Analysis
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My hope for the 2009 local housing market |
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![]() I am thankful that we have not seen much of a shift in home values in Harrisonburg and Rockingham County! However, the extremely slow rate of market activity that we are currently experiencing makes it very difficult for a homeowner to sell their home, and thus I hope that we will soon see market activity pick up in this area. Of note, we have seen a steady decline in overall residential sales for each of the past four years (shown above), with a 44% overall decline between 2005 and 2008. The graph and chart represent all residential sales recorded in our local MLS in Harrisonburg and Rockingham County. Each year the number of home sales has slipped further and further down, with 2008 finishing out with only 931 home sales. Thus, my hope for 2009 is that we can at least keep pace with 2008 --- with 931 home sales. I'm not hoping for a miraculous turnaround with 1,200 sales --- I'd just like to see market activity stop sliding downhill. How are we doing with this goal so far, you might ask? So far this year there have been 57 residential sales. Last year by this time, there had been 72 residential sales. We still have some catching up to do to hit the 931 mark by the end of the year, but it is indeed still early in the year --- and the stimulus package was signed into law less than 24 hours ago! | |
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What is sustaining home values in our local market? |
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![]() Over the past few weeks I have examined shifts in home values from several perspectives:
Why!???? This is the question that many people are asking --- why aren't we seeing a downward shift in values in this area? Over coffee today, I was presented with one hypothesis (thanks Ian!) for why this may be occuring. Ian's conjecture --- we're not seeing a big shift in values because there aren't too many people in our area that absolutely MUST sell, and thus they aren't making huge price drops in order to sell. I can go along with this theory. In talking to homeowners with their homes on the market, it seems that while there are many sellers who definitely, positively want to sell, the sooner the better, there aren't a very large number who are absolutely desperate and willing to take desperate measures in order to sell. What are your thoughts? Anyone want to refute or defend this theory? | |
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A quickening pace in the local real estate market? |
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![]() Our company runs over 60 web sites with real estate listings --- the company site, and a web site for each agent. Over the past year there have been hundreds of thousands of property views on this set of web sites --- with each property view being a web user clicking to view the details of a given property. The graph above shows a trendline for the number of properties viewed during each of the past 12 months on all of these web sites combined. The trendline is likely not too surprising, as we see a tremendous amount of activity in March/April/May, gearing up for summer purchases, and we see a rather significant drop through the remainder of the year (August-December). January, however, showed a sharp incline --- which leads me to question --- is this simply a seasonal trend coming around again, or will we see a significantly stronger real estate market this spring? | |
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Rent vs Own in Harrisonburg |
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![]() A common question I am asked is how costs compare in buying versus renting a "starter townhouse" in Harrisonburg. This changes over time, but here's how the costs compare now, assuming that you stay in the property for three years.... Buying a townhome at $156K (example) With a 3% down payment, you'll be financing $151,320, and at current interest rates (5.00%), this will equate to a $922 monthly mortgage payment. This $922 will include the principal, interest, taxes and insurance. You will likely pay $4,000 of closing costs to buy the townhome. During your three years of ownership you will have saved approximately $5,000 on your taxes because of the mortgage interest you have paid. After three years you will have paid off approximately $7,000 of principal on your mortgage. Thus, you have a net (unrealized) gain of $8,000 ($5k tax savings + $7k principal reduction - $4k closing costs). Renting a comparable townhome To rent a comparable townhome, you will likely be paying $900 per month. You will have no up front costs, no tax savings during your time of ownership, and no financial return at the end of the three year time frame. Three Year Conclusion If you are only going to live in your townhome for three years, you will still need to carefully consider whether you should buy vs rent. Even though you will have $8,000 of savings, you will burn through much of that in the transaction cost of selling your townhome. Five Year Conclusion If you're in the townhome for five years, it becomes a much better opportunity to have purchased. In the five year analysis, you will have a net (unrealized) gain of $17,000 ($9k tax savings + $12k principal reduction - $4k closing costs). Deciding whether to buy or rent is a big decision, but it can be made wisely with some basic financial analysis. Feel free to call (540-578-0102) or e-mail me (scott@cbfunkhouser.com) if you'd like some guidance for your personal situation. | |
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Looking even closer at home values over time |
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![]() The Daily News Record ran an interesting article yesterday which reinforces what I have been stating in my monthly home sales reports for quite some time now --- sales volume is down, median and average sales prices are stable. Ex. December 2008 Report. However, the comments in the DNR article were of quite a different persuasion -- the commentators were quite sure the assertion of stable home values was bogus. Here's where I stand on the issue:
