Intrigued by a post over at RealCentralVA exploring the number of contracts for single family homes for each of the 10 past months of May in Charlottesville and Albemarle County, I thought I'd see how Harrisonburg and Rockingham County are performing compared to our neighbors over the mountain.

Reading Jim Duncan's article, you'll note that the number of buyers signing contracts for single family homes has decreased for the past several years.  Here is an overlay of Harrisonburg / Rockingham data with Charlottesville / Albemarle data....



Again, the data above is showing the number of contracts that were signed in the month of May (for the past five years) on single family homes in Harrisonburg and Rockingham County as compared to Charlottesville and Albemarle County.

To make it a bit clearer....



As you can see, the number of home sales (contracts in this case) has continued to decline for the past several months of May in the Charlottesville area, but those same measures have started to level off and increase here in Harrisonburg and Rockingham County.

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Take a look at the graph below to see how buyer momentum is shifting in our market.  Do note, of course, that this is people looking at properties online, which is not the same as buyers committing to buy properties.


   click the image above for a higher resolution PDF

It will take several more months to know whether the Harrisonburg and Rockingham County real estate market really has turned the corner towards recovery, but the graph above shows yet another indicator that we may be headed in the right direction!

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There are a LOT of homes for sale right now....995 residential properties in Harrisonburg and Rockingham County as I type.  BUT.... the current levels aren't too much higher than we've seen during the past two spring/summer seasons!


   Click the graph above to view a higher resolution PDF.

Peak Inventory Levels:

• Current inventory = 995 residential properties
• June 2008 inventory = 956 residential properties
• April/June 2009 inventory = 932 residential properties

I suppose we might see even higher inventory levels as we move into June (CAN WE HIT 1,000???) --- but that still isn't too much higher than recently past years.

If you're a buyer....what is your experience of the current inventory?

• Are there way too many houses to choose from right now?
• Can you still not find that perfect home despite many choices?

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For the visual learners amongst us, here's a new take on the mix of homes for sale based on their price range, and the demand for such homes....



This (hopefully fun and self-explanatory) graph is based on inventory levels as of May 10, 2010, and average home sales per month from May 2009 through April 2010.

Questions?  Clarifications?

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Home sales have certainly started to bounce back in 2010...



Skeptics certainly won't believe we're making any progress until we pass June 30th and the end of the tax credit season.

Big picture thinkers will want to delve into why our market has outperformed so many others across the country..

But now let's examine what is actually selling this year:



Sales of homes priced under $300k have increased compared to last year.
Sales of homes priced above $300k, however, have declined this year.

Is it because of the tax credit?  Is it because buyers of sub-$300k homes often don't have a home to sell before buying?  Plenty of possibilities --- but so far the market is looking strong for the spring and summer!

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Some reports indicate that Americans lost over $1,000,000,000,000 (one trillion dollars) in home values in the last three months of 2009.  When looking at the sum of the last several years, the figures are even more staggering – declining home values across the United States have resulted in trillions of dollars of losses for American homeowners.  Yet during this same time period, homes values in Harrisonburg and Rockingham County have only been marginally affected.  In fact, it wasn't until 2009 that this area saw any significant decline in median sales price, and then it was only a 5% decline.  So why and how, in this time of rapidly declining home values, have homes in the central Shenandoah Valley held their value?

First, while Harrisonburg and Rockingham County did see a sharp increase in home prices (51% increase in median home value between 2003 and 2006), our median sales price started out quite low ($127,700 in 2003) and only increased to $192,983 in 2006.  Median sales prices in many other metropolitan areas increased to much higher levels leading to borrowers stretching pursuing riskier mortgages for their purchases. 

