Market
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Sometimes, Appraisals Are Reining In High Contract Prices, And That Can Keep Sales Prices From Getting Out Of Hand |
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 Let's say there's a house that comes on the market for $300K. Every Realtor and buyer that looks at it agrees that it is worth $300K because three identical houses sold the prior day for $299K, $300K and $301K. ;-) The house immediately has LOTS of interest, LOTS of showings and LOTS of offers. The house ends up going under contract for $335K. Wow! Now, a few things can happen from here...
So -- even if buyers are willing to (per their offers) pay higher and higher and higher prices for houses -- regardless of what other buyers recently paid for similar houses -- the appraisal process is still, often but not always, keeping things in check and preventing prices from skyrocketing too quickly. | |
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Just Because Home Prices Are High Does Not Necessarily Mean You Should Sell Your Home |
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 Yes, clearly, home prices are quite high right now! The median sales price of properties sold in Harrisonburg and Rockingham County increased 10% in the past year. The median sales price increased 21% over the past three years. So, yes, your home is likely worth a good bit more than it was a year ago... or three years ago... or seven years ago... and so on. But, that doesn't necessarily mean you should sell your home. Let's assume you can sell your home quickly AND at a higher price than you thought. Where will you go? Are you planning to buying again? You'll probably pay a higher price than you thought. Are you planning to rent for a while? Are you hoping to buy when (more likely if) the market cools off a few years from now? Before we rush right into getting your house on the market for sale because prices are so high, let's think through where you will live next -- to make sure it is the best overall financial decision to sell your house now. We might very well conclude that it would best for you to NOT sell your house right now -- and I am happy to talk things through with you to figure out whether to sell -- or stay! | |
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June Is Shaping Up To Be A Crazy Month For Local Real Estate |
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 Yes, I know it's the last day of June -- but it takes a few days after the last day of the month for all of that month's home sales to show up in the MLS. So, until then, you'll have to live with this snapshot of the first 28 days of June. As shown above, there were 115 home sales in the first 28 days of last June -- and 136 home sales in the first 28 days of this June! Again, this is just the first 28 days -- give it another week or so and we'll be able to get a clearer look at the entire month -- but so far it seems June will have been an exceptionally strong month of home sales in Harrisonburg and Rockingham County. The change from 2020 to 2021 shown above marks an 18% increase in the pace of home sales in (the first 28 days of) June. Stay tuned in early July for a full analysis of the first half of the year in our local real estate market. | |
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Is The Housing Market Still Crazy? Is The Sky Still Blue On A Sunny Day? |
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 So, yes... the housing market is still crazy... and the sky is still blue on a sunny day. Speaking of sun... and heat... looks to be a scorcher this week!?! A client asked me this weekend if the market was still pretty crazy / busy / active. Indeed, it is. Will it slow down sometime? I'm not thinking it will anytime in the foreseeable future. Maybe in November? I think there is a good chance that homes will keep selling as quickly as they are right now (median of 4 days on the market thus far in June) for the rest of the summer and into the fall. Which is GREAT if you are going to be selling your home and is AWFUL if you are trying to buy a home. But yes, you can buy a home -- it will just likely take a bit longer to find a home you like (given very low inventory levels at any given time) and to secure a contract amidst a likely multiple offer scenario which we are seeing on most property prepared, priced and marketed new listings. So, yes, the market is still crazy - and I'm not predicting that to change in the near term. What about you? Do you think things will slow down at all this summer or fall? | |
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Home Prices Are Rising Quickly But Buyers Seem To Be Well Qualified To Buy What They Are Buying |
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 I started working in real estate way 18 years ago, way back in 2003. Between 2003 and 2006 home sales and prices shot up quickly -- and then sales slowed dramatically and prices declined slowly. Does it feel somewhat similar now? We're seeing significant increases in the number of homes that are selling -- and significant increases in our area's median sales price. But -- at least one thing is definitely different right now compared to that 2003-2006 timeframe... Today's home buyers seem to be very well qualified to buy. Back in the early 2000's when sales and prices were careening upward, some/many buyers were only marginally financially qualified to buy the homes they were buying...
These days, things are quite different...
