Buying
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It Is The Beginning Of The End Of Summer When It Comes To Real Estate |
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 Yes, yes, I know... the official first day of summer was June 21st, which was only two weeks ago. But, when it comes to real estate, we're just about at the beginning of the end of summer. Here's the math, working backwards for anyone hoping to be settled into a new home before the start of next school year... August 23 - first day of school in Rockingham County August 22 - first day of school in the City of Harrisonburg August 18 - latest closing date to have a full weekend to move into a new home before school starts July 18 - a month prior to that August 18 closing date So... if you're hoping to close on the purchase of a home before the upcoming school year begins, you have a bit less than two weeks to do so. And... if you're hoping to sell your home to someone that wants to close on their home purchase before the upcoming school year begins, you should probably have your house on the market in the next two weeks. Happy Summer! ;-) | |
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Monthly Tax Bills in the City of Harrisonburg and Rockingham County Over Time |
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 If you're buying a median priced home in our market (Harrisonburg and Rockingham County) you would be spending $325,000. Will you pay more in property taxes if that house is in the City or the County? In most cases, you will pay more property taxes if you live in the City. The analysis above looks at how a monthly property tax bill has changed over the past decade for a median priced home in the City and County. To be clear, this analysis uses:
Also of note -- this analysis of monthly property tax bills over time does not adjust for inflation. A $260 monthly tax bill in the City of Harrisonburg in 2023 is not the same as a $260 monthly tax bill in 2013 as inflation has been running hot over the past few years. Certainly, one reason why the City tax bill has increased as much as it has over the past few years has been to fund the new high school currently under construction in the City. Will this difference in tax rates in the City and County result in some buyers deciding to buy homes in the County instead of the City? Maybe - but my experience has been that the tax rate is not what causes a home buyer to consider a home in one locality or the other. Multiplying by 12, here's a look at the annual tax bill in the City vs. County for a median priced (market wide) home in our area...  | |
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Monthly Housing Costs Up 84% In Three Years |
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 Over the past three years... [1] The median sales price has increased by about 10% each year. [2] The average mortgage interest rate has doubled. [3] The City real estate tax rate has increased by 12%. Given these three changes, and how each plays into housing costs, it shouldn't be much of a surprise that monthly housing costs have increased significantly over the past three years. Three years ago, if a home buyer financed 80% of their purchase of a median priced home, they would be paying about $1,064 per month. Now, if a home buyer finances 80% of their purchase of a median priced home, they will be paying $1,959 per month. Beyond the "wow, that's a crazy increase" here are a few of my other thoughts and observations... [1] Perhaps this is a statement of the obvious... but this "increase in monthly housing cost" only affects those who are buying homes now. Anyone who already owns a home is not seeing this type of an increase in their housing costs. They might have a minor increase in their monthly housing costs due to rising assessed values, rising real estate tax rates and/or rising homeowners insurance rates, but those will amount to a relatively small increase in their monthly housing costs compared to what is described above. [2] Yes, this is a big increase... but it's partially because monthly housing costs were abnormally low for quite a few years as a result of super low mortgage interest rates. We have now exited a prolonged period of tremendously low mortgage interest rates. This kept housing costs very low for anyone buying a home (or refinancing their mortgage) during that unique time of low mortgage interest rates. Thus, the increase in monthly housing costs seems huge -- but it's only partially because of how high mortgage rates are now, but also very much about how low those mortgage rates were very recently. [3] Just a note on methodology. The housing cost numbers above are calculated using the median sales price of homes sold in Harrisonburg and Rockingham County per the HRAR MLS, combined with the average mortgage interest rate for the duration of the year, combined with the real estate tax rate for the City of Harrisonburg, and assumes a 20% downpayment. Bottom line -- it is quite a bit more expensive for someone to buy a home now compared to just a few years ago. | |
