Happy Tuesday Morning, Friends!

I hope October is treating you well and that you are enjoying the cooler temperatures as much as I am.  Earlier this month I had a great time picking apples at Showalter's Orchard in Timberville for the very first time. I brought home plenty of apples and some of their delicious apple cider. I had high hopes of baking some of those apples into a crisp... probably to be enjoyed with some vanilla ice cream and caramel sauce... Delicious!  Alas, thus far those delicious, crisp, apples have only been enjoyed with a side of peanut butter -- but maybe I'll break out the apple crisp recipe yet this week.  I hope you are enjoying some delicious flavors of fall yourself, and perhaps you'll consider a visit to Showalter's Orchard...

But moving past delicious, freshly grown, hand picked apples... and the desserts they might produce... let's explore the latest numbers from our local housing market for a bit.

As always, you download a PDF of all of the charts and graphs here or, if you are intrigued by the beautiful house in Fairway Hills that graces the cover of my market report this month, check it out here.

Now, let's break down the stats...

From a big picture perspective, here's what jumps out to me above...

[1]  Home sales were a bit slower this September (143) than last September (159).

[2]  Despite a slightly slower September, we've seen 15% more home sales thus far in 2021 than during the same time period in 2020! 

[3]  When looking at a full year (12 months) of data there has been a 21% increase in the number of homes selling, annually, in Harrisonburg and Rockingham County.  That is a significant surge!

[4]  The median sales price thus far in 2021 is $269,675 which is 12% higher than it was a year ago when it was only $241,000.  This is a large increase in median sales prices in just a year.

[5]  Homes were selling fast a year ago.  They are selling faster now.  Median days on market has dropped 55% from 11 days to five days over the past year.

When we break things down between detached homes and attached homes we can learn a bit more about what is happening in our local market.  An attached home is a duplex, townhouse or condo...

The green sections above are tracking the sales of detached homes where we find...

[1]  There have been 17% more detached home sales (1,124) in the past 12 months as compared to the prior 12 months (957).

[2]  The median sales price of detached homes has increased 12% over the past year, from $257,500 to $288,775.  That is an increase of more than $30,000 in a single year.

The orange sections above are tracking the sales of attached homes where we find...

[3]  There was a much larger, 29%, increase in the sales of detached homes over the past year.  The annual pace of these detached home sales increased from 409/year up to 526/year.

[4]  The median sales price of these detached homes has increased 15%, from $189,900 up to $217,650. 

I mentioned earlier that home sales slowed down in September -- but maybe partially because August was bonkers?

As shown above, September 2021 fell short (143 sales) of September 2020... but...

[1]  Don't forget about August!  There were an astonishingly high number of home sales (184) in August 2021, and if we combine August and September we find that there were 292 home sales during those two months last year, compared to 327 this year. 

[2]  The last four months of 2020 were abnormally active because many home sales that would have likely taken place in the first half of 2020 were pushed into the second half of 2020 because of Covid.  As such, looking towards the remainder of the year, I would not be surprised if 2021 continues to under perform as compared to 2020. 

Now, let's stack all of those months up to see how 2021 compares to past years...

Remarkably, the home sales in the first nine months of 2021 was more than in the first ten months of 2020 and more than the first eleven months of 2018 and 2019!

So, we can take a month off, right?  We could have no home sales in October and we'd still be outperforming last year!  Alas, it doesn't seem like home sales will be taking a break in October. 

But as for predicting future sales activity, the best bet is to look at recent contract activity...

The most recent four months of contract activity (Jun-Sep) have definitely been slower than the contract activity we saw a year ago.  There have been a total of 534 contracts signed between June 1 and September 30 this year -- as compared to 617 contracts signed during the same timeframe last year.  This likely means we'll see somewhat fewer home sales over the next few months.

This next graph won't surprise you as you've likely heard about the extremely low inventory of available homes in this area...

As I have mentioned before, this graph can be a bit misleading.  Some might understand it to mean that there are fewer and fewer homes for sale and thus fewer and fewer homes are selling.  But, in fact, we have seen 21% more home sales in the past 12 months as compared to the prior 12 months -- so what's the story?  The second half of my comment above "at any given time" is the key to unlocking this mystery.  Homes are selling (going under contract) quickly, and thus the number of homes on the market at any given time is continuing to stay low.  That doesn't mean that there aren't homes on the market to buy -- there are, or were -- but most will go under contract and not be available for any more than a few days.

So, as a buyer, be prepared to act quickly, likely compete with other buyers, and possibly have to wait a bit to find the right opportunity.

Interestingly, the changes in inventory levels haven't affected all property types in the same way...

