Analysis
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Online shopping increases 15%, but wait --- contracts on homes in our local area increase 100%! |
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The significant increase in online holiday shopping is certainly an indicator that are economy may be finally starting to return to some form of normalcy. But did you see what happened in our local housing market? There was a 100% increase in December contracts (Dec 1 - 25) in the Harrisonburg and Rockingham County housing market! This continues the trend of increased activity in our local real estate market. 2011 looks like it will finish out to be a strong year -- or even if a weak year, a stronger weak year than last year! | |
Nation's housing market was much worse than suspected over the past four years |
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As Business Insider puts it, the National Association of Realtors just made the mother of all data corrections. Basically, the National Association of Realtors (NAR) retroactively adjusted its accounting of the number of home sales that took place in 2007 (down 11%), 2008 (down 16%), 2009 (down 15%) and 2010 (down 15%). Put simply, NAR had thought and had broadcasted quite widely that home sales were much stronger over the past four years than they really were -- and bear in mind, even the inaccurate, inflated numbers were quite depressing! Why did it happen?
It sort of matters retroactively -- everybody needs to go back and think that the housing market was worse than they thought before, and make their past decisions differently. Oh wait, that's somewhat difficult to do -- so the national impact is simply that we need to readjust our historical understanding of the pace of home sales from 2007-2010 and be a bit less dependent on NAR home sales estimates, as they are ultimately, just estimates. Does it matter locally? Since the national housing market (if one could be said to exist) doesn't impact us too much at all, these adjustments to national housing sales figures don't impact us that much either. Of much more importance is the pace of sales (and median price of those sales) on a local level. Could it happen locally? NAR and yours truly make different attempts as far as reporting home sales. NAR attempts to report on total home sales (MLS, by owner, by builder, etc) -- and thus there can be inaccuracies in their data. My home sales reporting is based solely on data reported through the HRAR MLS. Thus, I'm not making any guesses -- I'm just performing analysis and providing commentary on home sales reported through our local MLS. NAR's adjustments are rather significant, so let me know if you any questions or concerns beyond those addressed above. | |
Do home values go up and down with the temperature? |
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Are houses worth more in the summer and less in the winter? I have always mostly ignored that question because median home values bounce all over the place front month to month in Harrisonburg and Rockingham County. It's certainly hard to draw any conclusions about seasonal (summer vs. winter) changes in home values based on the data above. The related question here is whether home values really jump around as much as shown above -- no, they don't -- with only 50-100 home sales per month the sample size of the data set is small enough to allow for the variation shown above. Basically, the median home value might end up adjusting quite a bit in one direction or the other in any given month because of the composition of how many smaller homes versus larger homes sold in any given month. But then when I examine the entire state of Virginia, values do seem to adjust seasonally.... So -- does anyone have any theories here? Why do Virginia home values seem to adjust so seasonally (as per median prices) but Harrisonburg and Rockingham County do not? | |
Local housing market shows continued signs of gradual recovery |
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Click here to download my full market report (27 pages, 7 MB, PDF) or read on for highlights.... November was a relatively positive month for the local housing market:
A strong surge of buyers in 2011 is leading the charge towards more stability in the local housing market. As shown above, November 2011 was yet another strong month of contracts (76) showing a 27% increase over last November and a startling 77% increase over three Novembers ago. Inventory levels continue to significantly decline, down 12% from a year ago. Lower inventory levels (fewer sellers) combined with an increase in contracts (more buyers) will eventually lead to greater balance in the local housing market. Despite the fact that our local housing market's median price has not yet stabilized, it is interesting to note that we have seen a steady improvement in median price per square foot for single family homes over the past year. This is in sharp contrast to the steady decline seen in the four prior years. The icing on the cake is that mortgage interest rates remain at historically low levels creating amazing opportunities for buyers. At the end of November, the average 30-Year fixed mortgage interest rate was 3.98%. For an even more in-depth look at the Harrisonburg and Rockingham County real estate market, click the image above to download my full market report (27 pages, 7MB, PDF). If you have questions about the report, or if I can be of assistance to you with real estate that you own, or that you'd like to own, please be in touch. You can reach me most easily at 540-578-0102 or scott@HarrisonburgHousingToday.com. | |
Inventory levels drop to 45 month low (at least) |
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Each month inventory levels drop at the beginning of the month -- as quite a few listings expired on the last day of the prior month. So it's possible that today's incredibly low inventory levels (744 properties) will climb back up by a bit over the next few days. However, as things stand now, these are the lowest inventory levels we've seen in almost four years. It's actually probably quite a few more months than that, but I have only been tracking inventory levels for the past 45 months. What does this mean? Hope for further balance in the local housing market -- as the number of hopeful seller decreases, and the number of actual buyers increases, we'll return to a more balance market. | |