So, yes, the market is heating up like it did in 2003-2006, but this go round, home buyers seem to be very well qualified to buy what they are buying. That would seem to be good news for the future stability of our local housing market. | |
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Harrisonburg Area Home Sales and Prices Rising Quickly In 2021 |
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 Happy Friday morning to you, friends in the Harrisonburg real estate world and beyond! It is a wild and crazy time right now in the local real estate market with many (many!) homes selling in a matter of a day or two -- often with multiple offers. It is not uncommon to have 5+ (or 10+) offers on a house within the first 48 hours of the house being listed for sale. Which means, as you might imagine, that... [1] It is a delightful time to sell! [2] It is a difficult time to buy! [3] If you need to do both, perhaps it's a wash!? Read on for some numbers and charts and graphs that can help us gain a deeper understanding of some of the current dynamics of our local real estate market -- or download my entire market report as a PDF here. First, the basic overview of how things are looking so far this year...  Several things to unpack here, actually... [1] We saw about 1% more home sales this May (the month that just ended) as compared to last May. This is actually a bit surprising. Home sales were rather sluggish last May due to Covid. As a result, I expected we'd see more home sales than we did this May. That said, the limitation on the number of home sales happening these days seems to be more in the area of how many sellers are willing to sell -- as opposed to how many buyers want to buy. So, sometimes when we see fewer homes selling -- it may simply be a result of fewer sellers being ready and willing to sell. [2] Despite only seeing a 1% increase in home sales during May, there have been 15% more home sales in the first five months of this year as compared to the first five months of last year. Thus, don't knock 2021 just yet -- we're well ahead of the pace of home sales that we saw last year. Later on I'll show you an even broader picture to see how 2021 compares to earlier years. [3] When we look at a full year of home sales there has been an impressive 19% increase in the pace of sales. There have been 1,568 home sales in the past 12 months -- compared to only 1,314 home sales in the 12 months before that! [4] Prices keep on rising! The median sales price of all homes sold in Harrisonburg and Rockingham County was $250,000 over the past 12 months -- which is a 9% increase over the median of $230,000 during the prior 12 months. [5] Homes are selling fast -- FAST! The median days on market has dropped 60% over the past year, from a median of 15 days to a median of 6 days. The median days on market is a measure of how many days it takes for a house to go under contract once it is listed for sale. OK, phew, now -- onto one slight nuance that bears noting...  The chart above is comparing detached home sales (green section) to attached home sales (orange section) over the past year. While we have seen a respectable 11% increase in the number of detached homes selling -- we have seen an astonishing 42% increase in the number of attached homes selling! These attached homes are duplexes, townhomes and condos -- and a good number of those are likely new homes. Most new dwellings currently under construction are attached homes -- which contributes to the larger increase in the sale of attached homes. Here's another visual look at what was actually a somewhat surprisingly low month of home sales in May 2021...  As stated previously -- home sales in May 2021 were lower than I thought they'd be given past months of May. During May of 2018 and 2019 we saw 130 and 158 home sales -- but that dropped down to only 111 home sales in May 2020, largely due to Covid. So, yes, I was surprised to only see 113 home sales in May 2021. I expect we'll see home sales pop back up in June -- but as also stated previously, this will largely depend on enough sellers having been willing to sell! Now, let's look at the first five months of this year compared to the same timeframe for the past three years...  As shown above, we've seen 556 home sales thus far in 2021 -- which is well ahead of the pace we saw for each of the past three years. Thus, even though 2020 ended up being a wildly active year for home sales (1,493) it would seem that 2021 might be on track to surpass that pace! Buckle your seat belts -- if we're going to get there, to perhaps 1500+ home sales -- it's going to be a wild ride for the next seven months of the year. Here's a visualization of how the annual pace of home sales has been speeding up...  As I have described it above -- [1] We have seen STEADY growth in the median sales price over the past year, plus. The current median sales price of $250,000 is 9% higher than it was a year ago. [2] We have seen EXPLOSIVE growth in the pace of home sales over the past year. The current pace of 1,568 home sales a year is 20% higher than it was a year ago! Will home prices keep rising forever? Maybe so. Will the pace at which they increase start slowing? Maybe so. Here's a brief look at that dynamic just five months into the year...  When looking just at single family homes, above, we find that... In the five years before 2020 we saw between a 2% and 7% increase per year in the median sales price. On average, the median sales price increased 4.8% per year between 2014 and 2019. But then, 2020. :-) We saw a 12% increase in the median sales price of single family homes between 2019 and 2020. So, what will happen in 2021? Well, we're only five months into 2021 thus far -- AND, if you ask most active Realtors in this area, they'd likely tell you that, anecdotally, home prices seem to be accelerating even more this year than last year -- BUT, thus far we have only seen a 2% increase in the median sales price in 2021. So, stay tuned. I'll keep monitoring this as the year continues. I don't think the median sales price is going to actually flatten out or decline -- but I also don't think we'll necessarily see another 12% increase this year. OK, this next one requires a bit of thought and explanation, but bear with me...  