In such areas with significant increases in home values, many homeowners took on risky mortgage programs such as variable rate mortgages, interest only mortgages, or mortgages with a teaser rate.  Those with 30-year fixed rate mortgages knew what to expect of their housing payment and likely were able to continue to pay their mortgages after buying several years ago, but those with these higher risk mortgages often had trouble keeping up with their mortgages and were foreclosed upon.  Variable rate mortgages have been somewhat problematic, but not to a great degree because interest rates have remained relatively low for the last several years.  Interest only mortgages have proven to be quite dangerous, because the homeowners has not been paying down any principal on their mortgage, and thus does not build up an equity in their home absent any appreciation in the market.  Mortgages with teaser rates provided for a very low rate (1%, 2%) for a short time period in order to qualify a home purchaser.   These teaser rate mortgages would then reset to a much higher rate after several years, then putting the homeowner in financial duress, unable to make their mortgage programs

Since home values didn't go too drastically in this area, home buyers did not (in large number) feel pressured to obtain risky mortgages with variable or escalating future housing payments.  As a result, we have seen a very low number of foreclosures in the central Shenandoah Valley.  I have heard, anecdotally that earlier in 2009 over half of the homes on the market in the Winchester area were "bank owned" homes --- homes that had been foreclosed upon.  This high, high number of foreclosures lead to rapid decreases in home values, as banks quickly reduced the prices at which they would sell their inventory in order to get these homes off their books.  Thus while high foreclosure rates in other metropolitan areas lead to declining home values, the very low foreclosure rate in Harrisonburg and Rockingham County has lead to relatively stable home values.

The Harrisonburg and Rockingham County market has also been greatly protected by its diverse and stable local economy.  We have not seen significant losses of jobs over the past five years, which could have put large numbers of homeowners in a position where they had to sell their homes rapidly because they were unemployed, or because they were moving to another area to find work.  Our economy includes jobs from many sectors, and is largely supported by the colleges in universities in our midst.  It also helps that we have always had very low unemployment rates as compared to most every other metropolitan area in the country.

Since 2005, the pace of home sales has declined drastically, with only 813 home sales in 2009 compared to 1,669 home sales in 2005.  The law of supply and demand would suggest that such a large reduction in demand (a 51% decrease) would certainly lead to a drastic decrease in home values.  Yet, in the same time frame (2005-2009), the median home price has shown a net increase from $169,900 to $186,300 (a 10% increase).  While we have seen a 5% decrease in home values between 2008 and 2009, our local housing market continues to be amazingly resilient, without any significant shift in home values.

While we can't point one particular factor that has protected home values in the central Shenandoah Valley, it is highly related to the relatively slow and small increase in home values, the conservative mortgage programs used by home buyers, our low foreclosure rate, and our stable local economy.

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Earlier this week I posted my monthly market report for Harrisonburg and Rockingham County and I pointed out that there were several indicators that suggested we might be seeing an end to the local real estate downturn.  Several of you were quite skeptical -- attributing any short-term positive indicators to the tax credit.  A few clarifications before I get to some statistics:

1. The number of local home sales has declined quite significantly for the past five years.  Prices have declined relatively slowly during that same time period.  From my perspective, a local housing market recovery will take place when we first start to see more home sales than in the past, and after that we'll see stabilizing and then increasing prices.
   
2. I am NOT sure that we really are seeing a definite and lasting change towards the better in our local housing market.  BUT....several key indicators in my market report indicate that we might be.
3. It's really o.k. if you are skeptical --- in fact, it's what keeps me on my toes!
   

The main point of contention that I have heard relative to my report is that though there were a LOT of contracts written in March and April, that this was likely almost entirely because of the April 30th deadline to sign a contract in order to receive the $6,500 or $8,000 tax credit.  So.....if the skeptics are correct, we should see a significant drop in contracts being signed in May, right??

First let's look at signed contracts per month:

• March 2010 = 95 contracts
• April 2010 = 121 contracts
• May 1 - 13, 2010 = 46 contracts
  Extrapolating, that will likely be 106 contracts for the month!

Next, let's compare this May to last May:

• May 1 - 13, 2009 = 29 contracts
• May 1 - 13, 2010 = 46 contracts

Finally, remember that my tentative optimism is not just based on March and April 2010. 



Each data point in the graph above shows the number of sales in a twelve month period.  It often takes months for a trend to appear using this metric, but it seems pretty clear to me that over the past six months (which includes data from the last 18 months) we have seen a significantly different trend than we saw between 2006 and 2009.

What do you think?  Still skeptical?

