Analysis
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Real Estate Market Tidbits (good & bad) |
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As a brief variation from my typical long and detailed analysis, here are two quick market observations...
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I'm telling you, homes are significantly over valued in Harrisonburg and Rockingham County! |
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Some of you think this, don't you? For the past month I have been discussing this topic (via e-mail) with a statistician at JMU, and it has been a very helpful dialogue (for me) as I've explored some new perspectives from which we can examine home values. The statistician's hypothesis is that homes have increased so quickly in value here in Harrisonburg and Rockingham County, that they are now significantly overvalued and will need to decline by 30% - 50%. I started to explore this a few weeks ago in this article: Home Value Projections for Harrisonburg and Rockingham County. But here's the latest... Here's what we're seeing above:
Your Conclusion: Regardless of whether you are a statistician or someone who just barely understands the chart above, I'd love to hear your thoughts. What do you think of the data presented here? Do you think homes in our area are over-valued? For those of you who just have to see the numbers.... | |
April 2009 Harrisonburg & Rockingham County Real Estate Market Report |
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Read on for a full review of the state of the Harrisonburg and Rockingham County residential real estate market. Or....download the full report: April 2009 Harrisonburg & Rockingham County Real Estate Market Report Homes in Harrisonburg and Rockingham County are continuing to sell more slowly than in recent years -- when examining January 2009 - April 2009, we see a 29% decline compared to 2008. However, we continue to see median and average sales prices staying relatively level, with a 3% decline in median sales price and a 3% increase in average sales price. The homes that have sold this year took, on average, 21% longer to close than in 2008. As with each of the past three years, we saw a decline in home sales as compared to last month (March). April 2009 home sales (50 sales) were 38% lower than April 28 (80 sales). We will likely start to see an increase in May, as we have each of the past three years. The important thing to note will be how quickly sales increase, and whether we will be able to match the 2008 sales pace. This graph shows a normalized trend of home sales by charting the ongoing sum of the preceding 12 months' sales. We continue to see a decline in this metric, and likely will until the pace of sales stops its decline. Some people have noticed an increase in activity in the real estate market, but it is likely simply an increase in homes for sale that they are noticing. These increasing inventory levels are not welcome news to sellers, as it continues to over saturate our market. Unfortunately, the increased inventory of homes on the market over the past several months has not been matched by a corresponding increase in sales. Thus, the number of months of supply has started to increase again in all price ranges. This graph captures all residential real estate activity as reflected in the Harrisonburg/Rockingham Multiple Listing Service. The 2009 year-to-date sales figures now include four months of sales data, and show only a slight decline in median sales prices. This is positive, however, the pace of sales continues to decline. When examining only single family home sales in Harrisonburg and Rockingham County we see that the median sales price is holding steady as compared to last year and has not had a significant net increase or decrease since 2006. This is occurring despite a drastic reduction in sales pace between 2006 and 2009. Sales of townhomes in Harrisonburg and Rockingham County continue to slow, and median prices have started to slip ever so slightly down to $156,500. This marks a median value slightly below the 2006 median value of $160,850, and is coupled by a continued decline in sales pace for townhomes. Examining the median price per square foot of sold single family homes in Harrisonburg and Rockingham County shows that homes have started selling at a somewhat higher rate when examining their cost per functional space. We are now approaching mid-2005 levels, at $123 per square foot. The chart above examines time on market for homes sold in Harrisonburg and Rockingham County during the past six months. Homes with the lowest price points are selling the quickest, and homes in the upper price ranges are taking the longest time to sell. For example, overall only 10% of homes took longer than 1 year to sell, but 34% of homes selling over $400,000 took longer than a year to sell. In contrast, only 10% of these homes over $400,000 sold in the first three months, while 39% of homes selling for less than $200,000 sold in the first three months of being on the market. Download the full report here: April 2009 Harrisonburg & Rockingham County Real Estate Market Report | |
How to determine the value of your home |
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When preparing to sell your house, bear in mind that the value of your house is not (necessarily):
click image above for printable (and legible) PDF If you click on the analysis above, you'll see that I am comparing the property being evaluated to a set of recently sold properties and a set of currently available properties. (Or, that's what I was doing at the time --- this analysis is from 2008). The theory is this --- we can best understand what your property is worth by evaluating it in the context of very similar homes that have recently sold, as well as in the context of what is on the market today. A few notes about this general market analysis I perform before putting properties on the market:
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Land sales slowing (more slowly) over an acre |
