of this year will show fewer home sales than the fourth quarter of 2021... which would then lead to an overall decline in the number of home sales between 2021 and 2022... if my guess is correct... and I make plenty of guesses that are not correct. ;-) The following graph helps put this year in an even more helpful context... ![]() Two few observations about this "stacked up" graph above... [1] Yes, 2022 is still slightly ahead of 2021 through September... but we the gap is much narrower than it was a few months ago. [2] Even if we don't see 1,673 home sales in 2022 to match last year's total count, it seems very likely that we will still eclipse both 2019 and 2022. The following two trends seem to be running counter to each other, at least thus far... ![]() The orange line above shows the number of homes selling on an annual basis in Harrisonburg and Rockingham County. The number of annual sales was climbing quickly through the end of 2021 but has mostly leveled off since the start of 2022. It seems unlikely that the annual pace of home sales will start increasing again anytime soon. The green line above shows the median sales price of homes selling in a 12-month period. As you can see, sales prices keep on rising. The median sales price over the past 12 months has been $292K... which is about $26K higher than the median sales price of $266K just a year ago. Moving forward, I expect we'll see home sales (green line) stay level or decline somewhat... while sales prices (orange line) will likely keep rising or possibly level out a bit. Changes in home prices over time are pretty wild if we scoot back a bit and look at a multi-year picture... ![]() If only everyone had bought a median priced home ($198K) five years ago... then everyone would own a home that is now potentially worth $100,000 more, given the current median sales price of $299,837 in Harrisonburg and Rockingham County. This is a drastic shift in sales prices over a relatively short timeframe, meaning that... [1] Housing is more expensive for anyone who does not currently own a home. [2] Anyone who has owned a home during this time likely saw a significant increase in their home value and net worth. I am simultaneously thrilled for all of my past clients who have bought homes and are feeling good about these trends... and depressed for all of my clients who have not been able to purchase a home and are now faced with much higher purchase prices (and interest rates) in today's market. But back to that leveling off thing... ![]() This graph shows that home sales (blue line) are starting to level off and inventory levels (green line) are starting to stabilize and increase a bit. If there continue to be slightly fewer buyers in the market, and slightly more sellers in the market, then... [1] Home buyers might have a slightly easier time securing a contract on a home they hope to purchase. [2] We might see a slightly smaller increase in the price of homes over time. Read that twice, please. I'm not currently anticipating a decline in prices, but rather, a slightly smaller increase in prices. I don't hit on this every month, but it can be helpful to realize that we have seen a pretty good sized increase in the number of new homes being built and sold in this area... ![]() This graph is showing the number of new detached home sales per year in Harrisonburg and Rockingham County. This does not include attached home sales... which would would be duplexes or condos. After averaging 83 new home sales per year between 2018 and 2020, we saw a significant increase in 2021 to 144 new homes... and thus far in 2022, that is a total of 163 new home sales. Many, but not all, of these new detached home sales have been in Ryan Homes communities. It will be interesting to see how new home sales and resale homes track over the next few years especially within the context of higher mortgage interest rates. Now, a peek into the near future... ![]() In each of the past five months (purple arrows) we have seen fewer contracts signed than were signed in the same month last year. This probably doesn't surprise anyone who has been paying attention to changes in mortgage interest rates. Ever higher interest rates have changed the potential mortgage payment for buyers, which is definitely impacting how many potential buyers are capable of buying or interested in buying. Multiple (five) months of lower levels of contract activity means that we will continue to see lower levels of closed sales over the next few months... which is why I expect we'll see a slower fourth quarter of home sales this year as compared to last year. And after years of saying inventory levels are down, now we see that... ![]() Inventory levels are actually rising a bit. When looking at two years ago compared to one year ago we see about a 20% decline in inventory levels. When looking at one year ago compared to today we see about a 20% increase in inventory levels. Today's inventory levels are still *very* low compared to historical norms, but buyers today seem happy to have slightly more choices of homes for sale, or to see homes sticking around on the market for slightly longer before going under contract. Though... about that time on market trend... ![]() Over the past 12 months, the median number of days it took for homes to go under contract once listed for sale was... five days! We first hit that low (low!) level of a median of five days back in July 2021, and we have been hanging out at that same level ever since. Interestingly, I suspected that if I looked at a shorter, more recent, timeframe that I would find that it is taking homes longer to go under contract. With that theory in mind, I looked at the median days on market over the last 30 days and it was... still five days. So, the market (overall) seems to still be moving very quickly with half of new listings that go under contract doing so in five or fewer days. And finally, a visual to show you how quickly mortgage interests have been rising... ![]() A year ago, mortgage interest rates were right around 3%. Six months ago, mortgage interest rates were right around 4.7%. Now, today, they are all the way up to 6.7%. As you might imagine, this increase in mortgage interest rates significantly affects a buyer's mortgage payment - and potentially their ability to purchase the home they might hope to purchase. So where does all of this leave us? Despite what may be going on in other real estate markets around the state or the country, here's what seems to be true in our local market at this moment in time... [1] Contract activity and home sales has slowed in the second half of 2022, though the highly active first half of 2022 is still keeping us on track with 2021 thus far. [2] Higher mortgage interest rates are affecting buyer behavior which is often resulting in fewer showings and fewer offers. [3] Despite the points mentioned above, homes are still going under contract very quickly and home prices keep on rising. As you look ahead to the remainder of fall, and into the winter months, if you're thinking about buying a home, or selling a home, we should chat about how things are going in your segment of our local market as it relates to the property type, price, size, location and age of your home. I'll check in on the market again in about a month, but until then, enjoy your fall days, and best of luck to anyone else running in the Harrisonburg Half Marathon this Saturday! | |