When it comes to contracts signed per month, as shown above, here's what I'm trying to point out... [1] Last spring (March, April, May) only 375 buyers (and sellers) signed contracts. This was likely a bit slower than normal because of Covid. [2] This spring (March, April, May) things were much more active, comparatively, with 434 contracts signed. [3] Last summer (June, July, August) was extremely active -- with 495 contracts signed. This was likely somewhat the result of the market bouncing back after a slower spring. So, what's in store for summer 2021? It's hard to say if we'll have as strong of a summer as we saw last year -- and as mentioned several times thus far, a huge impact on the pace of sales, and contracts being signed, is how many sellers are ready and willing to sell. The buyers are certainly there waiting to pounce! Now, perhaps one of the most confusing and most depressing graphs...  Lots going on here in this relatively simple graph... [1] A year ago a buyer would have found 228 homes on the market for sale in Harrisonburg and Rockingham County. That end-ish of May inventory figure has tumbled 58% over the past year to where current buyers are only finding 96 homes for sale right now!? [2] Bear in mind that low inventory does not mean no options. While buyers at this exact moment have 58% fewer choices than they did a year ago -- technically, they have had about 19% more options of what to buy over the course of the past year as compared to the prior year. After all -- the 19% increase in the number of sales in the past 12 months (compared to the prior 12 months) is a result of 19% (or more) new listings having coming on the market in the past year as compared to the prior year. [3] How can this be? How can a buyer have had 19% more options over the past year but 58% fewer options today? It's a result of the how quickly homes are going under contract. Lots of new listings have come on the market over the past year but they have been going under contract faster and faster and faster, resulting in fewer and fewer and fewer homes left on the market for buyers at any given point in time. What's one of the reasons why so many buyers are buying right now?  Low mortgage interest rates are making it a very compelling time for buyers to buy right now. Even if prices are going up, interest rates are super low -- and buying with such a low interest rate allows you to lock in the largest part of your monthly housing cost (principal and interest) at a super low payment given these super low rates. Alrighty then! If you made it through all of the charts and graphs and commentary above, hopefully you are feeling like you have a relatively good understanding of some of the market dynamics affecting our local real estate markets. Now, the "so what" of all of these market dynamics... HOME BUYERS - It's definitely possible to buy a home right now, but you're going to have more competition than ever before. You need to have a lender letter in hand, see a house within the first day (or two) of it being listed for sale, be ready to make an offer very quickly, and be willing to consider paying over the asking price and limiting your contract contingencies. It's a tough market, but well prepared, decisive, strategic buyers are winning contracts on houses. HOME SELLERS - You will likely sell your home more quickly, at a more favorable price, and with more favorable terms than you would have a year ago. That said, if you do receive multiple offers within the first week of being on the market, we'll need to make sure we're picking the offer with the most favorable terms overall, that stands the best chance of making it successfully to closing. HOME OWNERS - If you love your home, or even if you just like it pretty well, great! Settle in and enjoy owning a home during a time when home values are increasing quickly and when homes are hard for buyers to buy. Just like toilet paper, swimming pools, lumber, gasoline, and cars -- houses are in short supply and are getting more expensive. Enjoy the fact that you already own one! If you're looking to connect with me to talk about buying or selling a house, perhaps this summer, feel free to reply to this email or call/text me at 540-578-0102. Until next month, I hope you are able to find some time this June to relax and enjoy this first month of summer 2021! | |
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Theory: Low Inventory and Low Interest Rates Are Causing Some Overqualified Buyers To Willingly Overpay For Properties |
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 ALERT: Anecdotal Evidence Only! I like data. I use data quite a bit to better understand the dynamics of our local real estate market. But, sometimes I can't figure out a way to (easily) obtain data that would help to prove or a disprove a theory. So, from time to time, I'll propose theories of a current dynamic in our local market based solely on anecdotal evidence. This is one of them. Low Inventory and Low Interest Rates Are Causing Some Overqualified Buyers To Willingly Overpay For Properties I have seen this happening quite a few times on recent listings -- often where I am representing a buyer who has made an offer on a property, and misses out. Here's how that might play out, theoretically...
Two quick caveats...
So, why is this happening!? LOW INVENTORY - This problem (overqualified buyers overpaying for houses) is at least partially brought on by low inventory levels. If there were plenty of homes on the market between $350K and $400K then perhaps this buyer who can pay up to $400K wouldn't be making an offer on a house listed for $250K. LOW INTEREST RATES - The extremely low mortgage interest rates (3% on 30 year fixed as I type) are allowing buyers to afford more house than ever. This has lots of buyers able to higher on price than they could have in some past years when interest rates were higher. So long as we have overqualified buyers in the mix -- willingly overpaying for houses -- it will be hard for appropriately qualified buyers ($250K buyers wanting to pay $250K for $250K houses) to buy homes. OK, I'll stop there for now. It's a theory, after all -- overqualified buyers willingly overpaying for houses. What do you think? Have you seen it happen? Heard about it happening? Have you been a participant in such a transaction? :-) Drop me a line at scott@hhtdy.com with some details. Or, yes, if you disagree and think I'm totally wrong, email me with that feedback as well. :-) | |
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Does The Current Rise In Home Prices Mirror The Last Real Estate Boom? |
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 At first glance, yes, the current increase in median sales prices DEFINITELY mirrors the last run up in prices.
But, let's look a bit closer... Last Time...
As an important side note -- the median sales price then flattened out (2006-2008) and next declined 13% between 2008 and 2011. This Time...