Today I'm going to take a closer look at one very narrow property type to examine value trends over time.... New-ish (2000+) two-story townhomes in the City of Harrisonburg with 1200-1500 s.f., without basements or garages. This includes developments such as Avalon Woods, Beacon Hill, Liberty Square, Harmony Heights, Meadow Point and Wellington Park. ![]() Prior to this analysis, my assumption was that tracking median price trends across our entire market (which show stability) does not reveal true value trends. I suspected that we would see the median price trend analysis break down if we limited it solely to one very specific property type. However, as seen above, median prices of very similar townhouses in Harrisonburg have stayed stable over the last year. I was wrong! But perhaps the most interesting part of this segment of the market is not found by looking at sold properties, but by examining those currently offered for sale. A few observations:
Still think this data or analysis is bogus, or missing some critical perspective? Tell me about it! Use the comment field below, or e-mail me at scott@cbfunkhouser.com. | |
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Understanding long term home sales trends |
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Below is one of the graphs I generate each month in my monthly market report. This graph shows an overall trend for residential sales in Harrisonburg and Rockingham County by computing the rolling sum of the previous twelve months of market activity. To explain a bit more clearly, here are a few examples:
![]() To go a bit futher, I broke down the data between different sizes of homes (0-1499 SF, 1500-2499 SF, 2500+ SF). This can show us trends in how each size of home is selling, and it will be interesting to see when each of the individual trendlines turns positive, and when the collective trendline turns positive. ![]() The graph above shows all residential sales, and then shows each of the other size ranges of homes (0-1499 SF in green, 1500-2499 SF in yellow, 2500+ in blue). ![]() This graph shows the trendline for homes (single family and townhomes) with less than 1500 square feet. With a somewhat smaller data set we see more volatility in this trendline, even with rolling twelve month sums, but it can still give us a good idea of long term trends in this type of housing. ![]() The graph above shows the changes in sales activity for mid-range homes (1500-2499 SF). This trendline doesn't have as much volatility, and mimicks more closely the overall trendline. ![]() This graph shows the trendline for larger homes, with at least 2500 square feet. There was a good bit of volatility in this trendline during 2003 and 2004, but it has now returned to a trendline much more similar to the overall market trend. | |
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Home value trends in Harrisonburg, Rockingham County |
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Question everything! Below is an excerpt from an e-mail that I received from one of my clients about a month ago. She asks a fantastic question, and one that I believe is on many people's minds these days... On your website (as well as many other local realty sites) people keep saying home prices are stable. How is that determination made? I understand (& am happy) that we have not experienced the free fall some places have in home values - but as someone who has been watching the local market I am starting to wonder if saying that about the local market is accurate. So, how do we figure out what is happening with home values in Harrisonburg and Rockingham County? Below are a variety of ways that you could come to some conclusion --- some are better indicators than others. 1. Median & Average Sales Price I use this measure quite regularly in my monthly market report, and this metric indicates that home values are holding (relatively) steady in Harrisonburg and Rockingham County. When comparing the 2008 median sales price ($195,000) to the 2007 median sales price ($195,100) we see only a 0.05% decrease. When comparing the 2008 average sales price ($223,668) to the 2007 median sales price ($224,394) we see only a 0.32% decrease. These metrics are often used for observing value trends because they are easy to calculate, and in theory give an all encompassing view of market conditions. However, in a smaller market, they can be greatly affected by what happens to be selling. As an one example of the imperfection of these metrics -- there has been a 40% decline in single family home sales (H'burg & Rock Co) between 2004 and 2008 --- but there has been a 32% increase in single family home sales with sales prices over $400,000. This shift in what is actually selling, can greatly affect the average and median figures, making them less meaningful. Another example of the imperfection of these metrics is found by examining single family homes at or larger than 2,500 s.f. sold in the City of Harrisonburg. In 2007, there were 36 such homes selling at an average sales price of $351,547 and a median sales price of $327,500. In 2008, there were 31 such homes selling at an average sales price of $336,357 (4.3% decrease) and a median sales price of $305,000 (6.9% decrease). In a market of our size, average and median home sales prices are useful for observing value trends, but can be quite off the mark for actual market trends. 