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Another Visual Of A Slightly Slowing Pace Of Home Sales |
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![]() I usually look at the pace of home sales each month, which shows quite a movement up and down as some months are surprisingly slow and some are surprisingly active. I also usually examine the annual pace of home sales to see how home sales are trending from a long term perspective, though this view of the data is very slow to reveal any shorter term trends. Upon a recommendation from a reader, I have created the graph above that averages the three most recent months of sales in order to smooth out the monthly data but get faster insights into trends than the annual data can provide. Thus... The August 2022 data point is the average of June, July and August home sales. The July 2022 data point is the average of May, June and July home sales. Etc., etc. A few things, then, to point out on the graph above... [0] There are plenty of normal season trends illustrated on this graph. For example, home sales are typically lowest in the first quarter of the year, accelerate through the second and third quarter and then decline in the fourth quarter. This happens most years. [1] The green line (2019) took a nose dive in the second half of the year due to the uncertainty and anxiety of a pandemic sending many people home to work, for school and more. [2] As shown on the yellow line, things were rocking and rolling again by mid 2020 as buyers were snapping up houses as fast as they could because "home" was so important during the pandemic and because of rock bottom interest rates. [3] Looking at the red line (2022) we see that home sales activity was setting new records all the way through June 2022... though that data point is an average of April, May and June. [4] Now that we're into August, we have seen a slight decline in home sales activity as compared to 2021. We are still well above 2020 and 2019 at this point. It will be interesting to see how the remainder of 2022 plays out. It seems unlikely that the market will be as active as it was in the last five months of 2021. | |
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Are Home Prices Rising Because Larger Homes Are Selling? |
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![]() When you see a 12% increase in the median sales price between 2021 and 2022 you might wonder if it is just a result of larger homes selling this year than last. It's a reasonable question, and a relatively straightforward one to investigate... The graph above shows... BLUE LINE = median sales price of single family homes in Harrisonburg and Rockingham County GREEN LINE = median price per square foot of those same single family homes in Harrisonburg and Rockingham County If the 12% increase in the median sales price could best be understood as a collective increase in the size of homes being sold, we would see an increase in the median price per square foot that was smaller than 12%. In fact, over the past year, the median price per square foot has increased by 13%, right alongside the median price increasing by 12%. So, this significant increase in sales prices does not seem to be attributable to larger homes selling. | |
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Home Prices Keep Rising in Harrisonburg, Rockingham County Despite Slightly Fewer Home Sales |
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![]() Greetings, and Happy Tuesday morning, friends! Would you believe it if I told you we're 70% of the way through 2022!? It's hard to believe, I know, but indeed, we only have about 30% of the year to go. Would you believe it if I told you I am now old enough to be the dad of an adult!? It's hard to believe, I know, but Luke recently celebrated his 18th birthday. Shaena and I are tremendously proud of the man he is and is becoming and we're excited to see what is in store for him in the coming years. Happy 18th, Luke! :-) ![]() This Month's Featured Home... The upscale rowhouse on the cover of this month's market report is one of the original lakefront rowhouses at Preston Lake, and you can find out more about this beautiful property by visiting 3313PrestonShoreDrive.com. Another of My Favorite Places... Each month I offer a giveaway, of sorts, for readers of this market report, highlighting some of my favorite places (or things) in Harrisonburg. Recent highlights have included Village Juice & Kitchen, Black Sheep Coffee and the Harrisonburg Half Marathon. This month I'm highlighting the JMU Forbes Center for the Performing Arts which is the premier destination for arts in the Shenandoah Valley with countless top notch musical, dance and theatrical performances each year. Have you been to a show at the Forbes Center? Would you like to? I'm giving away a pair of tickets to what is bound to be a hilarious show at the Forbes Center... "Whose Live Anyway?" featuring current cast members of the Emmy-nominated television show "Whose Line Is It Anyway?" for 90 minutes of hilarious improvised comedy and song. The show is on Friday, September 30 at 8:00 PM. Enter here for a chance to win this pair of tickets. And now, let's take a look at the latest news from our local real estate market... ![]() First off, let's get right to it... we saw significantly fewer home sales this August as compared to last August. We've been in "always more, every month more" mode for so long when it comes to home sales that it might seem jarring to see a 19% drop in August home sales, but it is important to realize that we couldn't necessarily always see more and more home sales forever and ever. We have seen an extraordinarily high amount