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A few days ago I mentioned that lot sales in Harrisonburg and Rockingham County (of less than an acre) have slowed dramatically. In fact, the rate of such lots sales has fallen 82% since their peak in 2004. Lane Chesley then asked about lot sales of over an acre, hypothesizing that such sales might not have fallen as much as those may be more desirable parcels. Let's take a look.... As you can see above (click the graph for a PDF) --- sales have also fallen rather dramatically of parcels larger than an acre, but Lane was correct in his assumption. Lot sales (larger than an acre) have only fallen 69% since their peak in 2005. Also of interest is that even though less than an acre lot sales slowed 25% between 2004 and 2005, lots sales greater than an acre increased 57% during the same time period. Thus, buyers of smaller lots (likely in a subdivision) began pulling back in 2005, but it wasn't until 2006 that buyers of larger lots started pulling back. | |
Lot sales are still "in the gutter" |
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As I expressed some time ago, my hope for the 2009 Harrisonburg and Rockingham County real estate market is that we would see the end of the ever-decreasing number of home sales in our market. We have seen (approximately) a 25% decrease in number of sales between 2006-2007, 2007-2008, and 2008-2009. Lot sales, however are doing much worse! In the first four months of this year (2009), In all of Harrisonburg and Rockingham County, there have only been 11 lot transfers of less than one acre. | |
How long will it take my Harrisonburg home to sell? |
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One of the most difficult questions to answer in our current real estate market is how long it will take for a home to sell. The data below will start to shed some light on what you might expect, but there are still many variables that could make your property sell very quickly or very slowly. This chart analyzes all homes sold in Harrisonburg and Rockingham County in the past six months, and attempts to provide more meaning to the "Days on Market" metric than I typically provide in my market reports. Many thanks to Liz (who suggested a histogram format) and Tisha (who suggested breaking it down by price range). Several observations can be made based on this analysis...
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Bridgewater Real Estate Market Report |
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Things may be picking up in the Bridgewater real estate market according to observers on the Bridgewater Buzz --- not to mention that my new listing in Bridgewater went under contract in less than a week (with two offers). With all that excitement, let's take a moment to look at the last two years of the Bridgewater real estate market. A few broad generalizations that can be made include:
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How do sales prices compare to assessed values? |
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Homes in the City of Harrisonburg are currently selling at approximately 95% of their assessed value. Taking a look at the data above, you'll note that approximately 30% of homes in Harrisonburg sold above their assessed value in 2009 thus far. An additional 40% (roughly) of homes sold between 90% and 100% of their assessed value, and the final 30% sold for less than 90% of their assessed value. The average (and median) ratio between sale price and assessed value is 95% thus far this year. Is this actionable? Not necessarily --- assessed values are not a reliable measure of what you could sell your home for in any given real estate market. But, do note that we can no longer assume that most if not all properties sell at or above their assessed value. In fact, 3 out of 4 properties selling these days are selling below their assessed values! Additional yet-to-be-opened can of worms: are home prices lower now than they were a year ago, or are assessments to high? This is another great question from a client --- if you have a question about our local real estate market that could be best answered with some data analysis, send it my way! Call me at 540-578-0102 or e-mail me at scott@cbfunkhouser.com. | |
How long does it take homes to sell in Harrisonburg and Rockingham County? |
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A recent comment from my blog raises a great question: "Statistical analyses always report "average days on market." As a buyer, I am wondering what a histogram of days on market for houses sold in the last 6 months looks like. In other words, how many houses sold within 1 week? 1 month? 6 months? How many took an entire year to sell?" As this reader points out, I typically only report the average days on market, which isn't very helpful. So, let's take a look at what we'll find when viewing the last six months of home sales in Harrisonburg and Rockingham County... Click on the chart above (or here) for a printable PDF. As you can see, there are still quite a few homes selling within the first few months of being on the market (94 homes) --- but there are a LOT that are taking a VERY long time to sell. There were 59 homes in Harrisonburg and Rockingham County that took more than a year to sell, with 30 of those taking more than two years! Hopefully this sheds a bit more light on the time it takes to sell a home in Harrisonburg or Rockingham County. A more detailed analysis of the days on market of your property type, location, price range, etc. is bound to be even more helpful for you. Let me know if I can assist. | |
Home Value Projections for Harrisonburg and Rockingham County |
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As can be seen below, home values across the U.S. have declined sharply over the past three years, after a sharp increase over the preceding years. (Source: OFHEO) In Harrisonburg and Rockingham County, however, we saw an increase in home values between 2003 and 2006, but we have not seen a comparable decrease between 2006 and 2009. (Source: HRAR MLS) One of my blog readers (who has a Ph.D. in Assessment and Measurement) wonders whether we will see a decline in home values in Harrisonburg and Rockingham County because of a principle called "Regression to the Mean". This principle suggests that over time things (scores, prices, etc) revert back to the mean. Let's use this concept to examine what might happen to home values in our area. Using OFHEO data, we see that home values across the entire United States have increased (on average) four percent per year since 1991. A few notes on the graph above, where the blue line shows actual home prices and the purple line shows a 4% per year increase in prices.