So... Yes - median sales prices are currently increasing much faster than normal from any historical perspective and it seems unlikely that they could keep going up like this forever. But - the current increases in median sales price (+24% over three years) are only about half the size of the last time we saw a real estate boom (+51% over three years) so it's not quite as severe of an increase as last time. Certainly, though, many wonder if median sales prices will flatten out (seems possible) or decline (seems less likely) in the coming years. | |
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Home Sales Up 19% In Harrisonburg, Rockingham County In 2021 |
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 Happy bright, sunny, soon-to-be-hot, Wednesday morning to you! Curious about how things are going in our local real estate market? Here's a snapshot of what now just seems like a typical day in the local real estate market... Driving To Work In The Morning: "Oh, look, that house was just listed for sale!" Driving Home From Work In The Evening: "Wait!? What!? Already under contract!?" Indeed, homes are selling FAST right now - often with multiple offers - often selling over their asking price. Feel free to download a PDF of my full market report or keep reading as I dive into the data to take a closer look at the latest trends...  As shown above...
So, if April 2021 home sales were way above April 2020, how did they compare to other recent months of April?  As shown above, this month of April -- with 117 home sales -- was the strongest recent month of April. The next strongest month of April was in 2019 when we saw 112 home sales. Looking ahead, it seems likely that we'll see somewhere between 130 and 160 home sales in May, if 2018 and 2019 are a good guide. It seems unlikely that we'll sink as low as the 111 home sales we saw in 2020 during the start of Covid. Slicing and dicing things a bit differently, this year has stacked up quite nicely compared to past years...  With 442 home sales in the first four months of this year, this is a very strong start compared to the past few years, and even most/all of the years prior that are not shown! Here's another visualization of the surge of home sales activity we have been experiencing over the past year...  The orange line above is the one that looks a bit odd right now - largely due to Covid. After seeing the annualized pace of home sales steadily increase for several years, things dropped off quickly between April and July of 2020 due to the onset of Covid. But then, things started heating up -- quickly! Home sales have been flying high, increasing ever further and faster, for the past nine months and aren't showing any signs of slowing down. Sales prices, on the other hand, didn't take a nose dive last spring -- they have been "slowly" and steadily plodding along and upward. I say "slowly" because the increase has not been at the same breakneck speed of home sales -- but we have seen a much higher than normal (9%) increase in sales prices over the past year. What should we expect over the next few months, you might ask?  We have seen many more contracts over the past two months (143, 140) than we saw during those same months last year (116, 120) though - to be fair - last March and April were an uncertain time due to Covid. The number of contracts signed over the past two months does, though, indicate that we'll see strong months of closed sales over the next two months -- and we're still at the front end of the strongest six months of the year as far as the number of homes that sell in Harrisonburg and Rockingham County. So, don't expect things to slow down or calm down anytime soon! Several folks have asked me over the past month -- how can so many homes be selling when inventory levels are so low!?  Indeed, a confusing phenomenon, at first. There are fewer houses on the market right now than at any time in the past several years. Buyers today have less than 100 homes to choose from in all of Harrisonburg and Rockingham County. But -- that doesn't tell the whole story. Quite a few new listings come on the market each month -- giving buyers quite a few choices over a month long period -- but because so many of those new listings are going under contract so quickly, the influx of new listings never has a net impact on the number of houses remaining actively for sale at the end of each month. So - you won't have many options of homes to buy in a single day, but if you can give it a few weeks or months, you should have plenty of options over time. Did I mention that homes are going under contract quickly?  Over the past year, 72% of homes have gone under contract within 30 days -- and half of homes have gone under contract within 7 days!?! This rapid pace of buyers signing contracts on homes is what is keeping inventory levels so low. If you're just entering into the market to buy, you'll likely be astonished / disappointed by how few options you have right now -- but again -- just give it a bit of time and evaluate those new listings as they come on the market -- but do so quickly, before they are under contract! If you're fortunate enough to secure a contract on a house, you are likely excited about the low interest rate you'll have on your new mortgage...  After having started rising -- above 3% -- the average 30 year fixed mortgage interest rate has dropped (barely) below 3% again. This is an outstanding (and historically low) interest rate that gives current home buyers a unique opportunity to lock in a low long term interest rate on your mortgage. So, there we have it. Lots of homes are selling, quickly, at higher prices than ever. What is a seller to do?
What is a buyer to do?
If you're thinking about buying or selling soon and would like to talk a bit more about your particular situation, I'm happy to meet with you or set up a time to chat by phone or zoom. Simply reply to this email or text/call me at 540-578-0102. Best wishes for a pleasant balance of the month of May, and I'll be in touch again in June! | |
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The Number Of Offers On A Single House Is Sometimes Staggering! |
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 I know that you've heard that it is a strong seller's market and there is lots of competition amongst buyers for many new listings -- but did you know HOW extreme it has become in our local market? Two houses are referenced below that have come on the market in the past month or two. Neither of these were my listings, but I did have a buyer make an offer on each of them -- and the buyers missed out -- their offer was not the chosen one... Anonymous Property #1 Priced between $200K and $250K 16 offers within 48 hours Anonymous Property #2 Priced between $275K and $325K 17 offers within 48 hours Indeed -- 16 offers on one property, 17 offers on the other. I believe each had 30+ showings in the first two days. Wow! A few thoughts...