of home sales activity over the past two years. Those home sales levels may have been inflated beyond the norm, so we may see a downward shift in the number of homes selling per year as we finish out 2022 and enter 2023. This isn't a catastrophe and it does not necessarily mean we will see any adjustments in home values and sales price in this area. In fact, in the "this is not a catastrophe" category, when we move beyond #1 above, where we see a 19% decline in August home sales, we'll also find... [2] The pace of home sales during the first eight months of this year are still slightly (0.65%) ahead of last year during those same eight months. Though, if home sales activity continues to be a bit slower through the rest of 2022, we should expect the annual pace of sales in 2022 to eventually fall behind 2021 levels. [3] The median sales price this year in Harrisonburg and Rockingham County ($298,950) is 11% higher than it was last year during the same first eight months of the year when it was $269,000. [4] When looking at a full year of data (September through August) we find that there has been a 9% increase in the median sales price over the past year, from $264,900 up to $289,900. [5] Homes are still selling just as fast as last year... with a median "days on market" of five days. So, while the number of homes selling might be slipping a bit compared to last year, prices are still rising, and homes are still selling very quickly. Now, let's break things up a bit by detached homes (green) and attached homes (orange) below... ![]() This chart pull a few things out that provide some helpful comparisons... [1] There have been slightly more detached home sales this year (734) as compared to last year (722) for a total increase of 1.66%. This has been accompanied by a year-to-date increase of 12.59% in the median sales price of those detached homes. [2] There has been a slight decline in the number of attached home sales this year (348) as compared to last year (353) for a total decrease of 1.42%. This has been accompanied by a larger, 12.13%, increase in the median sales price of those attached homes. So... we're seeing a slight uptick in single family home sales and a slight downturn in townhouse / duplex / condo sales... though the median prices of both property types are increasing. Finally, slicing and dicing the data one more time to compare the City and County, here's what we find... ![]() Here's what pops out to me in the chart above, when looking at a full year (Sep - Aug) of data... The pace of home sales has slowed a bit (-3%) in the City (#1) while the pace of County home sales (#2) has increased slightly (+2%). The median sales price has increased by double digits (+11%) in the City (#3) while the median sales price in the County (#4) has increased by a slightly lower amount (8.3%). So, again, lots of home sales at high prices in the City and County... but the pace of sales is slightly more robust in the County, and price increases are slightly higher in the City. Now, the summer that makes you say: Nice! Yikes! Hmmm... ![]() It was a wild summer in the Harrisonburg and Rockingham County real estate market... JUNE = NICE! We saw an incredible number of home sales in June 2022. The 188 home sales this past June was the highest single month of home sales in many, many years! JULY = YIKES! After sky high home sales in June, we saw the slowest month of July home sales in at least three years. July 2022 home sales weren't drastically lower than the previous few years but it was surprising (yikes!) to go from the "best June in 3+ years" to the "worst July in 3 years." AUGUST = HMMM... Home sales this past month were markedly lower than last August, with a 19% decline from 184 home sales to 149 home sales. But... home sales this August were still higher than in August 2019 and 2020. So... were home sales surprisingly slow this August? Or do they just look slow compared to a surprisingly active month last August? At this point it can be helpful to stack all of those months of home sales on top of eachother to look at things from a broader perspective... ![]() Here you can more clearly see that 2022 year-to-date home sales are barely sticking in the race with 2021. Yes, we have seen slightly more home sales thus far in 2022 than in 2021 (and than in the previous few years) but we're barely ahead now. It seems quite likely that the year-to-date pace of home sales will fall behind as we get through September and October of 2022, especially when we examine contract activity below. So, if you haven't picked up on it yet, it seems the rapid growth in the number of home sales we have been experiencing lately might be starting to... level off... ![]() During the height of Covid (2020-21) we saw an ever-increasing number of home sales on an annual basis, seemingly due in large part to the size and shape of "home" being more important than ever as people were spending more time at home during the pandemic... and because of historically low interest rates. Now, however, many of life's patterns (actually going to work, actually going to school) seem to be returning... and mortgage interest rates (if you haven't heard!?) are quite a bit higher than they were a year ago. So, it seems very unlikely that we will continue to see rapid growth in the annual pace of home sales like we saw between August 2020 and August 2021, and it seems more likely that we will see a leveling off, or even a slight slowdown, in the number of homes selling in Harrisonburg and Rockingham County each year. All of this, though, is related to the orange line above... the number of homes selling. Quietly, in the background, the median sales price (green line) just keeps on rising, and rising. The unknown, at this point, is whether we will see home prices start to level out at all. Thus far, they are continuing to rise quite rapidly. Speaking of rising prices, here's a graph that will put these price increases in context pretty quickly... ![]() In just four years (2018-2022) the median sales price of a single family home in Harrisonburg and Rockingham County has increased by almost $100,000... from $228,000 to $326,500! What a great time to have owned a home... and what a tough time to buy one now if you haven't owned a home for the past few years to be a part of a joyful ride up the roller coaster of home values. Here's another graph that provides further evidence of the likelihood that we will continue to see the market slow down when it comes to the number of homes selling... ![]() I've drawn the arrows above to show