The graph below shows local median home price changes (since 2000) in green, with a the 4% per year increase shown with a purple line. From the graph above we can see that since we haven't seen a sharp decline in prices in Harrisonburg and Rockingham County, that the actual median home price is still significantly above what it "should" be based on a 4% per year increase beginning in 2000. If we go along with the theory that home prices locally will regress to the mean, there are several ways that it might happen. The graph above shows what it might look like to return to the mean (of a 4% per year increase) --- if it happens by 2010 (sharp decline) vs. 2011 (moderate decline) vs. 2012 (no decline, or gain). Again, please note that the idea that we must return to this mean is not carved in stone. It is a mathematical principal that some people believe has applies to the housing market. Below is one final graph to leave you feeling a bit more hopeful... The red line above shows how we could see a steady (slow!) increase in home values every year from 2009 forward and still adhere to the principle of regressing to the mean. The yellow line above flies in the face of regressing to the mean, and shows a return to the 4% per year increase starting from today's home prices independent from any (real or imaginary) need to regress to the historical mean. Some of my references as I researched and wrote this post were: | |
March 2009 Real Estate Market Report for Harrisonburg and Rockingham County |
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Click here to view a PDF of this entire report. Enjoy! The pace of home sales in Harrisonburg and Rockingham County continues to decline --- with a 25% drop in sales pace when comparing Jan-Mar 2009 to the same time frame last year. Home values, however, seem to be holding relatively steady despite this drop in sales activity. Median home prices have dropped 5% since last year and average home prices have increased 1%. The next three months will be indicative of the overall health of our market, as we should see an increase in home sales as a result of seasonal trends, historically low interest rates, and the $8,000 first time buyer tax credit. Given this information, sellers should price their homes carefully, market them aggressively, and be flexible within reason when it comes to negotiating a contract. Buyers in our current market should look for good opportunities to buy at a reasonable price, but likely won't find too many opportunities to buy at a significant discount. If we start to see a more significant decrease in average or median home sales prices, buyers will be able to negotiate more effectively. Home sales in March 2009 (57) were decidedly slower than last March (92) -- a bit of a surprise after an exceptionally strong month of sales in February 2009. We will likely still see an increase in sales over the next four months (as we see each year at this time) but we will have to wait to see whether we can match last year's overall sales pace --- I am optimistic that we will be able to, given the $8,000 first time buyer tax credit. This graph shows a normalized trend of home sales by charting the ongoing sum of the preceding 12 months' sales. The drop we see this month is a result of March 2009 sales being markedly lower than March 2008 sales. Active inventory continues to rapidly increase, likely as a result of homeowners' anticipation of more buyers in the spring/summer market. This continued increase, however, will not help bring our market back into a balance between buyers and sellers. Unfortunately, the increased inventory of homes on the market over the past several months has not been matched by a corresponding increase in sales. Thus, the number of months of supply has started to increase again in all price ranges. This graph captures all residential real estate activity as reflected in the Harrisonburg/Rockingham Multiple Listing Services. The 2009 year-to-date sales figures now include three months of sales data, and show only a slight decline in median sales prices. This is good, however, the pace of sales continues to decline. When examining only single family home sales in Harrisonburg and Rockingham County we see a slight increase in median sales price, though this median sales price has not had a significant net increase or decrease since 2006. During the same time, the sales pace has decreased drastically -- 28% between 2006 and 2008. Sales of townhomes in Harrisonburg and Rockingham County continue to slow, though median sales prices continue to stay relatively steady. We have seen an amazing 56% decline in townhome sales between 2005 and 2008 --- with even more of a decline likely to be evident by the end of 2009. Examining the median price per square foot of sold single family homes in Harrisonburg and Rockingham County reveals a gradual (small) decline in home values (as defined by this metric) between 2006-Q3 and 2008-Q4. Over the past three months, however we have started to see an increase again. Click here to for a printable PDF of this entire report. | |