The blue line above is showing changes in the number of detached homes on the market at any given time.  You'll note that these inventory levels have dropped quite a bit over the past two years.  The red line, showing attached homes) has been very low and remained very low for quite some time now.  Neither property type is likely to meaningfully increase until and unless we see a significant amount of new construction to help offset high buyer demand.

This graph is a new one, but I think an important one for keeping an eye on the mood of the market. 

Days on market, as shown above, measures how quickly homes are going under contract. Independent of how many homes are selling and the prices at which they are selling -- if they are going under contract quickly then the market is strong and power is tipped towards sellers -- and if homes are taking a longer time to go under contract the market is not quite as strong and power is starting to balance out between sellers and buyers. Over the past three years we have seen a steady decline in how long it takes homes to go under contract, with a current median of five days on the market.

I'll continue to monitor this "days on the market" metric over time to see if things are cooling off at all in our local market.  That doesn't seem to be happening yet.  :-)

You might have heard that mortgage interest rates are increasing, but...

I have read quite a few headlines lately about how rising interest rates are certain to dampen home buyer enthusiasm.  If I had a dollar for every time someone told me (or I told you) that interest rates were going to rise over the past seven (+) years...

Mortgage interest rates were around 3.5% a year and a half ago, and around 3% a year ago, and are around 3% now.  So, are interest rates rising?  Sure, a bit, depending on when you pick as the "then" to compare to the "now" but they are still very (very!) low.

Alrighty then!  That brings my monthly deep dive into our housing market statistics to a close, for now.  As usual...

If you have a question about the market, or your home, or your overall real estate plans -- don't hesitate to ask.  Email me or call/text me at 540-578-0102.

Have a great remainder of the week, and if you visit Showalter's Orchard and subsequently make apple crisp, text me a photo to make me jealous... or invite me over to sample it... I'll bring the ice cream and caramel sauce!  ;-)

 

Here are the three sequences I see buyers follow most frequently....

As Late As Possible

• Guess at what you can buy using online mortgage calculators.
• Start viewing houses.
• Make an offer.
• Ratify a contract to purchase a home.
• Start talking to several lenders.
• Select a lender.
• Become pre-qualified.
• Make loan application.
  
• Provide income and tax documents (etc.) to lender.
• Obtain loan approval.
  

Incredibly Proactive

• Start talking to several lenders.
• Select a lender.
• Become pre-qualified.
• Make loan application.
  
• Provide income and tax documents (etc.) to lender.
• Obtain loan pre-approval.
• Start viewing houses.
• Make an offer.
• Ratify a contract to purchase a home.

A Reasonable Middle Ground

• Start talking to several lenders.
• Select a lender.
• Become pre-qualified.
• Start viewing houses.
• Make an offer.
• Ratify a contract to purchase a home.
• Make loan application.
• Provide income and tax documents (etc.) to lender.
• Obtain loan approval.

I try to encourage all of my clients to at least be in the "reasonable middle ground" sequence as outlined above.  This gives them a firm idea of what they can afford and how a home price will compare to a loan payment.  This also allows them to make a stronger offer, already having a pre-qualification letter in hand.

I strongly discourage my clients from following the "as late as possible" sequence as outlined above.  This doesn't help them make the best decisions about which houses to pursue, how far to negotiate, etc.  This also doesn't allow us to make as strong of an offer on a house.

Occasionally, one of my clients will fall into the "incredible proactive" sequence as outlined above, and wow, this makes the financing process a joy to work through!  These buyers have already done so much of their work with the lender before even thinking about which house to buy -- which then allows them to focus on buying, negotiating, inspecting, etc., rather than be bogged down in the process of securing their mortgage.

The answer to this question - will a house sell for more than its asking price - does not just relate to how the asking price compares to the market value of the home.

Certainly, if a house is priced too low, or even priced fairly in a competitive market, that will increase the likelihood that it will sell above the asking price...

[1] A house worth $350K, listed for $330K, will almost certainly sell for more than the asking price.

[2] A house worth $350K, listed for $350K, is likely to sell for more than the asking price in the current market.

... but there are other factors that affect this as well.

[1] How many buyers have viewed the home?

As the number of showings increases, the likelihood of a house selling for more than the asking price also increases.

[2] How many buyers have made an offer?

As the number of offers increases, the likelihood of a house selling for more than the asking price also increases.

All of this might seem pretty straightforward, but pause to reflect on these dynamics as you are considering an offer on a house recently listed for sale.

Consider these two fictional houses that came on the market (not really) yesterday, that we’re walking through today...

[1] House listed for $350K, with 18 showings and four offers thus far.