where I think things have been going and are going... Top Arrow = slight, slow, decrease in the number of buyers buying Bottom Arrow = slight, slow, increase in the number of sellers selling as it relates to active inventory at any given time So, indeed, the market may be transitioning a bit. A few fewer buyers are buying and a few more sellers are selling. These dynamics are turning our market, ever so slightly, towards a slightly less strong seller's market. But, yes, still a strong seller's market. Several times in this synopsis I have spoken about home sales slowing and referenced that I anticipate a further slowdown in the next few months. Here's why... ![]() The graph above is showing us contract activity per month in Harrisonburg and Rockingham County... counting how many homes go under contract each month. Last summer (the first set of 1, 2, 3) there were 143, 156 and 155 contracts signed for a total of 454 contracts. This summer (the second set of 1, 2, 30) there were 135, 114 and 135 contracts signed for a total of 384 contracts signed. So, indeed, fewer contracts for several months in a row has already started to translate into fewer home sales, and will continue to do so for at least another month or two in the future. With slightly fewer buyers buying are we seeing inventory levels starting to rise? Slightly... ![]() A year ago there were 129 homes on the market for sale at this time... and that has risen, slightly, to 147 homes for sale. So, yes, we are seeing somewhat of an overall increase in the number of homes for sale... but not by that much. And... from a shorter term perspective, inventory levels are currently trending down as they usually do as we move from summer into fall. Finally, one last graph for a bit of AHHHHH and GRRR... ![]() From the end of last summer (Aug 2021) through early 2022 we saw a rapid increase in mortgage interest rates. They rose from less than 3% up to over 5% in only eight months. Ahhhhh!!! Over the past few months, mortgage interest rates have shown they might not get all the way to 6%, but they haven't made their way back down to, or below 5%. Grrr... Comparably higher mortgage interest rates (as compared to the past few years) continue to have an impact on how many buyers are able to, or are willing to, buy a home right now... and it doesn't seem that these higher interest rates will be leaving us as quickly as they showed up. So... in summary... [1] The pace of home sales seem to be slowing, slightly, though 2022 is still ahead of 2021 at this point. [2] Contract activity is slowing, slightly, which means closed sales will also continue to slow. [3] Home prices continue to rise rapidly. [4] Inventory levels are rising, slightly. [5] Mortgage interest rates are still quite high. If you're thinking about buying a home, or selling a home, let's talk about how things are going in your segment of the market as it relates to the price, size, location and age of your home. The first step? Email me or text/call me at 540-578-0102. I'll check in on the market in about a month, but until then, enjoy the slightly shorter, cooler days ahead! | |
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Indeed, Fewer Homes Went Under Contract This Summer Than Last |
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![]() Indeed, as is shown rather clearly above, fewer buyers signed contracts to buy homes this summer than last. When I'm talking summer, in this instance, I'm referring to June, July and August...
So, about 15% fewer contracts were signed this summer than last. Why? A large part of it is likely the higher mortgage interest rates.
But despite fewer houses going under contract this summer than last...
If mortgage interest rates remain as high as they are now, it is reasonable to assume that home buying activity will continue to be a bit subdued this fall compared to last fall. | |
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Just As Many Homes Are Selling Over Asking Price Now As Compared To In 2021 |
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![]() This statistic might surprise you. It surprised me. Just as many homes are selling over the asking price now (in the past 90 days) as compared to in 2021. And, technically, slightly more are selling over the asking price now as compared to in 2021. Sometimes it seems that the market might be "slowing down" in some ways... with fewer showings and/or fewer offers in the first week of a house being on the market. But then, you see that we're still seeing about half of homes selling for more than the list price and it doesn't seem like things are slowing down at all!?! | |
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Harrisonburg Housing Market Still Showing Strength Despite Some Signs Of Slowing |
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![]() Happy Thursday afternoon, friends! As any student or teacher will tell you, summer is almost over! 😢 I hope that you and your family had a wonderful summer and that you had at least one opportunity to sneak away... to the beach, the lake, a tropical island, a music festival, a rural AirBNB, a national forest, a campsite or a new city! One of my favorite spots to sneak away is Deep Creek Lake, MD... ![]() But getting back to business... The beautiful house on the cover of this month's market report is located at 3161 Henry Grant Hill in Preston Lake and you can find out more about this spacious home here. Each month I have a giveaway, of sorts, for readers of this market report. This month's giveaway requires a special sort of market report reader... one who also likes to run... a lot. I enjoy running and frequently participate in races put on by VA Momentum, and thus I was excited to hear they are putting on a half marathon this fall. So... this month, you can enter for a chance to win a free registration to the Harrisonburg Half Marathon, to be held on October 15, 2022! Find out more about the half marathon here. Enter to win the free race registration here. Email me and tell me I'm crazy for thinking you'd run a half marathon here. 