Budget 34% less for your housing costs at Taylor Spring |
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Yesterday I pointed out that monthly housing costs have declined 28% since 2007 because of modest declines in median sales prices and significant declines in average mortgage interest rates. But let's make it a bit more specific.... The first townhouse pictured above was sold in 2007 for just $100 more than the median sales price at the time, and your monthly housing cost would have been $1,096 if you financed 80% of the purchase price at the average interest rate of 6.21%. The second townhouse pictured above is for sale now for only $159,200, and would require a monthly housing cost of only $719 -- again, assuming you financed 80% of the purchase price at today's average interest rate of 3.99%. This is quite a dramatic difference (-34%) in housings costs, and hopefully helps to illustrate the wonderful opportunities for buyers in today's market! | |
Monthly housing costs down 28% from 2007 peak |
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How much does it cost on a monthly basis to buy the median price home in our area, assuming 80% financing? Today, that adds up to a $791 monthly payment. That marks a dramatic 28% decline since 2007 when the monthly payment would have been $1,094. The decline in median sales prices over the last few years (from $195K to $175K) combined with the decline in interest rates (from 6.2% to 3.9%) has brought average monthly housing payments down to very affordable levels. Again, the graph above (click here for a more legible PDF) shows the mortgage payment including principal, interest, taxes and insurance (PITI) assuming 80% financing at November's average 30-year interest rate, and assuming Harrisonburg's real estate tax rate ($0.59 per $100). | |
Virginia's median sales prices relatively stable |
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Certainly, all real estate is local, but it is often insightful to see what is happening on the state level as well. As you'll note above, there hasn't been much of a shift in Virginia's median sales price, aside from seasonal changes. It's interesting to note that we don't see those same seasonal swings in our median sales price. Download the full October 2011 Virginia Home Sales Report (click here) which highlights:
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Blog Reader in Sept 2009: Housing Prices Will Fall 30% From Current Levels |
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I always encourage (and enjoy) healthy skepticism about anything related to the state of the local housing market. If you think I'm off base with my analysis or predictions, let me know! Revisiting some old exchanges with a reader of my blog, I find the excerpt below, from September 2009 (just over two years ago). This is just an excerpt of a longer exchange, but provides some interesting historical context.... On the other hand, Rockingham County real estate, while not "bubbling" quite like South Florida, California, and Arizona, is still outrageously overpriced. And, unfortunately, the area has yet to start correcting in any meaningful way. As my analyses have shown, the media house price to median family income ratio is still around 4 for this area (190k median house to ~50k median household income) – and the historic norm is closer to 2.5. This ratio will come back in line, which means a 30% + decrease in housing prices from current levels. Supporting this argument is the glut of houses on the market: there's over a 13 month supply of homes (and over 24 months supply in certain sectors). That's way too high. The law of supply and demand has to kick in sometime doesn't it? So, were these predictions true? Did prices fall 30% from the levels seen in September 2009?
So despite only a very small change in the oversupply of housing, we still have not seen very much of an adjustment in sales prices. Furthermore, if you believe my current predictions, we might finally be seeing a turning of the real estate market, as evidenced by:
OK -- now I'm ready for it. Tell me your predictions for the next few years in our local housing market. Feel free to comment below, or just shoot me an e-mail (scott@HarrisonburgHousingToday.com). Perhaps I'll hold onto your comments and reflect back on them two years from now! | |
More and more homeowners are remodeling |
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My tenants left, should I sell my townhouse? |
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In many cases, your better option is to keep renting your townhouse --- and doing whatever it takes to find a tenant --- rather than trying to cut your losses via a sale. In the example above, you could go for years with reduced ($750/m) rent with annual losses of $1800 before you came anywhere close to realizing the full amount of loss realized by a quick sale on day 1. | |
Home sales, contracts increase in October 2011, despite continued slow decline of home values |
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Click here to download my full market report (27 pages, 7 MB, PDF) or read on for highlights.... October was a relatively positive month for the local housing market:
A strong sign of strength to come in the local housing market, October 2011 was a great month of buying activity, with 84 buyers committing to buy homes in Harrisonburg or Rockingham County. This marks a 65% increase in buyer activity as compared to October 2010! Trends are very slow to reveal themselves in annualized sales figures (shown above) because they are an indication of 12-month rolling averages. That said, it seems that it may be a safe bet that home sales and home prices are on the mend when examining the graph above, which has now been showing increases in these long-term indicators for four months. Some price ranges are recovering more quickly than others. The graph above shows that the price ranges under $300K have been starting to see increases in sales over the past several months. This should eventually roll over into the higher price ranges as buyers move up the price spectrum. For an even more in-depth look at the Harrisonburg and Rockingham County real estate market, click the image above to download my full market report (27 pages, 7MB, PDF). If you have questions about the report, or if I can be of assistance to you with real estate that you own, or that you'd like to own, please be in touch. You can reach me most easily at 540-578-0102 or scott@HarrisonburgHousingToday.com. | |