This house is very, very likely to sell for more than the asking price.  :-)

[2] House listed for $350K, with eight showings and one offer thus far.

This house might sell for more than the asking price - if another buyer jumps in and makes a second offer.

[2] House listed for $350K, with 12 showings and no offers.

This house could, possibly, sell for more than the asking price, but it is not seeming very likely given that lots of buyers have looked at it already and there aren’t any offers.

[3] House listed for $350K, with one showing and no offers.

This house is almost certainly not going to sell for more than the asking price - unless a bit more time passes and several buyers all of a sudden go see the house at the same time and make simultaneous offers and then have to compete with each other to buy the house.

So, to answer the question of whether a house is likely to sell for more than its asking price, we really need to start by asking how many showings a house has had and how many offers exist.
  

How much interest will my house have once it is listed for sale?

The answer?

Assume nothing!

Just because you are in a low price range with very low inventory that does not mean you will have high buyer interest if there are other factors of the property (location, condition, age, finishes, systems) that make it less than appealing to most buyers.

Just because you are in an extremely high price range that does not mean you will not have lots and lots of early buyer interest and lots of offers.

Just because you are in a popular neighborhood that doesn’t mean that you can price your home higher than is justified based on comparable sales once adjusted for how they differ from your home based on layout, finishes and condition.

In the end, we can make some educated guesses on how much buyer interest (showings, offers) will exist once your house is listed for sale - but we won’t REALLY know until we list it for sale.

Ah, the suspense…
 

• The closing for both will be on the same day.  Let's say it's a Friday.
   
  
• You'll have to be out of your current house by the evening before closing (Thursday evening in this case) so that you can close on the sale of that house the following morning (Friday morning).
   
• You won't have access to the new house to move your belongings in until after you close on Friday afternoon.
   
  
• So, where are your belongings going to be from Thursday evening until Friday afternoon?  And where will you be?

• Work with a moving company that is willing/able to load you up one day and not unload you until the following day.
   
• Ask the buyer of your house if you can retain possession of the house for a day or two after closing to get things packed up and moved out after closing.
   
• Ask the seller of the house you are buying if you can have early possession of the house for a day or two before closing to get things moved in before closing.

 

If a buyer is buying a home priced over $400K or $500K, or even over $300K, the layout of the home becomes very important to them.  That is not to say that it is unimportant for a $200K buyer -- but someone buying a more expensive home oftentimes plans to stay in it for a longer time frame.

If not the #1 feedback, then perhaps the #2 feedback I receive from showings of homes priced over $400K is that the layout just didn't work for the buyers....

• They wanted another bedroom here, instead of there. 
   
  
• They wanted a more open floor plan. 
   
  
• They wanted more of a formal dining room. 
   
  
• They wanted a more spacious basement. 
   
  
• This room is a bit too big. 
   
  
• That room is a bit too small. 
   
  
• They don't like how close this room is (or is not) to that room. 
   
  
• And on and on.

Frustratingly, the layout is something that is hard (nearly impossible) for a seller to change in order to appeal to a wider segment of buyers.  Thus, if your home has a layout that continues to not work for buyer after buyer, you must either wait (and potentially wait and wait and wait) for the buyer who loves that layout -- or adjust the list price to make the house (even with its layout) more appealing to more buyers. 

 

1. Obtain a pre-approval letter from a lender.
    
2. View the property.
    
   
3. Ask follow up questions of seller.  (utility costs, age of house components, reasons for selling, motivation level, timing logistics)
    
   
4. Research comparable sales to determine market value.
    
5. Research restrictive covenants, deed restrictions, septic system details, survey, etc.
    
6. Discuss negotiation strategies.
    
7. Determine main terms of offer.  (price, timing, contingencies)
    
8. Draft and review offer documents.
    
9. Sign (in person or electronically) offer documents.
    
10. Submit offer documents to the seller and (patiently?) wait.
    

Let me know if you have questions about this process -- and know, of course, that the process looks slightly different for each buyer and for each property.  This is a general guide, but not a required list and sequence.

When we get to step seven, above, we will be discussing and deciding on the terms of the offer.  Below is a list of the main contract terms we will need to discuss in preparing to make an offer.

• Your Full Name:
  
• Your Current Address:
  
• Personal Property to Convey:
  
• Offering Price:
  
• Type of Financing: LTV: Rate Cap:
• Earnest Money Deposit:
• Request for Closing Cost Credit?
• Financing Deadline:
• Settlement Date:
• Home Inspection? Radon Inspection?
• Inspection Deadline:
• Do you want to purchase a home warranty?
• Other Terms?