Again, it is staggering how much unmet buyer demand exists in the market these days. It's a great time to be a home seller. It's a rotten time to be a home buyer. :-/ | |
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13% More Contracts Signed This Year than Last |
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 It has been a busy few months for home buyers in Harrisonburg and Rockingham County. During the first four months of this year, 510 contracts have been signed for residential properties. This is 13% higher than the number of contracts during the first four months of last year. Some might find this increase in contract activity surprising as inventory has been extremely low all year but this statistic shows that even though there are not many homes on the market at any given time, there have enough new listings coming on the market for more buyers to contract on homes this year than last during this timeframe. If I had to guess how many offers were written in the first four months of this year versus last, here are the make-believe statistics I would come up with...
There are a tremendous amount of buyers attempting to buy homes right now which results in many of them finding themselves making offers on multiple houses before they finally are the winning buyer on a particular house. It will be interesting to see how the next few months ago but at this point I suspect we will continue to see strong contract activity through the summer of 2021. | |
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The Morning Brew on whether the housing market will crash like it did in 2008 |
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 Do you read the Morning Brew? It's a daily email with top new stories in a format that is enjoyable to read. Subscribe here if you are interested. Here's an excerpt from today's Morning Brew that is applicable to the sort of things I usually share with you in this space...
Again, sign up for other great content from the Morning Brew here, and let me know if you agree with their editor's take on the future of the housing market. | |
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Home Sales Soar In First Quarter of 2021 in Harrisonburg, Rockingham County |
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 Happy not-really-tax-day, friends! (taxes are due May 17 this year) What a wild first three months of the year it has been thus far in the Harrisonburg and Rockingham County real estate market! Before starting to pick through the data to find some meaningful insights, here are a few general notes for you...
Now, let's dive right into the data and see what we can learn about our local housing market...  OK, some of these numbers (above) are just bonkers...
Now, then, let's take a look at a break down of detached homes (single family homes) and attached homes (duplexes, townhomes, condos)...  A few things to note when we look at this data sliced a bit differently than in the first data table... [ 1 & 3 ] While sales of detached homes increased 7% over the past year compared to the prior year, sales of attached homes increased 26% during that same timeframe. [ 2 & 4 ] The median sales price of detached homes increased 12% over the past year which is just slightly higher than the 10% increase in the median sales price of attached homes. Chopping the data up one more time by City vs. County we can note some differences as to how these two portions of our local market are performing...  The data above is just looking at where we are seeing home sales increase and by how much. Over the past year there has been a 3% increase in the number of homes selling in the City -- while there has been a 16% increase in the number of homes selling in the County. I believe this is primarily because the majority of new construction is now happening in the County -- thus those sales numbers have more of an ability to grow as compared to the City numbers where most home sales are resales. OK, next, let's visually contextualize that exciting month of March...  Indeed, March was a BUSY month of home sales in Harrisonburg and Rockingham County. While I am only showing three years of data above, the file I'm working in when I create these reports includes data all the way back to 2003 when I started in real estate. There has never, in that time, been a month of March where we have had 137 or more home sales in Harrisonburg and Rockingham County! Given contract data (we'll look at that a bit later) it seems likely that we will see another strong month of sales in April and May, which means the year is likely shaping up to be a year of a LOT of home sales. Which leads me to...  I put this graph together by stacking each month of home sales on top of the prior to see how each new year stacks up in comparison to past years. As you can see, above, this year (2021) is currently poised to be the best year ever as far as the number of properties selling in Harrisonburg and Rockingham County. So, lots of homes selling, how did we get here?  We didn't get here (1500+ home sales) without some turbulence. A year ago we had seen a slow and steady increase from 1300 sales/year up to 1350 sales/year. Then the COVID dip and then the COVID spike! Looking back, we had a five month period with far fewer home sales than we would have expected given our overall trajectory. And now, we are in the fourth month of what a much (much!) more active market than we would have expected given our overall trajectory. Now, you might find yourself saying that things have been crazy for MUCH longer than four months. Yes, you are right. The graph above is looking at a rolling 12 months of home sales, which evens out some of the peaks and valleys of home sale seasonality, but also can mean it takes longer for overall trends to appear. And yes, I know you probably didn't need a graph to tell you that a lot of homes are selling these days... but this graph made me realize that these two conflicting realities are being experienced daily in our local market...