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I have been waiting a long time to have tangible, factual, good news to share about a recovery of the Harrisonburg and Rockingham County housing market.  I think that time is coming, and here's why ---

April 2010 home sales increased 62% compared to April 2009!  (see graph below)




Long term home sales indicators continue to show stabilization and growth!  (see graph below)



Home buyers committed to buy homes in record numbers in March and April 2010!  (see graph below)



Learn more about our local housing market by clicking the image below to read my full market report.

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Lots of people who are renting have thought about buying . . . and lots of people who are thinking of buying wonder whether they should keep renting.  Here's a highly interactive calculator to help you compare your options, thanks to the New York Times.



Using this online calculator, you can enter in all sorts of variables including all of your up front and ongoing costs for buying as well as renting.  The resulting graph shows you how long it would take for it to have been worthwhile to have bought instead of renting.

The illustration above is with a $160,000 townhome purchase, compared to renting the same townhome for $950 per month.  With a 5% interest rate on a 97.5% mortgage, it would take four years to be worthwhile to buy --- if home values were increasing at 1% per year.  In the first three years, your annual costs would be higher for having bought.  Starting in the fourth year, your annual costs would be LOWER for having bought.

Longer term normalized price increases per year range from 3% to 4%.  With 3% per year increases in home values, you start having annual savings each year after only two years.

If you are wondering whether you should rent or buy a home, feel free to use this handy calculator, or schedule a time to meet with me and I can help you explore the pros and cons of each option.

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Perhaps it was the tax credit.  Perhaps our local housing market is starting to recover.  Perhaps it is a bit of both!

In April 2010, an astounding 121 contracts were ratified on residential properties in Harrisonburg and Rockingham County.  This is the highest number of contracts in a single month since March 2007!

Despite the contract deadline having passed for the tax credit, I believe we will still continue to see strong sales as we move through the summer.

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Apparently, long enough for the ivy to grow through the windows!

But on a more serious note --- or at least more focused on data.....

In the past year, there have been 828 home sales, 97 of which took longer than a year to sell, which is 12% of the home sales.

There are currently 989 homes on the market for sale, 192 of which have already been on the market for more than a year, which is 19% of the active inventory.  If we assume it would take another 60 days for any of these active listings to sell, we find that there are 250 that have been on the market for at least 10 months --- in other words, 25% of the active inventory.

So, it would seem --- no big surprise --- that there are many more homes on the market than there are buyers to buy them.  This, thus, results in many homes languishing on the market. 

Of note, as I mentioned earlier this week, we're not really headed in the right direction.  So far this month (Apr 1 - Apr 28) we have seen 217 new listings come on the market in Harrisonburg and Rockingham County, and in that same time only 57 sold.

Conclusions & Directives:

1. If you don't have to sell, don't --- it's not a great time to do so, given all of your competition with so many other listings.
    
   
2. If you have to sell (or really want to), know that it may take longer than you expect.
    
   
3. Don't believe the cartoon in yesterday's Daily News Record.....yet.....

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Over the last several years, we have seen fewer and fewer (and fewer) homes sell each year in Harrisonburg and Rockingham County:

• 2005 = 1,669 sales
• 2006 = 1,438 sales
• 2007 = 1,248 sales
• 2008 = 936 sales
• 2009 = 816 sales

Each year I (foolishly?) hope that we have finally seen the end of the ever decreasing number of home sales in our local market.  But this year, we may actually have rounded that corner. 

In the first 115 days of 2010 (Jan 1 - Apr 25) we have seen:

• 186 home sales (compared to 179 last year)
• 268 homes going under contract (compared to 244 last year)

From both of the numbers above, our market seems to be headed in a good direction.  But perhaps ALL homeowners have caught wind of this, as there is a massive number of new listings on the market:

• Last year there were 389 new listings between Jan 1 and Apr 25.
• This year there have been 629 new listings between Jan 1 and Apr 25.

WOW --- did you catch that?  That's the laugh, by the way --- that somehow our market would keep up with all of these new listings!
 

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This is a story of quickly rising, and quickly falling real estate values.  In Harrisonburg.  Despite a relatively stable overall housing market.