😉 And now, after all that, let's dig in and see what is happening in our local housing market... ![]() As noted in my headline above, there are some signs that our local real estate market might be slowing down a bit. This very well may mean, though, that it slows down from going 90 MPH in a 60 MPH zone to going 75 MPH in a 60 MPH zone. The latest numbers, as shown above, indicate that... [1] July home sales were slower (140) than last July. We'll see this again on a graph in a moment. [2] Thus far this year we have seen 932 home sales, which is 4.6% more than last year. We had a record number of home sales last year, so a further increase this year is... record breaking. [3] The median sales price in July was 5% higher than last July. [4] When looking at the first seven months of the year, the median sales price has risen 11.7% in Harrisonburg and Rockingham County. So... most of these indicators are quite positive, rosy, exuberant, except the slight slow down in July. This is seen a bit more clearly here... ![]() Above, you'll note that in June 2022 we had an astronomical 188 home sales... higher than any of the past three months of June. But, then, July. In July 2022 we only saw 140 home sales, which is less than any of the past three months of July. Some might point out that looking at a single month of housing data, in a small-ish housing market, can make you think something is happening, when nothing is happening. I agree that can happen. If we smash the two months together, we find that there have been 328 home sales this June and July... compared to 322 home sales last June and July. So... maybe things are "just fine" right now, and maybe things are starting to slow, slightly. ![]() As shown above, if things are starting to slow... they're only just starting to do so, and they're doing so verrrrry slowly. The 932 home sales seen thus far in 2022 is more than we have seen in the first seven months of any of the prior four years. Perhaps when we get another month or two into the year we will see things level out a bit in 2022? ![]() Slicing and dicing the data once more, this graph (above) measures (each month) the number of sales in a 12 month period as shown with an orange line, and the 12-month median sales price (measured each month) shown with the green line. As you can see at the end of the orange line, it's possible that the overall pace of home sales is slowing a bit... but then again, maybe not. We'll need to watch this for a few more months to know for sure. Speaking of the future, our most reliable indicator of future sales is... current contracts... ![]() This one surprised me a bit. We usually see around 150 to 160 contracts signed in any given month of July. But... not this July. There were only 114 contracts signed in July 2022, which is much lower than usual, and likely means we will see a lower than usual month of closed sales in August and/or September. This falls to the category of "things that make you say hmmmm...." and this will definitely be a trend we will need to continue to monitor. Somewhat fewer buyers signing contracts might mean that inventory levels would rise a bit... ![]() Indeed, we are starting to see inventory levels creep up a bit. There are now 163 homes for sale in Harrisonburg and Rockingham County, which is a bit more than the 129 we saw at this time a year ago. It is important to note, though that these "slightly higher" inventory levels are really still VERY, VERY low. Many or most buyers in most price ranges and locations still have very few options of homes to buy right now. So, yes, inventory levels are creeping up a bit, but don't think that's necessarily giving buyers more choices... or giving buyers more leverage... at least not at this point. So... a few fewer sales... fewer contracts... slightly higher inventory levels... that probably means that homes aren't selling as quickly, right!? Well... ![]() Looking at the 12 months of home sales prior to July 2021 (a year ago) the median "days on market" for those sales was only five days. That metric has remained constant for 13 months now... and today, when looking backwards by a year, the median "days on market" is still just five days. Narrowing the focus even more, to just the 114 properties that went under contract in July 2022, we might expect to see a higher "days on market" -- and we do -- but only barely. The median days on market during July 2022 was... six days. So, homes are still going under contract very, very quickly! Finally, maybe this (below) is a contributing factor to the slight slow down over the past 30 to 45 days? ![]() A year ago, the mortgage interest rate was 2.8%. Six months ago it was 3.55%. During June and July it was as high as 5.81%, though it has started to decline now. It is quite possible that these higher mortgage rates have caused some buyers to not be able to buy any longer... or that it has at least partially dampened their enthusiasm. So, there you have it, friends. The housing market in Harrisonburg and Rockingham County is still showing great signs of strength with more sales than ever, at higher prices than ever. But... we might be seeing a slight slow down in home sales (from record high levels) and we might be seeing a slight increase in inventory levels (from record low levels). We'll have to give it a few more months to see how things continue to develop in the local market to know for sure. Until then... If selling a home is on your mind, let's talk sooner rather than later. Before you know it, we'll be halfway through fall and headed into winter. If you are planning to buy a home soon, let's start watching for new listings of interest and going to see them quickly when they hit the market. If I can be of any help with the above (selling, buying) please call/text me at 540-578-0102 or email me here so we can talk about working together to navigate your way through the ever changing Harrisonburg real estate market. | |
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Contract Activity Slowing A Bit In July 2022? |
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![]() In the first 25 days of July 2022, we have seen 88 signed contracts. Some context and notes...
Is this a massive slow down or a one month anomaly? Only time will tell, but thus far, contract activity in July is certainly seeming slower that I would have expected. | |
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Inventory Levels Creeping Slowly Upward, To Higher Low Levels |
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![]() Inventory levels - the number of homes for sale at any given time - have been creeping upward for the past 6+ months. With 163 homes for sale, we are now seeing more homes for sale than we have seen at any time since late 2020. The gray bars above show the number of homes on the market at the end of each month. The red line above shows a moving three month average to show the overall trend more clearly. To put this in a bit of context though, these new highs are actually still pretty low... Homes for Sale In...