Has the Harrisonburg real estate market hit bottom? |
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I was asked that two times yesterday.....and the hypothesis of the two people asking was that the Harrisonburg real estate market has indeed hit bottom. But what do we mean "hit bottom"? When people use this language in most other real estate markets, they are referring to the end of a period of declining home values. But in Harrisonburg (and Rockingham County), we saw a 1% increase in home values between 2006, 2007 and less than 1% change between 2007, 2008. So, without an overall decline in home values, we probably wouldn't be referring to home values when we say "hitting bottom" --- if we were, we should be asking if home values are starting to increase again (after 2 years of treading water). Perhaps when people ask if the Harrisonburg housing market has "hit bottom" they are referring to the dramatic decline in sales activity. The number of home sales in our local market peaked in 2005 (1,669) and have declined ever since (-14% in '06, -13% in '07, -25% in '08). I do hope that we see that we have "hit bottom" in terms of this steady decline in market activity. More specifically, I hope that we see at least the same amount of home sales in 2009 as we saw in 2008. A broader view... In a sense, we may see market activity pick up in Harrisonburg and home values increase again when other real estate markets across the country are deemed to have hit bottom. Some analysts are predicting that we are seeing the beginning of that in March. Factors that may be contributing to an increase in sales activity and home values (in Harrisonburg and otherwise):
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Exploring huge variances in Price Per Square Foot |
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From a loyal blog reader... "I used your lovely search tool to look at all of the Belmont Estate listings. One thing that surprised me is the vast difference in the price per sq ft. Some were as low as $88 and others were as high as $139+. I'm curious to know why there's such a difference." An excellent question! Here's what she was noticing.... One reason for these differences is based on whether the homes have basements. You'll note (below) that the three homes without basements have a much higher price per square foot than all other homes in the neighborhood. What is really going on here is that when you start to add basement finished square footage into the "total livable square footage" (which is then used to calculate price per square foot) you are able to achieve a much lower price per square foot in a home with a basement. So....while the homes without basements seem to be really expensive on a price per square foot basis, it's really that the homes WITH basements are able to look less expensive using that metric. Another item to notice is that the largest homes (on a total livable square foot basis) are able to achieve the lowest price per square foot (see below). Three of the largest homes in this group have the lowest price per square foot. Given all of this, remember that it is best to compare relatively similar homes using the price per square foot metric. If some of the homes you are comparing have basements, and others do not, or if they are vastly different in total livable square feet, then you are likely to find significant a variation in the cost per square foot. | |
Benefits of $8,000 tax credit, record-low interest rates |
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Let's assume for a moment that a first-time buyer decides to buy a $150,000 townhouse in Harrisonburg. With the appropriate income and credit scores, they may be able to obtain a rate as low as 4.625% on a 30 year fixed rate mortgage, with no downpayment. In the first year, this first-time buyer would likely have the following income and expenses:
Contrast this to a buyer who closes on December 1 of this year. At that point, the tax benefit will have ceased, and I predict that rates will be at least as high as 5.75% on a 30 year mortgage.
The combination of the tax credit, and the extremely low interest rates we are currently experiencing are likely to save you almost $9,000 in the first year of homeownership. As you can see, much of the above $9,000 of savings is in the $8,000 tax credit for first time buyers --- but the additional savings because of a low interest rate becomes quite dramatic over the course of the loan. Buying now at very low rates (4.625%) may save you as much as $37,000 over the next 30 years as compared to buying at 5.75%.