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If Your Offer Is Competing With Other Offers, You Should Max Out Your Preapproval Letter |
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 A few (4+) years ago, most offers were made without having to compete with another offer. In such as a circumstance, it often made sense to tailor your preapproval letter to match the price you were offering. For example... $275,000 = List Price $350,000 = Your Max Preapproval Amount $265,000 = Your Offer $265,000 = The Preapproval Letter You Include After all, why let the seller know that you could pay $350K when you're trying to negotiate them down from $275K to $265K. :-) These days, however, things work a bit differently. You should consider maximizing the amount of your preapproval letter to show your financial strength. $350,000 = List Price $475,000 = Your Max Preapproval Amount $375,000 = Your Offer (after escalating) $475,000 = The Preapproval Letter You Include Yes, you could certainly include a preapproval letter from your lender showing you are qualified to pay $375K for the house -- but the strength of your finances will be much more evident to the sellers if you include the maximum preapproval letter of $475,000. So... in a competitive offer scenario, don't hide the top price you can afford, as it might sway the seller in your favor as they are considering multiple offers. Most sellers, if presented with these three offers would choose the third offer... [1] Offer of $375,000 with pre-approval letter of $375K [2] Offer of $375,000 with pre-approval letter of $395K [3] Offer of $375,000 with pre-approval letter of $475K As a side note -- even if you don't want to spend $475K, and you won't spend $475K, if you qualify for $475K it can still be helpful to have that letter from your lender for the reasons outlined above. | |
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Think About These Questions Before You Go See A House You Want To Buy |
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 The market is still moving quickly in Harrisonburg and Rockingham County. As such, once we walk inside of a house, and you decide you like it enough to make an offer, the clock will start ticking. We'll have a limited amount of time for you to make a few big decisions... [1] What price do you want to offer? [2] Do you want to include an escalation clause? [3] How high will that escalation clause go? [4] Do you want to include a home inspection contingency? [5] Do you want to include an appraisal contingency? Some of these questions are certainly property specific -- and your answer will be different when asked about different properties. But some questions can be made somewhat more generic... [1] Will there ever be a time when you are comfortable making an offer without an inspection contingency? [2] Are you comfortable paying more than the appraised value for a house? Including a home inspection or appraisal contingency (or both) will definitely make your offer less competitive if there are multiple offers and if one (or more) of the other offers does not include either or both of those contingencies. So... before you go see a house that you then might discover that you love... think about... [1] Would you be comfortable buying a home that you love without doing an inspection? [2] Would you be comfortable paying more than the appraised value for a house that you love? Thinking about these questions generically will prepare you for when I ask you to think about your answer to that question when we're inside of one specific home. | |
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It Can Be Frustrating To Try To Buy A Home Right Now, But Keep At It! |
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 Surely, homeownership isn't for everyone... [1] You might only know that you'll be living in the Harrisonburg area for a year or two, and thus it might not make sense to buy. [2] Your overall financial picture might not be stable enough right now, or yet, for it to make sense to buy a home. [3] You might not be ready to take on the long term commitment to the ongoing costs of homeownership such as replacing a heat pump, a roof, etc. But... there are seem to be plenty of people locally who are not currently homeowners, but who are ready to own a home... [1] They know (or are very confident) that they'll be in this area for 5+ or 7+ years. [2] Their finances are stable and they have funds saved up for a downpayment and closing costs. [3] They understand and are prepared for the ongoing costs of homeownership such as improving or replacing the systems or building components of a home over time. Plenty of these well prepared, would-be, homeowners have not been able to successfully secure a contract to buy a home over the past few years because of extremely high levels of buyer interest in buying in our local market - which often results in multiple buyers making offers on the same house within the first day or two that it is on the market. So, yes, it can be quite frustrating to try to buy a house right now. You might make offers on 2, 3, 4 or more houses