So, yes, July 2022 inventory levels are higher than a year ago... but are also much lower than any other recent July... | |
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Harrisonburg Housing Market Still Speeding Right Along |
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![]() Happy Tuesday morning, friends! The starting and ending point of summer likely varies for many of us, but it seems like we're somewhere around the middle of summer. Gasp! As such, I hope the first half (or so) of the summer has treated you well, and that you still have some fun, adventures and relaxation in the works for the second half of summer. Before we get to the real estate news of the day, I'll mention that Red Wing was *fantastic* this year... ![]() I enjoyed seeing many of you out at Natural Chimneys over that long (but not quite long enough) weekend and I hope the rest of you will consider checking it out next year! Sign up for Red Wing Updates here. Next, I should mention that the beautiful home on the cover of my market report is on the market, for sale, as of this morning! Find out more about 390 Callaway Circle here. Finally, if you're looking for a good cup of coffee (or a caramel latte) one of my favorite coffee spots in the 'burg is Black Sheep Coffee, tucked away over on West Bruce Street. Interested in checking out Black Sheep Coffee? I'm giving away a $50 gift certificate, which you can enter to win here! And now, let's spend a few minutes together exploring the latest news and happenings in our local housing market... ![]() Right off the bat, we get to some rather fascinating updates just checking out the very basic metrics of our local market. As referenced in the tiny red numbers above... [1] A normal June might have around 135 or 145 home sales. Last June (2021) we saw an impressive 175 home sales. I did not think we would clear that high bar this June. But... we did. There were an astonishing 184 home sales in June 2022! [2] The median sales price in the first half of this year was $299,000! That is almost 15% higher than it was in the first half of last year, when it was $260,600. Even with *much* higher mortgage interest rates, homes keep selling at higher and higher prices! [3] Homes are still selling fassssssssst! The median days on the market in Harrisonburg and Rockingham County during the first six months of 2022 was... only five days, just as fast as when we look at the entire past 12 months of data. So... lots of sales, prices that are higher than ever, and homes are going under contract faster than ever. Hmmmm... things don't seem to really be slowing down thus far in 2022!? This fast moving market has been one contributor to the steady increases in home prices seen over the past two years. Take a look at these increases... ![]() [1] The median sales price of detached homes was only $250,000 just two years ago... but over the past two years that median sales price has risen to $310,000! [2] The median sales price of attached homes (townhomes, duplexes, condos) was only $180,400 just two years ago... but over the past two years that median sales prices has risen to $240,000! Homeowners have been delighted with these increases. Sellers have also been big fans. Buyers... not so much. It can be tough for buyers to get excited about paying a *much* higher price alongside their *much* higher mortgage interest rate... but buyers still seem to be moving forward full steam with their home purchases thus far in 2022. Those home buyers are moving along so steadily that we're breaking (tying) some records... ![]() Over the past ten years, the most home sales we have seen in a month has been 184 home sales... which took place last year, in August. Well, what do you know!? This June (last month) we saw... 184 home sales! Looking ahead, what should we expect for July? The past three months of July have been tightly clustered around that 145 - 155 range, so I'm going to play it safe and guess we'll see right around that many home sales in July 2022. Perhaps 150 on the nose!? As I have mentioned to many of you, I fully expected (and still expect) that we'll see a bit of a slow down in home sales activity in 2022 due to higher mortgage interest rates... but... the data just isn't agreeing with me thus far... ![]() As shown above, the 787 home sales we've seen in the first half of 2022 exceed the number of home sales in the first half of each of the past three years! If I didn't know better, I'd think mortgage interest rates must be *lower* than ever in 2022 to spur on so much buyer activity!? But, no, not so much. More on that later. Looking at these big picture trends in a slightly different way, it's astonishing to see three years in a row of double digit growth in the median sales price in our market... ![]() How much did our area's median sales price increase in 2020? 10% How much did our area's median sales price increase in 2021? 10% How much has our area's median sales price increased thus far in 2022? 11% It's been an astonishing few years in our local market to see home values escalating so quickly... without any signs of slowing down. But... to try to reel us back in a bit from cloud nine... ![]() It's hard not to look at the graph above and think that things could be, might be, possibly be changing... [BLUE] The top, blue, line shows the number of buyers buying in a six month period as evaluated over the past four years. This metric has been steadily marching upward over the past two years... but... it seems that the number of buyers buying might be flattening out a bit. Again, not that the amount of buyers buying is decreasing, but buyer activity might not be continuing to increase as quickly as it has for most of the past two years. [GREEN] The bottom, green, line shows the numbers of sellers selling at any given time... the inventory levels at the end(ish) of each month. For most of the past four (plus) years we have seen fewer and fewer (and fewer and fewer) homes on the market, due largely to excessive amounts of buyer demand. But... over the past six months... we're starting to see some modest flattening out of inventory levels in our local area. Inventory levels seem to be steadying themselves. Bear in mind that it is still definitely a strong (strong!) seller's market, but we might be starting to see some early signs that the market might be slowing down a touch... perhaps cooling off from a strong-strong-strong seller's market to a strong-strong seller's market!? Changing gears, slightly, here's an interesting trend to make sure that we recognize... ![]() After typically only seeing around 70 - 90 new (detached) home sales per year, we saw a remarkably high 144 such sales last year... and this year we seem to be on track to see around 180 new detached home sales in Harrisonburg and Rockingham County. These recent, steady increases in the number of new homes selling in our market is doing two things... one, allowing the overall number of home sales to increase without relying just on resale homes as inventory... and allowing the median sales price in our market to keep climbing, given that new homes are typically more expensive than resale homes. OK, shifting back to the overall sales market, here's a look at recent months of contract activity... measured by when contracts are signed... ![]() Looking at the highlighted months... [2022] We have seen 630 signed contracts in the past four months. [2021] In the same months last year, we saw 620 signed contracts. So, yes, even with *much* higher mortgage