2. List to Sell Ratio Most people would assume that sellers probably aren't getting anywhere near what they used to for their homes expressed as a percentage of their asking price. I have asked several people to guess, and the general consensus was that sellers were probably getting 99% of their asking price in the "hot market" of 2004 and 2005, and are probably getting only 90% now. In 2004, a total of 1,507 homes sold in Harrisonburg and Rockingham County at an average of 99.13% of the asking price. In 2008, a total of 932 homes sold in Harrisonburg and Rockingham County at an average of 96.86% of the asking price. This shows us that buyers are able to negotiate more off of the sales price, but the difference is not as dramatic as you might suspect. This metric is most helpful in judging whether the market is a buyer's market or a seller's market. 3. Changes in Asking Price on Specific Properties This is an interesting one, and one that my client was quite instrumental in helping me to observe. She has been observing the market for the past year and a half (roughly) and has seen a dramatic shift in the asking prices of specific homes. Changes in the asking price of specific homes can't necessarily reveal any particular market trend, because sellers don't necessarily price their homes at the price the market would suggest. If an appraiser conducted a full appraisal of every home in our area before it went on the market, and the home was listed at the appraised value, then if we saw a shift in asking prices, it would be very meaningful. As it stands, a home seller may price their home well above the market to start, and then continue to lower the price over time after not being able to sell at an above-market price. Then, because the home sat on the market for so long, buyers are skeptical, and the seller has to lower the price "below-market" in order to sell it. Some (many?) observed changes in asking prices on specific homes are an indication of pricing mistakes, rather than market trends. However, while asking price trends on specific houses won't give as a true indicator of value trends, if we expand this metric to specific neighborhoods or property types we can begin to observe real market trends. 4. Changes in Asking Prices in Neighborhoods or Property Types If owners of homes in Belmont (for example) used to be asking $350,000 - $400,000 for their homes, and are now asking $300,000 to $350,000 that may be a good indicator of a change in value. If owners of two-story townhomes in the City of Harrisonburg built since 2000 used to be asking $160,000 for their townhomes, and are now asking $140,000, that may be a good indicator of a change in value. This metric is getting close to being a good indicator of market trends, but can be improved if we look at sales prices in specific neighborhoods or property types instead of asking prices. 5. Changes in Sales Prices in Neighborhoods of Property Types Again, if we can narrow down the market to a specific neighborhood, property type, age range, square footage range, etc., and then observe average sales prices over time, we will have a very good idea of what is happening with home values in our market. One challenge here is that we probably want to eventually get back to the "big picture" of what is happening in our entire market --- and it would be quite arduous to create 20-30 (or more) profiles of market segments, calculate changes in average sales prices, and then try to come to some broader conclusions about the entire market. But remember --- we came to this as a metric for understanding changes in home values, because we realized (or at least I asserted) that the average (or median) sales price for our entire market isn't necessarily an indicator of what is happening with home values. 6. What could I have sold my home for, and what can I sell it for now? This is a very inexact concept, and one that often confounds, frustrates and depresses homeowners. Part of the problem with understanding changes in home values within this context is that the first data point (what I could have sold my house for) is often a very rough personal assessment. For example, "I am sure I could have sold my house for $250,000 a year ago" --- regardless of whether comparable sales data would actually support that. However, if we take emotional, and imperfect "self assessments" out of the equation, this is a very valuable metric. If you live in a neighborhood where the homes are all very similar, you can probably have a very good idea of what you could have sold your house for a year ago, and what you could sell it for now. CONCLUSION I believe my client's question, and many homeowners' concerns are based on the conflict between several of the metrics above. Homeowners sense that there has been a decrease in home values in general, and their home value specifically, but average/median sales price suggest that they have not. Based on my analysis above, I believe that average and median home sales price are not very helpful in understanding changes in home values in our market. However, because of the complexity of a true analysis of home values (using criteria #5 and #6 above), we may never have a better sense of what is happening with home values in our market in general, beyond using the quite inexact metrics of average and median home sales prices. Homeowners (or prospective homeowners), should take the time to understand how their home value has changed over time. It is not an easy or exact analysis, but it will give you a much better sense of where you have been, where you are now, and where you may be headed in the near future. I welcome any and all dissenting views, alternative perspectives, suggestions for other value analysis criteria, etc! Feel free to e-mail me (scott@cbfunkhouser.com), call me (540-578-0102) or leave a comment below. | |
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Calculating the return on your home improvement investment |