When making our offer, it will be important to remember that there are a variety of terms that will be important to the seller - not just price, but also timing, contingencies, etc.
 
Before and after making an offer, there is a lot more to know about and think about regarding the home purchasing process.  Read more at....


 

If you plan to buy a home this fall -- but you already own a home, that you plan to sell -- then one of your first conversations should likely be with your favorite mortgage lender. 

It's a seller's market, after all, which means that...

[1]  When you are selling your home, you will likely find yourself able to negotiate favorable terms with most buyers making an offer on your home.

...but...

[2]  When you are making an offer to buy a home, the seller will likely have the upper hand in negotiations.

As such, if you are planning to make an offer to buy a house with any of these scenarios, you are unlikely to be successful...

So, if you want to have a fighting chance at buying a home right now, you will likely want to explore what it would look like to buy before (or independent of) selling your home.

Basically, will your lender allow you to buy a new home before selling your current home. 

If your lender says this is possible -- and if you are comfortable with it -- this will allow you to pursue houses that come on the market and make offers that are not contingent on the sale of your home.

But again, all of this starts with a conversation with your lender.  So, if you want to buy this fall, but will also need to sell, and you're not sure if you can buy before selling -- talk to a mortgage lender ASAP to find out!

If you need recommendations on some great mortgage lenders in this area, feel free to email me.

 

This house has soooo much of what I want in a new home...

...I mean -- it checks off almost all of the boxes...

...well, but, except for ___, and I did say that was pretty important...

...but there are so few options for buying right now...

...should I just go ahead and move forward with this mostly perfect house?

This is the conversation I have had went LOTS of buyers lately -- they have decided to buy, have seen so few options on the market, finally see a house that is reasonably close to what they want -- and they then need to decide whether that house is close enough.

It's a tough call with no one right answer!

How close to perfect do you need to get when shopping for a home in a market where there are very few listings on the market at any given time, and when houses often go under contract in days rather than weeks or months?

Will you be glad to finally have a contract on a house be done with the frantic search?

Are the areas in which the house misses the market for you critical areas or "nice to have, but not essential" areas?

Are the ways in which the house is not perfect changeable (condition, finishes) or unchangeable (location) in the future?

There is no easy answer -- but I'm happy to talk it all through with you when we find that house that is pretty darn close to what you want to buy -- but not quite perfect.

 

Home prices are increasing quickly these days -- we've seen a 13% increase in the median sales price over the past 12 months!  As such, it might seem nearly impossible to overprice your home when you are listing it for sale.  But it's possible.  :-) 

Let's say homes in your neighborhood were selling for $400K a year ago and are now selling for $440K.  That sounds about in line with that 13% increase described above.

Even though market data points to a value of $440K for your home, you decide to list it for sale for $475K. 

Why not, right?  Buyers will pay nearly any price in the current market!

Here's what is likely to happen...

[1]  You will still have showings.

[2]  Some (or even many) of the buyers who view your home will want to buy your house, but not for $475K, and they will hesitate to make an offer because they figure there is probably some buyer who will pay $475K because the market is so crazy.

[3]  You won't have any offers on the house.

[4]  You'll wait 2 or 3 or 4 weeks and then reduce the price to $460K.

[5]  You will won't have offers.

[6]  You'll wait another 2 or 3 or 4 weeks and then reduce the price to $449K.

[7]  You'll get an offer of $440K and settle on a price of $445K.  The offer will include an inspection contingency and an appraisal contingency.

Now -- wouldn't it have been easier to go this route instead?

[1]  Price your home at $445k or $449K.

[2]  Have lots of showings and multiple offers.

[3]  Sell your home for $445K or $449K without an inspection contingency or appraisal contingency.

Even in a strong seller's market, it is important to price your home reasonably within the context of past sales data and competing listings.  Overpricing your home is likely to slow down your home sale, possibly lower the price for which you'll sell, and possibly result in an offer with more contingencies than you would have had if you had priced your home reasonably from the beginning.

 

If you own a townhome in the Taylor Spring neighborhood -- or actually, in most townhome neighborhoods -- this could be a fantastic time to sell it.

You have likely seen a $21K increase in its value over the past year, and a $34K increase in value over the past two years and a $40K increase in value over the past three years!  Wow!

Buyers are paying more (and more and more) for townhomes these days -- which can make it an ideal time to sell such a property if you own one.

With two important caveats, of course...

[1]  If you own a Taylor Spring townhome and live in it, we'll need to make sure we have a plan in place for where you will buy after you sell.

[2]  If you own a Taylor Spring townhome and are renting it out, you'll want to consider the tax consequences of selling the property and whether you would want to roll the proceeds into the purchase of a different property.