interest rates, we are seeing more buyers sign contracts to buy homes now as compared to a year ago. Is this surprising? Yes, relative to interest rates. No, relative to what seems to be a significant number of buyers who wanted to buy homes in this area in the past two years who have not yet been able to do so. In other words, demand exceeds supply. There are still lots of buyers who want to buy... even if the interest rates are higher than they were previously and higher than they would prefer. So, demand is high. How about supply? Well... ![]() It is possible that our local housing supply is increasing, slightly. After multiple years of constantly declining inventory levels, we now seem to be seeing inventory levels increasing a bit. Sadly, these *slightly* higher inventory levels aren't evenly spread across all property types, locations and prices... so many buyers will still find inventory levels to be *quite* low in their segment of our local market. Because inventory levels are still so low in most segments of the market, we are still seeing homes selling just as quickly has they have for the past year... ![]() As shown above, the pace at which homes go under contract once listed (days on market) declined steadily through 2020 and 2021 until it seemed to bottom out at a median of five days on the market. That is to say that half of homes go under contract in five or fewer days... and half go under contract in five or more days. This metric hit a median of five days on the market back in July 2021 and has stayed there ever since. If or when the market starts to slow, soften or cool, we'll start to see this metric drift upward again. Finally, that one topic that isn't quite as exciting to talk about... mortgage interest rates... ![]() Just six months ago... the average mortgage interest rate for a 30 year fixed rate mortgage was... 3.55%. Now, it has risen all the way up to 5.7% as of the end of June. This drastically affects the monthly payment for buyers in today's market as compared to just six (or twelve, etc.) months ago. I don't think we'll see interest rates rise above 6% but it is definitely possible. If there is one thing that could cool off our local housing market, it's this "cost of money" in the form of the mortgage interest rates. But, again, it hasn't happened yet despite drastic changes in interest rates. And here we find ourselves again, at the close of what seems to be another red hot month of real estate activity in Harrisonburg and Rockingham County. By the headlines... [1] More and more home sales are selling! [2] Homes are selling at higher and higher prices! [3] Homes are selling as fast as ever! [4] Inventory levels are increasing, slightly, in some pockets of the market. [5] Mortgage interest rates are higher than they have been in years! What will we see over the next few months in our local real estate market? Most likely, more of the same... but we won't know for sure until those next few months pass... and I'll pause each month to check the numbers and share some thoughts with you so that we can all have a good sense of where we have been, where we are and where we might be going next. Speaking of next... If you are planning to SELL a house in the next few months, sooner is likely better than later, and I'd be delighted to chat with you about how we might work together. If you are planning to BUY a home in the next few months, you ought to check in with your lender sooner rather than later to get proper expectations of your potential mortgage payments within the context of rising mortgage interest rates... and yes, I'd be delighted to help you with buying as well. Be in touch at any point if I can be of any help to you or your family or friends. You can call/text me at 540-578-0102 or email me here. Until next month... may your summer be as relaxing as this crazy real estate market can be stressful! ;-) | |
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An Early Look At June 2022 Home Sales |
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![]() As mortgage interest rates rise, many continue to wonder whether it will significantly slow down the amount of home buying activity we are seeing in our local market. It's a reasonable thing to wonder about. Here's a quick preview of how things went last month (June 2022) compared to the same month a year ago... June 2021 Mortgage Interest Rate at Start of Month = 2.99% Closed Home Sales in Harrisonburg & Rockingham County = 175 Contracts Signed = 143 June 2022 Mortgage Interest Rate at Start of Month = 5.09% Closed Home Sales in Harrisonburg & Rockingham County = 168 Contracts Signed = 129 Conclusions By the numbers... there were 4% fewer home sales this June compared to last June... and 10% fewer contracts. So, maybe (?) things are slowing down, a bit? That said, in many months over the past few years home sales seem to be constrained by the number of sellers willing to sell, and not so much the number of buyers interested in buying. Stay tuned for further updates as I take a fuller look at the market over the coming week. | |
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City Townhouse Sales Prices Increase 34% Over Four Years |
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![]() Townhouse values in the City of Harrisonburg have certainly increased rather quickly over the past few years... As shown above, we have seen a 4% to 11% increase in median sales prices for each of the past four years. There has been an overall 34% increase in the median sales price since 2018. If you happened to buy a townhouse a few years ago, you'll likely be in great shape if you're selling now or soon! Also helping this segment of our local housing market is that most new townhouses are now in the $250K+ price range. | |
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Are We Seeing A Big Slow Down In Home Sales Activity Locally? |
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![]() If you read much national news you'll see plenty of headlines that say the housing market is slowing down... the housing market peaked... slower times are ahead for housing markets across the country. I'm sure that is all true, generally, nationally, and maybe in many markets. But, real estate is and has also been, local. Will the pace of home sales slow down in our local market? Maybe so. Will prices stop climbing as much as they have been in recent years? Maybe so. Are either of those things happening yet? Are we seeing a big slow down in home sales activity locally? It seems not. Properties going under contract in the past 30-ish days (April 25 - May 24) this year compared to last... Last Year = 170 contracts This Year = 162 contracts If things start changing in our local market, I'll be certain to be writing about it here... but just because you're reading it in the national news doesn't mean it is necessarily happening in Harrisonburg and Rockingham County. | |
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Sales of Not New Homes Are Increasing Too |
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![]() What do we call homes that are not new homes? Resale homes? Used homes? Existing homes? Previously owned homes? :-) Last week I pointed out that we are seeing a rapid increase in the sale of new homes in our market... a 39% increase in 2020 and a 68% increase in 2021. One might have thus wondered if ALL of the increases in our local area home sales can be attributed to new home sales. Well, the answer seems to be... no. As shown above, sales of not-new homes are increasing as well... a 10% increase in 2020 and a 5% increase in 2021. | |