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![]() Remodeling Magazine has released their 2008-2009 report comparing the cost of a variety of home improvement projects as compared to the added value of each renovation. The projects that they analyze include: basement remodel, bathroom addition, deck addition, master suite addition, window replacement, and many more. Drum roll please... The highest return on investment (as a national average) is a deck addition (80% return on investment), and the lowest return is on a home office remodel. Learn more... You can download a full report of the data on a city-level (the closest city to us is Richmond, VA) here. © 2008 Hanley Wood, LLC. Reproduced by permission. Complete city data from the Remodeling 2008–09 Cost vs. Value Report can be downloaded free at www.costvsvalue.com. | |
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Home Sales History in Rockingham County Towns |
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After yesterday's analysis of year-to-year residential sales in Harrisonburg and Rockingham County, I thought it might be interesting to compare similar sales trends in sub-markets in Rockingham County. Here's what I found . . . ![]() ![]() ![]() ![]() ![]() ![]() ![]() ![]() | |
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The big picture - year to year real estate sales trends |
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Each month I conduct a thorough analysis of home sales, but most of my analysis takes a look at a monthly snapshot. Thus, at the request of one of my blog readers, I have compiled the monthly data to show a bit more clearly how the Harrisonburg and Rockingham County market has changed from year to year over the past six years. ![]() Bear in mind that all of these charts show 2008 data through December 9, 2008 --- so there will still be a more sales before the 2008 data set is closed out. We have seen decreases from 2005 through 2008 --- who wants to guess, will 2009 be an increase over 2008, or will we have to wait for 2010 for an increase? ![]() Single family home sales, as we might have imagined, follow a similar trend line to the first graph that showed all residential sales. ![]() One peculiarity seen here is that there was a sharp increase between 2004 and 2005 in the number of townhouse sales. I suppose 2005 was the year of the townhouse! | |
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What sold in November 2008? |
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![]() As my November 2008 monthly market report shows, November 2008 was a rather slow month for real estate sales --- only 40 properties sold (closed) in Harrisonburg and Rockingham County, which is the lowest sales level we've seen in (at least) six years. With so few houses selling, let's see if we can come to any conclusions about what did actually sell, but first, two side notes:
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October 2008 Harrisonburg & Rockingham County Real Estate Market Update |
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The October 2008 Harrisonburg & Rockingham County Real Estate Market Report is now available. Click here for a printable PDF of this report. ![]() Sales continue to be slow compared to last year, but overall prices continue to slowly and steadily increase. Both the median and average sales price increased when comparing January through October of last year versus this year. ![]() After a strong September (compared to last September), October's sales figures are lower than expected. October's sales (62) were 40% lower than last October's sales (103). Perhaps last year's fall months (October & November) were an anomaly with their strong increase. ![]() This graph shows a normalized trend of home sales by charting the ongoing sum of the preceding 12 months' sales. Despite an increase in sales pace last month (October 2008), this month we again see a continued decrease in this long-term sales trend. ![]() Inventory continues to decline in Harrisonburg and Rockingham County --- this month down to 866 active single family, townhome and condo listings. This is a 9% decrease compared to June 2008's inventory level of 956 active properties. ![]() As inventory continues to decline, likewise the number of months of housing that is on the market has also declined. The top two price ranges ($300k-$400k, $400k+) both are headed back down towards (somewhat) healthier supply levels. | |
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September 2008 Harrisonburg & Rockingham County Real Estate Market Update |
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The September 2008 Harrisonburg & Rockingham County Real Estate Market Report is now available. Click here for a printable PDF of this report. ![]() When comparing September 2008 to September 2007, both median and average sales prices show declines, of 3.85%, and 4.96% respectively. However, when comparing Jan-Sept 2008 to Jan-Sept 2008, the median sales price still shows an increase of 1.03%. ![]() Each year for the past six years, September sales have been slower than in August, and 2008 was no different. However, September 2008 sales were stronger than September 2007, which, combined with the typical increase in October sales, make this a good trend to watch. ![]() This graph shows a normalized trend of home sales by charting the ongoing sum of the preceding 12 months' sales. Pay close attention this trend next month, as the September 2008 sales trend figure (Oct 1 ‘07 - Sept 30 ‘08) shows an increase in sales. ![]() For quite some time, we have seen an elevated level of inventory -- thus, it is healthy to see a decrease in inventory levels. Yet, we may also be observing a seasonal trend in inventory that we will see continue through the winter. ![]() Inventory has declined since August, and likewise, the number of months of housing that is on the market has also declined. The sub-$200k supply has remained stable for several months, but the price range with the most extreme over-supply ($400k+) has declined. | |
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August 2008 Real Estate Market Report for Harrisonburg & Rockingham County |