Some parents of JMU students buy an investment property for their son or daughter to use a a residence while at JMU, and many of these parents have historically bought condos and townhomes at Hunters Ridge.

Let's take a look at sales trends for each over the past several years:



As you can see here, prices of Hunters Ridge condos and townhomes had steadily (sometimes rapidly) increased for many years before arriving  in 2009.  Last year, Hunters Ridge sales slowed down to a snails pace --- with only one condo sale in the entire year, and only 3 townhome sales. 

Good news --- townhomes and condos are starting to go under contract again.  Bad news --- it's because the prices have dropped very low!

At the moment there are 5 condos on the market at the $60,000 price point, which is well below any recent sales price.  There are also townhomes on the market for only $70,000. 

Some conclusions:

• If you're looking for a rental property, you might want to consider Hunters Ridge.
• It will take some time (years) for Hunters Ridge prices to increase anywhere near where they had been in recent past.
• Some owners that bought at Hunters Ridge in the last several years will likely have difficulty selling without taking a big loss.
  

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Let's take a quick look at 1st Quarter Median Sales Prices over the past few years --- comparing Harrisonburg to the Greater Charlottesville Area.  Take a look here for the CAAR report where I derived these figures:



Take a look at the differences in these two markets:

• Over the past four years, the Charlottesville area median sales price has declined 19%, while the Harrisonburg and Rockingham County median sales price has only declined by 2% in the same time period.
• There was a $105k price difference between these markets, and now there is only a $55k price difference.

What other observations can you make, or what do you know about the performance of the Charlottesville real estate market?

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Click here or on the image below to view the full April 2010 Harrisonburg & Rockingham County Real Estate Market Report (PDF).  Read on below for a few highlights.



Mixed indicators this month . . .

• Home sales declined 18% from 57 sales in March 2009 to 47 sales in March.
• The median sales price decreased 5% from $211k in March 2009 to $200k in March 2010.
• The average sales price increased 3% from $237k in March 2009 to $245k in March 2010.

As can be seen below, March sales were the first month this year where the sales pace was not equal to or greater than last year.  We'll need strong April sales to catch back up to the 2009 sales pace.



Also of note, we have seen a steady increase in Inventory over the past several months.  Lots of options for buyers --- lots of competition for sellers!




Don't delay -- get all of the exciting (and not as exciting) details and beautiful charts by downloading the full April 2010 Harrisonburg & Rockingham County Real Estate Market Report (PDF). 


If you find the information in this report to be helpful....

• Feel free to share it with your friends or colleagues.
• Let me know if you'd like to meet to discuss this report and/or the particulars of your real estate situation.
• If you'd like to know even more about the housing market in Harrisonburg and Rockingham County, click here to subscribe to HarrisonburgHousingToday by e-mail or by RSS.
• Though I spend a considerable amount of time analyzing our local housing market,the majority of my time is spent helping people like you buy and sell real estate.  If you (or someone you know) will be buying or selling real estate sometime in the near future, I'd be delighted to have the opportunity to be of service.

 

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Have any questions? Contact Scott Rogers at 540-578-0102 or scott@funkhousergroup.com

Greetings, blog readers.  My sporadic content creation of late has been a result of being busy working with buyers and sellers.  I'll soon be releasing my monthly market report, but in the meantime, I thought I'd see if my own recent increase in sales activity was an indicator of a wider market trend.

Indeed, it seems that buyers are re-entering the market.  We saw just as many buyers signing contracts in March 2010 as in March 2008, after a big dip in March 2009.  (see below)



Then, looking at the first three months of each of the past several years, we see this same shift in buyer activity. (see below)



It will likely be at least a month before this translates into an increase in closings, but it almost certainly will given these large increases in buyers deciding to buy.

Of course, this could be related to the deadline of April 30th for buyers to commit to a property in order to be eligible for a tax credit.
 

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Despite high inventory levels in the upper end price ranges in Harrisonburg and Rockngham County, large homes (3,000+ square feet) are currently selling faster than they have since at least 2006.