Townhomes have seen steady increases in their market value over the past few years, so if you own one and are thinking of selling it, this could be an ideal time to move forward with that plan!

You can explore Taylor Spring townhome value trends here and explore value trends in most of our area's townhome communities here.

   

I've written about improving your home a few times this week...

Thanks, to Frank, for spurring on many of these thoughts and topics.

On to one more important concept to note...

It is possible to over improve your home within the context of your neighborhood.

A stark example...

This stat (illustrated above) might surprise you.  It surprised me!

Thus far in 2021 there have been 379 sales of townhomes, duplexes and condos in Harrisonburg and Rockingham County as recorded in the HRAR MLS.  Of those 379 sales -- 35% of them have been new home sales!

I know there have been plenty of new home sales (particular of attached properties) in 2021, but I didn't think it was more than a third of all attached homes that are selling.

Here are some of the spots where we have seen the most sales of new townhomes, duplexes and condos thus far in 2021...

As I pointed out yesterday...

But... that's not to say that you shouldn't consider remodeling your home... and it certainly doesn't mean that you should just trade up to a nicer home rather than making those improvements to your current home.

Let's explore the numbers a bit using one of yesterday's example as a starting point...

Dialing in a bit, let's imagine this is your scenario...

Are you looking to renovate your living room, kitchen or bathroom... or replace your siding, roof, windows or deck?  Are you curious about how each of these projects will affect your home value?

Will spending the money on these major home renovations increase your home value by more than the cost of the renovations?

Almost certainly, no.

In almost all cases, you will spend more on these major home renovations than you will see in an increase in the value of your home after the renovations.

According to the Remodeling 2020 Cost vs. Value Report the amount of your cost that will be recouped through an increase in value ranges from 50% to 70% for almost all of the home improvement projects they analyzed.

So...

 

The number of homes that sell in a given timeframe is somewhat indicative of the strength of the local housing market - but not necessarily.  The number of homes selling in a given timeframe is affected not only by how many buyers want to buy -- but also how many sellers are willing to sell.

The median price of homes that sell in a given timeframe is a somewhat better indication of the strength of the local housing market - but it is somewhat slow to respond to changes in the market.  Even if (when?) the market starts cooling off, we're not likely to see an immediate impact in the sales price of homes.

But days on market -- how quickly homes are going under contract -- that can be an excellent indication of the mood of the local housing market.  Independent of how many homes are selling and the prices at which they are selling -- if they are going under contract QUICKLY the market is strong and power is tipped towards sellers -- and if homes are taking a longer time to go under contract the market is not quite as strong and power is starting to balance out between sellers and buyers.

The graph above shows the median days on market (the number of days it takes for a home to go under contract once it hits the market) measured each month by looking at the 12 months leading up to and including that month.  So, for example...

So, you're thinking about putting your house on the market?

And you're wondering how long it will take to go under contract? 

And how long it will take to get to closing?

These days the chances are very high that your home will be under contract within 30 days and closed within 90 days -- and that's rounding up quite a bit.

As shown above, 78% of homes that sold in the past year were under contract within 30 days.

Technically, as per the stat at the bottom (median = five days) we can see that half of the homes that sold were under contract in five or fewer days!

So, if you're wondering how the timing of your real estate transaction *might* play out, per the stats from the past year...

Relatively (50%) Likely:  under contract within 5 days, closed within 45 days.

Very (78%) Likely:  under contract within 30 days, closed within 90 days.

One caveat, of course, is that your particular home, depending on it's location, price range, how well it is prepared, how well it is priced, how well it is marketed may over or under perform as compared to market norms.

 

It is so darn exciting for homeowners to see how much their home has increased in value over the past few years!  As noted earlier this week in my monthly market report...

Wow!  Having $70,000 more equity in your home based on increases in market values over the past four years is amazing!

But, as the conversation has gone with soooo many folks lately....

So, in the end, many homeowners find themselves wishing that they could do something about their newfound wealth via increased equity in their home - but not finding a home that they'd like to purchase - and not really wanting to move just to move.

So, my encouragement to them (maybe to you?) is to...

 

I knew August 2021 was a busy month of home sales in our local market -- Harrisonburg and Rockingham County.  I didn't know HOW busy when put in the context of past years.

Looking back a bit -- 10 years -- it seems that the 176 home sales that took place in August 2021 was the highest number of home sales seen in any month over the past 10 years!

Runner Up = June 2021 with 174 home sales (yes, two months ago)

Third Place = June 2018 with 174 home sales

What, oh what, shall September... and October... bring in our local housing market!?