But I digress. Lots of homes have been selling. What is to come over the next few months?  Well, based on a STRONG month of contract activity in March (143 contracts) it would seem that we'll continue to have strong months of home sales in the coming month or two. Furthermore, we're entering into what is typically one of the busiest seasons for buyers to be buying homes, so I expect contracts and closed sales to continue to stay at higher levels for the next five or six months, at least! And now, I think I mentioned (or you may have heard) that there aren't many homes for sale right now...  Yes, it is true. Even though we are seeing an ever increasing number of homes selling, we are also seeing an ever declining number of available listings. As I recently commented to a client, if we start the month with low inventory and 5,000 homes are listed for sale and 5,000 homes go under contract, we will still end the month with low inventory. As such, understand low inventory fully by remembering that...
Finally, just one more graph for your perusal...  This graph shows trends in the average 30 year fixed rate mortgage interest rate and there are a few things to note here as well...
Alright, that's all I have for you at this point. You are now up to speed on the latest news and developments in our local housing market. But if you are thinking about buying or selling sometime soon, these general market trends are only part of what you want (and need to know) as you also should dig into the market in which you are hoping to buy or sell -- whether that is best defined by price range, location, property type, etc. If I can be of help to you as you make plans to list your home for sale, or to seek a home to purchase, just let me know. I'd be happy to meet with you in person, via Zoom, or to chat by phone to help you think and talk through the possibilities. You can reach me at scott@hhtdy.com or via phone/text at 540-578-0102. Until we chat, or until I write again, here a few final tips... Sellers - Even though the market is hot, you still need to prepare your home well, price it appropriately based on historical sales data and market it thoroughly and professionally. Buyers - Get prequalified for a mortgage, start stalking new listings, go see them on the first day they hit the market, and get ready to compete in a multiple offer situation. Seller / Buyers - If you need to (or want to) sell in order to buy, this will require a bit more strategery than normal. It can be done, but we need a solid plan in place from the start. | |
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Is The Local Real Estate Market Frothy? |
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 One of my colleagues has asked me several times in recent months if it seems like our local real estate market is getting frothy. I have said yes, but without a full understanding of what exactly is typically meant by "frothy" when referring to a real estate market. Let's take a look, based on some great information from investopedia.com. What Is Froth? "Froth refers to market conditions preceding an actual market bubble, where asset prices become detached from their underlying intrinsic values as demand for those assets drives their prices to unsustainable levels. A frothy market is one where investors begin to ignore market fundamentals and bid up an asset's price beyond what the asset is objectively worth. Froth in the marketplace is often characterized by overconfident investors and is a sign that investor behavior and investment decisions are being driven by emotions." Picking that apart a bit...
What Might Happen? "A frothy market can be the precursor to a market bubble, which may lead to a severe contraction of asset prices, also known as a crash or burst bubble. The dotcom boom and bust of 2001 and the housing crash of 2007-08 are examples of asset frothiness that eventually lead to burst bubbles. Both bubbles were marked by increased levels of investor speculation that continued until investor confidence waned and sell-offs ensued, leading to a market correction and a sharp decline in prices." I suppose the best way to think about now (2020-21) as compared to the housing crash of 2007-08 is to consider investor participation in each of those timeframes. We did see a high number of investors buying homes in 2007-08 which was temporarily driving up demand, and thus prices, and then everything came tumbling back down. While it's difficult to precisely measure, I don't think that the level of investor participation in the market is as high now as it was then. Most competition for new listings seems to be from owner occupant buyers as they are generally willing to pay more than an investor for most property types and price ranges. How to Spot Froth in Real Estate Markets Here are some of the ways to spot froth in a real estate market per investopedia...
The whole article over at investopedia.com is worth a read. Does our current real estate market seem frothy? Yes. Will it result in a real estate downturn? Maybe, but not necessarily. Should we be worried? Maybe, but not necessarily. | |
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Some Would Be Home Buyers Are Deciding NOT To Buy Given The CRAZY Housing Market |
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 Many buyers are feeling a bit overwhelmed by the prospect of trying to buy in the current CRAZY housing market. They find themselves asking...
If you're trying to buy a house right now and you are having some (or all) of these thoughts -- you are not alone. There are many reasons to persevere and to keep on pursuing that goal of buying a house -- and most buyers do seem to be doing that -- though there are also some buyers who are throwing in the towel. Here's how that might look...