and still not have a contract to buy a home. What should you do? Should you give up? Rent forever? If you match the description above (staying here, financially stable, prepared for home maintenance costs) I would encourage you to keep trying to buy a home. Eventually it will work out, and you will successful contract to buy a home and then you'll be able to start enjoying the many benefits of homeownership, including... [1] Mostly stable housing costs - with the principal and interest portion of your mortgage payment staying level, even if there are some increases in taxes and insurance over time. [2] An increase in the value of your home over time - maybe not every year, but certainly over the long-term. [3] The ability to make a house/property your own, improving or upgrading it to fit your specific needs and wants. [4] The tax benefit of paying mortgage interest. [5] Often longer-term relationships with neighbors which doesn't happen if you're bouncing around from one rental to the next. The list could go on, but I think you get it -- there are plenty of great reasons for many (but certainly not all) folks in our area to buy a home -- so even if you miss out on an offer or two, don't give up the hope yet! | |
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Buying A Home In Harrisonburg When You Do Not Yet Live Here Is Particularly Difficult Right Now |
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 TUESDAY: Nice! A pretty sweet new listing just hit the market. I will definitely plan to make the (four hour) drive to Harrisonburg this weekend to see that house! THURSDAY: Oh, shoot. It's already under contract!? Argh. Anyone who lives out of town right now, but is attempting to move to Harrisonburg and buy a house in Harrisonburg is likely experiencing some variation of the scenario described above. It is a challenging time to buy a house in Harrisonburg if you don't already live in (or pretty close to) Harrisonburg right now... and it's all because of how quickly homes are going under contract. If you want to see a home in person before you make an offer to purchase it, and you live a few hours away and have a work or life schedule that doesn't allow you to hop in the car for a day (or overnight) trip on a moment's notice -- it can be hard to lock down a contract on a house. Enough about the problem... what's the solution? Here are a variety of the strategies you could employ... [1] Keep Hoping. Keep Trying. Hope that a great property will hit the market on a Friday when you're already planning to drive to Harrisonburg on Saturday, such that your timing and the timing of that new listing will work together perfectly. [2] View Houses Remotely. I can certainly walk you through (and around) a house via FaceTime or Zoom to allow you to more quickly see a house even if you can't make it to town. The question will then be whether you are willing to commit to purchasing a house that you have only seen via a phone (or tablet, or computer) screen. [3] Rent First, Buy Later. Go ahead and move to Harrisonburg, renting an apartment, townhouse or home, so that you are "on site" and ready to look at homes as they come on the market and pursue a house when you find the right now. Low inventory levels make it hard for even local home buyers to buy a house -- and it is even more difficult if you are trying to buy here but are not yet physically located here. If you find yourself in this situation, I'm happy to support you with any or all of the strategies noted above. Just reach out to connect so that we can talk about a game plan. | |
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The First Buyer To Make An Offer Will Likely Not Include An Escalation Clause, At Least Not At First |
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 Yes indeed, we're still in a market where we often see multiple offers on new listings... and when there are multiple offers, we are likely to see some escalation clauses. If you are selling one of these popular new listings, should you expect that the first offer you receive will have an escalation clause? Probably not. Here's why... An offer only needs an escalation clause if it is in competition with another offer... and thus, if a buyer is making the first offer, the escalation clause is not needed. For example, if a house is listed for $325K, an interested buyer might offer $325K - but they are unlikely to offer $325K with an escalation clause going up to $350K. Why not include the escalation clause up front? If the first offer a seller receives includes an escalation clause, they are almost certainly going to be motivated to... wait for other offers. If your home is listed for $325K, and you have eight showings lined up, and the first buyer to see the house makes an offer of $325K that escalates to $350K -- you'll want to wait to see if you have any other offers, hopefully above $325K, that would cause that escalation clause to kick in. Now, certainly, that first buyer will want the opportunity to consider adding an escalation clause if or when there is a second offer with which they are competing. Thus, they may ask to be notified if any other offers are received -- and it would make sense for a seller to give them a heads up if or when a second offer is received. So... BUYERS: You likely don't need to have an escalation clause in your offer if you are the first buyer to make an offer -- but you should be ready to adjust your offer (to add one) very quickly if/when you hear that there is a second offer. SELLERS: Don't be surprised if the first offer you receive does not include an escalation clause. Likewise, don't be surprised if those buyers add an escalation clause once a second offer exists. | |