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Inventory Levels Have Been Dropping For Almost An Entire Decade |
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![]() At the end of last month there were only 127 homes for sale in Harrisonburg and Rockingham County. Five years ago, at the end of April 2017, there were 411 homes for sale. Five years before that, at the end of April 2012, there were 733 homes for sale. Home buyers over the past year have had fewer options of what to buy at any given point in time than ever before in the past decade, and possibly ever before, ever. The low inventory levels don't mean fewer buyers are buying -- in fact, more buyers are buying on an annual basis than ever before. The low inventory levels are an indication that there is much more buyer demand than seller supply, so new listings get scooped up (go under contract) within a matter of days -- thus, not contributing to the inventory levels at the end of the month. | |
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Generally Speaking, The Larger The Home, The Lower The Price Per Square Foot |
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![]() If all other attributes of two houses are the same or similar (age, condition, finishes, location, lot size) then we will almost always see the price per square foot being lower for the larger of the two houses if there is a decent difference in the sizes of the two houses. Stated differently, if we look at five homes that have sold in a neighborhood and we find the following... House 1 = 2,000 SF and sold for $168/SF ($336,000) House 2 = 2,050 SF and sold for $167/SF ($342,350) House 3 = 1,985 SF and sold for $168/SF ($333,480) House 4 = 2,025 SF and sold for $169/SF ($342,225) House 5 = 2,003 SF and sold for $167/SF ($334,501) ...and then if we looked at a sixth house in the neighborhood that is 3,000 SF, would it be reasonable to calculate the average price per square feet of the first five houses and then use that to calculate the value of the sixth house? Average PPSF of First Five Houses = $167.80 / SF Projected Value of Sixth House = 3,000 SF x $167.80 / SF = $503,400 So... is that reasonable? Will this sixth house sell for $503,400 while surrounded by houses that are selling for $330K to $345K? Probably not. Generally speaking, the larger the home, the lower the price per square foot. Thus, we can't reasonable use the PPSF of smaller homes to accurately predict the home value of a larger home. A seller would love to use the logic above to conclude that their home is worth $503,400 but buyers (and an appraiser) are not likely to agree. The reverse is also true... we can't use the PPSF of larger homes to predict the value of a smaller home. House 1 = 3,000 SF and sold for $152/SF ($456,000) House 2 = 3,050 SF and sold for $151/SF ($460,550) House 3 = 2,985 SF and sold for $150/SF ($447,750) House 4 = 3,025 SF and sold for $151/SF ($456,775) House 5 = 3,003 SF and sold for $151/SF ($453,453)...and then if we looked at a sixth house in the neighborhood that is 2,100 SF, would it be reasonable to calculate the average price per square feet of the first five houses and then use that to calculate the value of the sixth house? Average PPSF of First Five Houses = $151 / SF Projected Value of Sixth House = 2,100 SF x $151 / SF = $317,100 So... is that reasonable? Will this sixth house sell for $317,100 while surrounded by houses that are selling for $445K - $465K? Probably not. Generally speaking, the smaller the home, the higher the price per square foot. Thus, we can't reasonable use the PPSF of larger homes to accurately predict the home value of a smaller home. There is a place for using price per square foot for analyzing home value... but it depends on most attributes of all of the homes being very similar... location, age, lot size, finishes, and yes, square footage! | |
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If Home Sales Are Going To Slow, April Did Not Show It |
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![]() Many wonder or suspect if home sales will slow in 2022 because of rising mortgage interest rates. That is certainly just one of the reasons why home sales could slow -- they could also slow because there aren't enough homeowners willing to sell their homes. Low supply = slow sales. Above, you'll see that we've seen just about the same number of home sales this year as last year during the first four months of the year. Furthermore, home sales this April were stronger than last April!? Finally, there are likely still some April home sales that closed this past Friday that aren't showing up in the MLS yet. So... if home sales are really going to slow down in 2022, it doesn't seem that April sales figures are showing that. Maybe things will slow down in May? Or maybe not! | |
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Is FOMO Fueling Rising Home Prices? |
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![]() The Federal Reserve Bank of Dallas indicates that there are signs of a brewing housing bubble... and FOMO (fear of missing out) might be a contributing factor. You'll find the article from the Dallas Fed and some accompanying graphs here... Some summary points from that article... [1] If lots of home buyers believe current, large, housing price increases will continue, further and stronger buying can be fueled by FOMO - the fear of missing out - which can drive prices up even further. [2] The Dallas Fed calls this phenomenon described above "expectations-driven explosive appreciation" or "exuberance" and it seems to be happening in many housing markets right now. [3] The U.S. housing market has shown signs of exuberance for more than five consecutive quarters. [4] Since the beginning of 2020 there has been a divergence between home prices and rental rates... home prices have been going up much more quickly than rental rates. [5] Much of the data the Dallas Fed analyzed shows signs of "abnormal U.S. housing market behavior" -- which probably is not a surprising descriptor for anyone who has been in the market (buying or selling) over the past few years. [6] Factors contributing to the abnormal market behavior seem to include historically low interest rates, pandemic-related fiscal stimulus programs, Covid-19-related supply-chain disruptions among other factors. So, that was most of the worrisome parts of the article, but this little paragraph towards the end is somewhat of a reassuring finale... "Based on present evidence, there is no expectation that fallout from a housing correction would be comparable to the 2007-09 Global Financial Crisis in terms of magnitude or macroeconomic gravity. Among other things, household balance sheets appear in better shape, and excessive borrowing doesn’t appear to be fueling the housing market boom." So... it's possible that there is a housing bubble (though every local market is different and will behave differently) and if there is a bubble, prices could flatten out or decline, but if they do it doesn't seem likely that it will have the same impact as the 2007-09 housing and financial crisis. Happy Monday!? ;-) P.S. Read the actual article yourself... it has some great additional commentary and context... | |
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Scott Rogers
Funkhouser Real
Estate Group
540-578-0102
scott@funkhousergroup.com
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