It is times like these that I am thankful for all of the counseling classes I took while I was completing my graduate degree from JMU. So, if you think you want to buy, but are are nervous wreck because of the hectic housing market -- feel free to reach out. I'm happy to meet with you to chat about the process and the market. We can call it a home buying meeting or a counseling session -- whichever makes you feel more comfortable. ;-) | |
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Ryan Homes May Be Starting To Help Some Housing Inventory Issues In Rockingham County |
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 Ryan Homes, a regional builder currently building homes in 15 different states including Virginia now has two communities underway in Rockingham County and likely will be bringing more on board in the future. SOUTH PEAK is a community of single level, three bedroom (1343 - 1527 SF) duplexes in McGaheysville with current pricing seeming to be mostly between $275K and $350K. While it appears that this will be a community of 72 duplex, thus far, 35 homes have sold, 2 are under contract and one is listed for sale, at least per the MLS. SHADY CREEK is a community of three and four bedroom (1296 - 1903 SF) single family homes (so far, though I believe attached dwellings are to come) in Grottoes with current pricing seeming to be mostly between $270K and $325K. Thus far, 17 homes are under contract and 4 are listed for sale, at least per the MLS. We are definitely having some inventory issues in Harrisonburg and Rockingham County -- with more buyers wanting to buy than there are sellers willing to sell. New home construction at scale can help to address this unmet buyer demand. Thus far, these communities by Ryan Homes are only hitting two segments of our local market but I believe we will see more communities to come that will likely create inventory in other areas and price ranges in our local market. | |
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Is My Home Value The Same As The Tax Assessment Or Zestimate? |
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 Which one of the values above is the "market value" of the imaginary home in question? The answer is -- the GREEN bar -- a home's value is most often determined by how much other buyers have recently paid for similar properties. A would-be buyer might WANT the home's value to be the "tax assessed value" -- but that might be quite a bit lower than the recent sales prices -- so a home's tax assessed value is not necessarily the home's market value. A would-be seller might WANT the home's value to be the "Zestimate" from Zillow -- but that might (often, usually) vary quite a bit from a home's market value -- so a home's Zestimate is not necessarily the home's market value. A would-be seller might REALLY WANT the home's value to be the same as the list price on competing properties currently for sale -- but those listings might sit on the market forever with unreasonably high list prices -- so the list price of competing listings is not necessarily the home's market value. Now, this scenario would be much easier...  As you can see here, there isn't too much of a difference between the different values -- so it matters a bit less which of the value perspectives we use when estimating a likely sales price and planning for a potential list price. But in the case where there is quite a bit of separation in these different value perspectives -- stay focused on what other buyers have recently paid for similar properties -- this alone is your best guide as to what you can/should expect the next buyer to be willing to pay for your house. | |
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What Could Cause Home Prices To Fall? |
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 Home prices have been on a tear (having great success over a period of time) for the past year+. Many home sellers are delighted to find out what a buyer is willing to pay for their home. Many home buyers are incredulous as to the price they have to pay for a house if they haven't been watching values adjust over the past year or two. But with all of these increases in sales prices of homes -- up 12% over the past year -- some buyers find themselves wondering if home prices will decline at some point in the future. Market fundamentals (supply and demand) seem to suggest that prices won't level out or decline anytime soon. There seem to be a nearly endless supply of buyers that are trying to buy homes (and often missing when there are multiple offers) and despite new listings starting to hit the market more frequently, inventory levels seem unwilling to meaningfully rise. So, if supply remains low and demand remains high, won't home prices stay steady or keep on rising? Yes, almost certainly. Here, though, are three reasons why home prices could fall over the next year or two -- even if none of them seem to be highly likely to occur... LARGE SCALE ECONOMIC CHANGES Certainly, if we see large scale economic changes, with the economy collapsing or unemployment skyrocketing, or a global trade war, etc., etc. then we could see a rapid decline in the number of buyers buying homes, which could cause home values to fall. But -- the economy has been through a lot in the past year+ and we didn't see that trickle down to a reduced number of buyers buying homes. So, this seems relatively unlikely. RISING MORTGAGE INTEREST RATES One of the reasons why today's home buyers often don't mind paying 12% more for a home than they would have paid last year is because of the low mortgage interest rates. Their mortgage payment often ends up being just about the same as it would have been a year ago. Rates are starting to trend upwards now, but slowly. If mortgages interest rates rose quickly, it would increase the monthly cost for a new buyer's mortgage payment, which could push some buyers out of the market, or reduce how much they could pay for a house. Thus, a large or sudden change in mortgage interest rates could cause home values to flatten out or even decline -- though it doesn't seem likely that we will see a large or sudden change in mortgage interest rates over the next year. EXCESSIVE NEW HOME CONSTRUCTION We all (hopefully) know that we have very low inventory levels in this area -- meaning that buyers have very few options of homes to buy at any given point. As I recently pointed out, new construction is perhaps the only way to meaningfully affect the available inventory. So, it's great to see some new building starting to happen in various areas of the County. If we saw a sudden, large, influx of new homes for sale, in a variety of price ranges, this could cause home values to flatten out or to decline. Of note, new construction at a large scale only in one price range might affect home values in that price range but wouldn't necessarily have a direct impact on home values above or below that price range. So -- are we likely to see home values fall over the next year or two? It doesn't seem likely -- but a combination of the factors outlined above could certainly slow down the current rapid ascent in sales prices. | |
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Will My House Really Sell For That Much?? |
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 It's a valid question. You see a few of your neighbors' houses being listed for big bucks -- more than you would have thought. Then, the sign says "UNDER CONTRACT" after just a few days. Wait, what!? Could *that* house really have sold for *that* much? If it did, what would my house sell for?? Many homeowners are surprised these days when they see what buyers are paying for houses on their street or in their neighborhood. It often prompts the question of... "Will my house really sell for that much??" The answer is often, yes, it probably will. Depending on your house and what "that much" is, of course. If you're thinking about selling this spring or summer we will need to be checking in multiple times on sold AND pending sales data. For example, if you will be putting your house on the market on June 1... March (now) - Look for homes that have sold in the past six to twelve months and those that are currently under contract to determine likely market value and to prompt potential pricing strategies. May 20 - Look again at sold data, and homes under contract at that time to again determine likely market value and to finalize our pricing strategy. You'll likely be delighted to see what other buyers have been paying for homes similar to your home -- and yes, that often can and will translate into a delightful sales price for your home as well! | |
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The Harrisonburg Area Real Estate Market Is As Strong As Ever Two Months Into 2021! |
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 Happy Thursday morning to you! It's been a busy week on my end, what with St. Patrick's Day yesterday, and my daughter's 13th birthday the day before (Happy Birthday Emily!) so forgive me for the slight delay in getting the news to you that... The Harrisonburg Area Real Estate Market Is As Strong As Ever Two Months Into 2021! Before I dive into the data below, a few quick links...