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Home Buyers Seem To Be Drawing The Line In A More Rational Place Now When Making Offers |
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 In 2021 and most of 2022, it wouldn't be surprising to see these type of offers... [1] price escalates $50K above asking price [2] no home inspection [3] no appraisal contingency [4] will pay up to $20K over appraised value This was also in the context of often having 5+ (or 10+) offers within the first 48 hours a house was on the market. Right now, we are still often seeing multiple offers within the first 48 hours that a house is on the market -- but it is often 2 or 3 offers -- and not 5 or 10. Furthermore, current offers (in many but not all price ranges, locations, etc.) are more along these lines... [1] price escalates $5K to $10K above asking price [2] yes, I'd like an inspection contingency, please and thank you [3] contingent on the property appraising at/above the contract price [4] no willingness to pay more than the appraised value Now... don't get me wrong... these terms are still very favorable for sellers. Many or most sellers are still likely to have more than one offer from which to choose, and they are also relatively likely to sell for more than their list price -- but they are likely to see inspection and appraisal contingencies in those offers. As such, it seems that buyers are drawing the line (of how far they'll go on an offer) in a more rational place -- perhaps because of higher mortgage interest rates and the accompanying higher monthly mortgage payments. | |
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Buy A House For Yourself, Not The Next Owner |
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 What are you focused on as a buyer when you walk through a home you might purchase? [1] Does this home work well for my needs? [2] Will this home be easy for me to sell when that time comes? Thankfully, with many homes, the answer to both questions can be "yes" - but that is not always the case. Sometimes, you'll walk through a home that is just perfect for you -- but you started to wonder whether this aspect or that aspect of the home will make it more challenging for you to sell it when that time comes. We should talk about those aspects of the home, acknowledge them, discuss whether they might impact the future resale of the home, talk about your intended length of ownership of the house, and then... focus in again on how the home works for your needs. After all, you should be buying a home for yourself, not the next owner. Certainly, if there is a high likelihood that you will need to sell the home again within a very short timeframe, perhaps we think a bit more about the future sellability of the house -- but in most circumstances, I'll encourage you to be focusing on how any particular house works well for you... rather than the next owner. | |
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Tell Me What Type Of Home You Want To Buy And I Might Be Able To Tell You Where You Will Buy It |
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 Wouldn't it be nice if you could buy a restored early 1900's home in five different areas in Harrisonburg, east of the City, west of the City, etc.? Wouldn't it be nice if you could buy a mid-range $300K single family home in any school district you'd like in Harrisonburg and Rockingham County? Wouldn't it be nice if you could buy a four bedroom home built in the past 10 years in downtown Harrisonburg, or on a variety of one acre lots in many different parts of the County? Yeah -- it would be nice. But, this is a rather small area. Sometimes, the home you want to buy will dictate where you will live. This is the most surprising to buyers moving here from larger metro areas -- where any different type of home (style, price range, age, etc.) is available in countless areas in and around the ___ metro area. Not so much in Harrisonburg and Rockingham County. So -- we can talk about what you want to buy -- and where you want to buy. But then we'll have to pause to make sure the what and the where appropriately overlap to give you a chance of finding that home. If not, we'll either have to adjust the what, or the where! | |
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Run The Numbers On Selling And Then Buying A Home |
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 If you will be selling your home to buy another, there are a lot of numbers floating around....