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Home sales increase in February, is our local market poised for a recovery? |
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Click here to view/print a PDF of my real estate market report. Enjoy! This month's home sales report (above) has several surprises, the first ofwhich is the increase in sales in February 2009 compared to February2008. Though only a modest increase, we have only seen this type ofincrease in sales (compared to the same month the prior year) 3 timesin the past 14 months. Median sales prices have fallen considerably when comparing Jan/Feb2009 with Jan/Feb 2008. This is, however, solely based on two monthsof data (a small sample size), and thus these figures may be affectedby the sales price distribution of the properties that have closed inthese two months. Somewhat contradictory to the median sales pricetrends, we see that average sales prices have increased when comparingJan/Feb 2008 to Jan/Feb 2009. Average Days on Market has increased somewhere between 14% and 20%during the past year, which is likely no surprise to sellers, many ofwhom have experienced a longer than typical length of time on themarket. Home sales in February 2009 (53) were stronger than in February 2008 (52), perhaps suggesting that we may see 2009 turn into just as strong of a year as 2008. After several years of consecutive declines in real estate activity, February's sales figures should be an encouragement for homeowners --- perhaps the pace is finally increasing again in our local residential real estate market. This graph shows a normalized trend of home sales by charting the ongoing sum of the preceding 12 months' sales. This normalized trend line is now showing a leveling off of home sales, perhaps indicative that the market is becoming more stable. Likely as a result of the coming spring real estate market, inventory levels are now headed back up. If we continue to see an increase in the number of homes on the market, buyers will have even more negotiating power as we move forward. Supply levels in the $400,000+ price range dropped significantly (from 25 months to 22 months) --- due in large part to a significant increase in sales in this price range. We continue to see the healthiest supply levels in the lowest price ranges. This graph captures all residential real estate activity as reflected in the Harrisonburg/Rockingham Multiple Listing Services. The pace of home has decreased significantly over the past four years, but home values have continued to stay level or increase slightly. When we examine solely the single family home market we find a somewhat more significant decrease in median sales price (4% between 2007 and 2008), but we don't see as much of a drop off in the number of sales taking place. Of note, the record growth in median sales prices was 2004 when we saw a 24% increase. Sales in the townhouse market have drastically decreased, with a 37% decrease just between 2007 and 2008. Sales of townhouses are now down below even 2003 levels. The good news, however, is that the median sales price of townhouses continues to increase, with a 2% increase between 2007 and 2008. Examining the median price per square foot of sold single family homes in Harrisonburg and Rockingham County reveals an overall decline in home values (as defined by this metric). We are now at 2005 First Quarter prices per square foot, which is a decline of 14% since the peak in 2006. | |
Analyzing Investment Properties |
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When considering the purchase of an investment property, you ought to account for the following investment benefits:
Click on the image for more detail. | |
JMU Student Housing Supply & Demand Analysis |
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As we approach the 2009/2010 academic year at JMU, I believe we will be facing a significant surplus in student housing for JMU students. However, do bear in mind that there are many factors that make it difficult to track the actual supply and demand for student housing, including:
On the demand side of the student housing equation, enrollment for Fall 2009 is projected to be 18,928 students. This is an increase of 1,500 students as compared to our Fall 2007 baseline. On the supply side, I estimate that 3,240 additional beds will be available for Fall 2009 as compared to Fall 2007. These new beds are located in the following communities:
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The Most Popular Neighborhoods in Harrisonburg |
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Why are fewer homes selling in Harrisonburg? |
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As referenced in yesterday's "My hope for the 2009 local housing market" post, the quantity of home sales has fallen 44% over the past 4 years (between 2005 and 2008). At the same time, values haven't significantly fallen, and thus I tried to answer the question of why we haven't seen a big shift in home values. But one question remains --- why have we seen such a larger decline in the number of home sales!? Here are my thoughts, though I welcome your insights as well...
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Scott Rogers
Funkhouser Real
Estate Group
540-578-0102
scott@funkhousergroup.com
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