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Click on any of the charts or graphs below for a printable PDF of the August 2008 Real Estate Market Report for Harrisonburg & Rockingham County. Perhaps of most interest is that buyers are committing to buy properties at an almost equivalent rate as they were last year. Last August, 77 properties went under contract, and this August 76 properties went under contract. This seems to indicate that either we will see closed transactions pick up as the year continues, or that fewer buyers are able to get from contract to closing on a property. ![]() We are in a buyers market. In many markets around the country, which are also in buyers markets, prices have declined significantly over the past 18-24 months. However, we continue to see average and median sales prices staying relatively level. Both average and median sales prices increased (by less than 1%) when comparing Jan-Aug 2007 to Jan-Aug 2008. ![]() Home sales continue to be largely seasonably predictable. Sales increased in August (as compared to July) as they have in most previous years. September, October and November will be interesting months to observe, as last year October and November showed a modest increase in sales activity. ![]() Housing supply is holding steady, or increasing slightly in all price ranges. The lowest price range ($0-$200k) continues to have the healthiest relationship between buyers and sellers, with the most expensive price range being the most out of balance. If you are interested in a more specific analysis of a particular segment of the Harrisonburg or Rockingham County real estate market, please call (540-578-0102) or e-mail me. | |
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"It would be great if more properties on the market..." |
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"It would be great if more properties on the market..." Isn't that an interesting thought? ![]() I couldn't agree more! Several of my current buyer clients are pre-approved and ready to buy, but they can't find a house that suits their needs. They would love to see more houses for sale to give them more options from which to find their new home. I couldn't agree less! For months, most price ranges have been significantly over-supplied. Adding more houses to the already healthy supply levels would just further exacerbate the situation. Hmmmm........ | |
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July 2008 - Home Sales Down, Prices Up! |
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A few weeks ago I posted my Harrisonburg & Rockingham County July 2008 Real Estate Report. Below is a similar report issued by my company (Coldwell Banker Funkhouser Realtors). Slightly different analysis -- and definitely interesting to review. (click the image for a PDF) Generally speaking, home sales are down, but prices are up! | |
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The time-value of an interest free $7500 loan to first-time home buyers |
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Over the past few weeks I have been explaining to many first time home buyers that if they buy a home before July 1, 2009 they can take advantage of a $7,500 tax credit. Some, though, have been less than enthused because the full $7,500 tax credit has to be repaid over 15 years. Yes, that's right --- even though you will pay $7,500 less in taxes for the tax year in which you make your first home purchase, you do have to repay these tax savings in years three through seventeen. I thought I'd take a look at the value of what is essentially an interest free $7,500 loan. For this analysis, I am examining the aggregate savings from not paying interest on the $7,500, using a current interest rate of 6%. ![]() As you can see --- over the course of the 17 years, you save a total of $4,050. Thus --- even though you are paying back the $7,500 tax credit, it is still at a significant ($4,050) savings. | |
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At the close of the first half of 2008, here's another look at the Harrisonburg housing market. |
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Here is a quick overview of the current state of the Harrisonburg and Rockingham County housing market:
Click on the chart for a printable PDF, or click here for some additional analysis of the Harrisonburg housing market in the first half of 2008. | |
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Housing supply remains steady in Harrisonburg and Rockingham County (except those high-priced homes!) |
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This past week, I overheard someone at the grocery story telling their friend "Can you believe how many homes are coming on the market? I don't know when they'll all sell!?!" Many seem to share this sentiment. You might find it interesting, then, that housing supply is actually remaining rather steady (compared to demand) in all but the highest price range. Click on the graph below for a printable PDF, and read below the graph for more information on how I calculate these values. ![]() The number of houses on the market at any given time is only relevant within the context of how many people are buying. If 100 houses are for sale and 100 houses are being bought each month, we have a very different market condition than if only 10 houses are being bought each month. Thus, to compare housing supply and demand in Harrisonburg and Rockingham County, I use the following process: 1. Calculate the average number of sales per month over the past 12 months. 2. Calculate the number of houses currently for sale. 3. Divide the number of houses for sale by the average sales rate per month to find out how many months it would take to sell the current inventory. The numbers you see in the graph show the results of these calculations. Let me know if you have any questions, or suggestions for additional analysis. | |
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Scott Rogers
Funkhouser Real
Estate Group
540-578-0102
scott@funkhousergroup.com
Licensed in the
Commonwealth of Virginia
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