Now, on to the data...  As shown above, with St. Patrick's Day green numbers for ya, you'll note that...
So -- more home sales, at higher prices, selling more quickly! Sounds like a good time to be a seller and a bit less exciting of a time to be a buyer! What might develop as we finish out March?  You might notice that the 77 home sales seen in February 2021 was higher than last February (63) but was not the strongest recent month of February home sales. There were 81 home sales back in February 2018. Looking ahead to March, will we see more than 110 home sales close? It seems quite possible! Here's the data stacked up a bit differently...  As shown above, the January + February sales pace during 2021 of 182 home sales is the fastest start we've seen in the past several years. This is a good indication (though not a guarantee) that a relatively strong year of home sales lies ahead of us. You've seen a version of this graph below, but it surprises me again every time I see it...  The orange line (above) is tracking the number of home sales per year -- measured each month. Throughout 2019 and into the beginning of 2020 this was steadily increasing, from just below 1300 to nearly 1400. Then, Covid hit -- and within a few months the annual pace of home sales had dropped back down to 1300 sales per year. That's the downward dip shown above. Then, as we made it into the summer and fall (and winter) of 2020, the pace of home sales picked up incredible momentum, and accelerated beyond where we might have expected it to have been otherwise -- as shown with the dashed red line. All the while, the median sales price just kept on climbing, up to its current level of $247,700 as compared to $222,150 a year ago. So, Covid dealt us two surprises -- a rapid slow down and then a fast and furious rebound!  As noted previously, sales prices are on the rise. The median sales price of all detached homes (not duplexes, townhouses or condos) sold in Harrisonburg and Rockingham County (via the HRAR MLS) rose 12% in 2020 -- from $240,000 up to $269,000. If you bought a home in the past year, you likely paid 5% to 15% more than you would have a year prior. Not as fun for you as a buyer -- though the seller on the other end of your purchase transaction likely thoroughly enjoyed that increase! Looking ahead, again...  While we have seen a significant increase in the annual pace of contracts being signed (1364/year up to 1548/year) the number of contracts signed in February did actually drop off a bit from last year. Admittedly, the January 2021 contracts helped keep the Jan/Feb numbers higher this year than last, but this February did have a bit slower pace of contract signing than I expected. Maybe this smaller number of contracts has something to do with inventory levels??  A year-ish ago I thought it was quite something that we had broken through the 200 mark -- and all of a sudden we were in the 190's as far as the number of homes for sale in all of Harrisonburg and Rockingham County. But now -- we might break through the 100 mark?? A month ago there were 107 homes for sale -- now 106. Please, let's keep it to triple digits -- let's not get down to only 95 or 97 homes for sale!? One of the reasons buyers haven't minded (too terribly) that they were paying higher prices for homes over the past year was because mortgage interest rates were soooooo low...  But now, yes, mortgage interest rates are starting to rise a bit. It doesn't seem likely that they will rise dramatically through 2021, but the lows of being below 2.75% might be (??) behind us for good. OK -- I'll wrap it up there for now. A bit less than a month from now I'll send you another update on where we are a full quarter of the way through the year. My how time flies! Until then... Sellers - Even though the market is hot, you still need to prepare your home well, price it appropriately based on historical sales data and market it thoroughly and professionally. Buyers - Get prequalified for a mortgage, start stalking new listings, go see them on the first day they hit the market, and get ready to compete in a multiple offer situation. Seller / Buyers - If you need to (or want to) sell in order to buy, this will require a bit more strategery :-) than normal. It can be done, but we need a solid plan in place from the start. | |
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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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