Above you will see a spreadsheet I put together to help you think about some of these numbers as you are evaluating if and when you will make a move to a new house. In yellow, are all of the inputs you will need to provide, or that you and I can determine together, such as your current payment, your home's current value, your mortgage payoff, whether you will be putting any additional money into the transaction, etc. In green, I have identified your potential future mortgage payment and the net change in your monthly payment. All of the numbers without a background color will automatically calculate for you. Click here to download this worksheet as an editable Excel file. | |
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Will A $300K Townhouse Be More Expensive In The City Or The County? |
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 It sounds like a trick question, right? Will A $300K Townhouse Be More Expensive In The City Or The County? Certainly, my monthly payment for a $300K townhouse in the City will be the same as for a $300K townhouse in the County, right? Nope. The difference is the real estate tax rate... City of Harrisonburg = $0.93 per $100 of assessed value Rockingham County = $0.68 per $100 of assessed value As such, here's how the monthly mortgage payments break down if you financed 90% of the purchase price over 30 years with an interest rate of 6.25%... City of Harrisonburg = $1,958 Rockingham County = $1,895 So, they're close... but you'll pay approximately $63 per month more on your $300K City townhouse as compared to a townhouse at the same price point in the County. Or, annually, you'll pay about $750 more to live in the City than in the County. | |
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Higher Mortgage Interest Rates Are Making Would Be Home Buyers More Thoughtful About Offers |
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 Back when mortgage interest rates were 3% - 3.5%... 10:00 AM - new listing hits the market 10:10 AM - drive by 10:11 AM - text Realtor to set up showing 1:30 PM - walk through the house 1:55 PM - get kicked out by the next buyer in line to see it 2:30 PM - make an offer on the house (90% chance you'll make one) Home buyers didn't have to think very hard at all about whether to make an offer on a house they liked because their mortgage payment would be pretty darn low given historically low mortgage interest rates at the time. Now a days, with mortgage interest rates of 6% - 6.5%... 10:00 AM - new listing hits the market 12:15 PM - drive by 12:30 PM - text Realtor to set up showing (next day) 10:00 AM - walk through the house 4:00 PM - talk through the mortgage payment details with lender (next day) 9:00 AM - make an offer on the house (33% chance you'll make one) Buying a $350K house (for example) is a big decision! Buying a $350K house can seem like a smaller decision with 3.5% mortgage interest rates. It's only a $1600/month mortgage payment given a 20% down payment. Buying a $350K house can seem like a really big decision with 6.5% mortgage interest rates. It's a $2,115/month mortgage payment given a 20% down payment. As noted in the comparison above, buyers are still making decisions relatively quickly -- but they're thinking things through a bit further -- and they're not always choosing to make an offer. These higher mortgage interest rates do impact the market, even though they haven't caused home prices to drop in Harrisonburg and Rockingham County. | |
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Home Sellers Still Are Not, For The Most Part, Accepting Home Sale Contingencies |
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 As we make our way through the spring real estate market, plenty of folks are getting geared up to buy a home. Some of those would-be home buyers also need to sell their current home. No worries, right? We can just make an offer to buy contingent on you selling your home. Right? Right??? Maybe not. There still seem to be MANY, MANY more buyers in the market to buy than there are homes available for them to purchase. As such, home sellers are not, for the most part, accepting home sale contingencies. An offer with a home sale contingency technically means the seller has their house under contract -- but does it really matter? The sale won't head to closing unless some other house (your house) also goes under contract. If you are selling a home this year, I am likely going to tell you that you won't have to accept an offer with a home sale contingency. If you are buying a home, the same logic applies, a seller is unlikely to have to accept an offer with a home sale contingency. Case in point... there are 266 houses under contract right now in Harrisonburg and Rockingham County in the HRAR MLS. Of those...