LOTS of buyers signed contracts in October 2011 |
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Despite starting to see some colder weather (and the first snowfall of the year) October 2011 was a strong month of contracts for Harrisonburg and Rockingham County. These 84 contracts was a significant increase over last October's 51 contracts -- and at 84 was right in line with May (88), June (84) and July (86). Wow! | |
Recovery underway in overall Virginia real estate market? |
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The Virginia Association of Realtors released their 3rd Quarter real estate market report, and one trend that stands out to me is a potential indicator that the overall Virginia housing market is starting to recover all on its own, aside from any help from a tax credit. For a big picture look at the entire state of Virginia, definitely download their full report here. | |
Will homes prices decline another 10% locally? |
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Someone mentioned last week that they expect local home prices to drop another 10% or so before they stabilize. I don't think that I agree, but let's try to put it in context: The graph above (click here for a larger version) shows the median prices for single family homes in Harrisonburg and Rockingham County since 2000. You'll note that the median sales price has fallen 17.5% from $226,800 in 2006 to the current value (in 2011) of $187,000. Will home values really drop by another 10%, down to $168,300? I don't expect that they will -- I think that as the pace of home sales stabilizes (which started in 2010) that we will see prices gradually start to stabilize. Certainly, though, if prices were to drop another 10% locally (or even 5%) that would be instructive for sellers who are holding out with aggressive list prices. | |
Zillow is slightly more optimistic than our tax assessor |
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Zillow.com has been around for a few years, but only recently has offered thorough information on the Harrisonburg and Rockingham County area. On Zillow you can look up the estimated value of (just about) any house in this area. But the question, of course, is how valid are these estimates by Zillow? I performed a brief analysis for a client on the Greendale subdivison. Thus, admittedly, this is quite a small sample size. Perhaps I'll expand it further soon to see how Zillow performs in other areas when estimating the value of properties in the City of Harrisonburg. The above analysis considers arms length sales from the past year in Greendale subdivision located in Harrisonburg, Virginia. This does not include REO sales (bank owned) or short sales. A few observations....
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Home sales increase 44% in September |
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Click here to download my full, 27-page report on the Harrisonburg and Rockingham County real estate market, or read on for highlights.... The housing market in Harrisonburg and Rockingham County continues to show signs of stabilization and recovery:
While contracts were down slightly in September (67 compared to 74 last September), contracts year-to-date are up 15%. Yes, that's right, 15% more buyers have committed to buy properties this year as compared to last year -- indicating that we should see continued strength in closed home sales over the next several months. Helping to balance the housing market, inventory levels have declined 14% over the past year. After three years of declining sales pace and sales prices, both metrics are now increasing when examined from an annualized basis. If you have questions about the report, or if I can be of assistance to you with real estate that you own, or that you'd like to own, please be in touch. You can reach me most easily at 540-578-0102 or scott@HarrisonburgHousingToday.com. | |
September home sales continue recent positive trends |
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Thus far, September is looking good, with 38% more home sales than last year! Re-read last month's report if you missed it, and know that we have more positive data in September to continue what appears to be a stabilization of the market. | |
Is it wise to put my house on the market in Sept? Oct? |
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Everyone knows, the summer is the busiest sales season -- but how does the rest of the year compare? And is it reasonable to list a home for sale now (in the Fall) or should homeowners wait for Spring? The graph above shows the percentage of homes that go under contract each month through the year. Thus, if 1000 homes were available for sale in January, we could expect that 6.9% of them (69) might go under contract that month. The red line running through the graph shows the average -- on average, 7.7% of available homes go under contract each month in this area. Thus, the "better than average" months to have your home on the market are March through July. But....does that mean that homeowners who didn't sell in those months should give up until the following March? I say no..... First, on average, 423 homes will go under contract in those better-than-average months of March through July. But an additional 405 homes will go under contract in the remaining worse-than-average months of the year of August through February. Second, other than November (6.2%) and December (5.5%) all of the other months show roughly 7% of homes going under contract --- a mere 0.7% lower than the average of 7.7%. So, homeowners, you need not be depressed from now until next March when the buyers come back out of hibernation. There will continue to be buyers in the market even if we are currently in the not-quite-so-active months of the market. | |
With contracts still on the rise, the local housing market is showing continued signs of stabilization |
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August was another strong month of contracts.... Contracts year-to-date are also still quite strong! Stay tuned for my full market report next week --- could this finally be the year when home sales stop declining in Harrisonburg and Rockingham County? | |
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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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