The graph above examines first quarter sales (Jan 1 - Mar 31) of homes larger than 3,000 square feet in Harrisonburg and Rockingham County per the HRAR MLS.  As you can see, the seventeen sales in first quarter 2010 has surpassed the number of homes sold in any other year back to 2006.

During this time, median prices have shifted up quite a bit ($78k between 2006 and 2008) and then back down quite a bit ($93k between 2008 and 2010). 

Yet, all you sellers of large homes out there, please bear in mind that although sales in first quarter 2010 are brisk (compared to the recent past), that does not change the fact that there are 102 such homes currently for sale.  At the current pace of sales (17 in 2010-Q1), it would take 6 quarters (18 months) to sell through all existing inventory.
 

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Explain this....



The number of properties viewed online (on our company site and all of our company's agent sites) has increased dramatically over the past year.  Thus, it seems that more buyers are hunting for homes.

But when we compare the number of closings in the first 28 days of last March and this March, we see a rather significant decline.

What is going on here?

• Will the last three days of March this year be much more exciting (in terms of closings) than the last three days of March 2009?
• Are a smaller percentage of potential buyers deciding to actually buy as compared to last year?
  
• Are our web sites simply more popular than they were last year, and a higher percentage of buyers are using our sites now?

What are your theories?

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In talking to a Daily News Record reporter last week I made a BOLD PREDICTION, that the local housing market would probably NOT improve this year.  I felt somewhat bad about making such a prediction --- being so pessimistic!  But wait --- the BOLD part was predicting that it wouldn't get any worse!

Since 2006, the pace of home sales has been declining:

• 2006 as compared to 2005: decline of 14%
• 2007 as compared to 2006: decline of 13%
• 2008 as compared to 2007: decline of 25%
• 2009 as compared to 2008: decline of 13%

So.....while I'm not predicting that our real estate market will improve this year, I also don't think it is likely to get worse.  That is to say that last year there were 816 residential sales in Harrisonburg and Rockingham County, and I am predicting that the 2010 sales figure will be very close to that same number. 

Check out the data:

• Sales between 1/1/2009 and 3/22/2009 = 124 sales
  
• Sales between 1/1/2010 and 3/22/2010 = 124 sales
  
• YES, THAT'S RIGHT --- an exactly equivalent sales pace

Also of note, CBS's MoneyWatch made price predictions for all metro areas, and predicts only a 2.2% to 0.7% decline in sales price over the next year+.  That would be welcome news to many in our local market who are hoping that prices do not decline any further than the small amounts that they already have.

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Click here or on the image below to view the full March 2010 Harrisonburg & Rockingham County Real Estate Market Report (PDF).  Read on below for a few highlights.



Some high level February 2009 to February 2010 observations include:

• Inventory increased by 3%.
  
• Sales held steady (no change).
• Prices (median) declined by 3%.
• Days on market held steady (no change).

As can be seen below, we may be entering a new period of growth in our local real estate market.  Between 2004 and 2006, the pace of sales increased steadily.  Between 2006 and 2009, the pace of sales decreased drastically.  Over the past four months, we have seen the pace of sales stabilize and start to increase.



Don't delay -- get all of the exciting (and not as exciting) details and beautiful charts by downloading the full March 2010 Harrisonburg & Rockingham County Real Estate Market Report (PDF). 


If you find the information in this report to be helpful....

• Feel free to share it with your friends or colleagues.
• Let me know if you'd like to meet to discuss this report and/or the particulars of your real estate situation.
• Let me know if you would like to schedule a time for me to come speak to your company or an organization in which you are involved.
• If you'd like to re-publish all or part of this information on your web site or in an article, just let me know if you need any additional information or graphics.
• If you'd like to know even more about the housing market in Harrisonburg and Rockingham County, click here to subscribe to HarrisonburgHousingToday by e-mail or by RSS.
• Though I spend a considerable amount of time analyzing our local housing market,the majority of my time is spent helping people like you buy and sell real estate.  If you (or someone you know) will be buying or selling real estate sometime in the near future, I'd be delighted to have the opportunity to be of service.

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Have any questions? Contact Scott Rogers at 540-578-0102 or scott@funkhousergroup.com