* These are houses marked as "Pending" in the MLS ** These are houses marked as "Active with Kickout" in the MLS So... if you're looking to buy, and you need to sell, we need to talk through the logistics of how you can accomplish that in this competitive market where most other buyers are likely making offers on houses without home sale contingencies. | |
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Make The Offer You Are Comfortable Making Even If You Suspect It Will Not Succeed |
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 As a would-be buyer in a competitive seller's market you might find yourself thinking that you need to... [1] offer over asking price [2] include an escalation clause [3] waive an inspection contingency [4] waive an appraisal contingency Indeed, for some properties (in some price ranges in some locations) the only way to secure a contract to buy the home of your dreams is to do some or all of the above. But yet, I do encourage you to only make the an offer you are comfortable with... even if you suspect that offer will not succeed. If a hot new listing is priced at $400,000 and that seems like a reasonable price for the house... YES -- it is OK to offer $400,000 without an escalation clause, with an inspection contingency and with an appraisal contingency. Will that offer succeed? Quite possibly not -- especially if there are multiple offers. But... if that is the strongest offer you are comfortable making then that is the offer you should make. It won't necessarily lead to you securing a contract on the house -- but it might -- and if it does, you'll be under contract to buy with contract terms you are comfortable with. | |
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The Amount You Are Comfortable Paying For Your Next Home Might Be Different Than The Amount Your Lender Would Let You Spend |
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 So, you took my advice and talked to a mortgage lender to get a sense of what you are qualified to spend and to get a feel for potential mortgage payments. Great! You had been hoping to spend up to $350K on a house. But your lender said you could spend up to $475K on a house! But... when you look at the monthly mortgage payment associated with a $450K home purchase... WOW!!! How does your lender expect you to pay this much per month, and still have money for other life expenses, travel, emergency savings, etc.?!? This is not an uncommon place to be. Plenty of well qualified buyers discover that their lender will qualify them for a home purchase price that would involve a monthly mortgage payment much higher than is comfortable. So... start with a conversation with your lender about how high you *could* go on price... but be prepared to possibly need to do a bit more work with your lender to dial back that potential purchase price until you get to a monthly mortgage payment that is comfortable for you! | |
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How Patient Are You Willing To Be To Get Into THAT Neighborhood? |
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 There are some neighborhoods in the City of Harrisonburg and Rockingham County where it seems like homes NEVER come on the market. They are often GREAT neighborhoods for reasons related to the fact that there is very little turnover... homeowners stay in their homes for a long time, and wonderful relationships are built between neighbors over many years of living next door or down the street. So, if you decide you're interested in buying a home in THAT neighborhood.. where it seems like homes NEVER sell... you will likely have to decide how patient you are willing to be to get into that neighborhood. It may very well be worth the wait, but it might mean staying in your current home longer than you'd like (if you're local) or renting for longer than you'd like (if you're moving into the area). | |
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Consider How Soon You Will Need To Replace These Items When Purchasing A Home |
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 Many aspects of any home that you might purchase will likely never need to be replaced, for example... [1] the foundation [2] the wall framing [3] the plumbing Some items may need to be replaced at some point but when you choose to do so will be more elective than necessary... [1] flooring [2] interior paint [3] light fixtures But... some items will definitely need to be replaced at some point in your home's lifetime (or multiple times in your home's lifetime) and as such you should consider how soon they will need to be replaced when contemplating a home purchase. These "definitely will need to be replaced at some point" items are... [1] roof [2] heating and/or cooling system(s) [3] water heater [4] kitchen appliances If you're considering the purchase of a home that has recently had all four of those items replaced... great! Alternatively, if all of them are 30+ years old... not so great! Ask about the age of the main systems of the house you are purchasing... preferably before you are already under contract to buy it! | |
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Why Are Housing Inventory Levels So Low In Harrisonburg And Rockingham County? |
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 First, Harrisonburg is a popular place to live. Beyond everyone who is living here now, we continue to see new folks planning to make Harrisonburg their home, including but not limited to...
So, lots of people want to make Harrisonburg their home. Second, I think that more people are moving to Harrisonburg than new housing units are being built. If over a five year period, 5000 new people decided to make Harrisonburg their home, we wouldn't see a change in availability of housing if we also saw 5000 new housing units built. I think that the amount of new moving to (or attempting to move to) Harriosnburg over the past 5 to 10 years has exceeded the number of new housing units built during that same timeframe. Third, I think there is an imperfect match between what home buyers want to buy and new housing units that are being built. First of all, plenty of the new housing units that have been built over the past ten years have been rentals - apartments or otherwise - which hasn't helped provide housing for would be home buyers at all. Furthermore, the "for sale" housing that is being built in this area certainly meets the needs of some buyers, but probably not most or all buyers. If you're hoping to buy a home that is within the location, size parameters and price parameters of one of our area's new home communities -- great, you'll be in good shape! If what you are hoping to buy is not the type / size / price of new homes being built in our area, then the new housing units being built don't help you out at all. As such... the popularity of Harrisonburg and the rate at which new housing units are being built, and the type of housing units being built all contribute to a shortage of housing inventory for many price ranges and property types. | |
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Scott Rogers
Funkhouser Real
Estate Group
540-578-0102
scott@funkhousergroup.com
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