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How Do Home Inspection Negotiations Usually Proceed? |
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A buyer agrees to pay a price for a house based on what they know about the house at that time. The home inspection process allows them to learn more about the house to confirm that it is the house that they thought. But sometimes, they discover problems with the house that they'd like the seller to address....
So, how do these home inspection negotiations usually proceed? The short (and vague) answer is -- well, it depends on the terms of your contract. But, overall, here is how the inspection process typically flows.... As you can see above, after a buyer requests repairs (based on the home inspection) the seller can choose to make some, all or none of the requested repairs. The transaction (and negotiations) can then go in a few different directions based on that response. Learn more about the home buying process at.... | |
Home Buyers Keep On Buying |
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You almost have to squint to see major differences between the trajectory of each of these lines over the past few years. The three lines above are showing the cumulative number of buyers signing contracts at any given point in the year. Looking back to the middle of March, just when we were starting to see effects of COVID-19 on our daily lives, the pace of contract activity in 2020 was ahead of the past two years... Jan 1, 2020 - Mar 15, 2020 = 265 contracts Jan 1, 2019 - Mar 15, 2019 = 242 contracts Thus, as of March 15, buyers were 9.5% ahead of last year's pace. Now, two thirds of the way through May, things have flipped flopped... Jan 1, 2020 - May 20, 2020 = 536 contracts Jan 1, 2019 - May 20, 2019 = 565 contracts Thus, as of May 20, buyers are 5% behind last year's pace. So... 1. Home buyer activity has slowed in 2020 over the past two months. 2. Home buying activity in 2020 is only 5% behind last year! I expect we'll see things start to speed back up at some point -- but it hasn't seemed to have started yet... | |
Mortgage Interest Rates Are Absurdly Low |
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Fortunate are the home buyers who happen to be buying right now -- and locking in super low mortgage interest rates! Over the past year, interest rates have been at an average of 3.62% -- but that has varied widely from being over 4% a year ago, to now being right around 3.25%. Rates have never (ever, ever, ever) been this low! If you are buying right now, you are fortunate to be locking in a very low mortgage interest rate, and it will likely never make sense to refinance! | |
Inventory Changes Can Reveal Reasons For Fewer Home Sales |
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Contract activity is slowing, a bit, and that will likely eventually lead to fewer sales -- that is to say fewer sales in 2020-YTD than in 2019-YTD. So, if we get to that point, perhaps in July 2020, what shall we conclude about the state of our local housing market if we're seeing fewer home sales this year than last? After all, we have been seeing relatively steady increases in the number of homes sales for almost 10 years now! I think inventory trends (at such a future date) will help reveal the reason for fewer home sales. If fewer home sales are accompanied by rising inventory levels... that will indicate that more sellers want to sell their homes than there are buyers who want to buy homes. That will mean that the market is softening and it will become less of a seller's market than in the past. If fewer home sales are accompanied by steady or declining inventory levels... that will indicate that fewer sellers want to sell their homes and the buyers are still there wanting to buy homes. That will mean that the market is staying strong with sustained buyer interest despite an interruption in the flow of sellers willing to sell. So -- fewer home sales could mean two very different things -- and thus far, it's seeming that it's the second scenario -- fewer sellers willing to sell despite a consistent pool of buyers ready to buy. | |
Home Sales and Prices Still Rising Despite Declining Contract Activity |
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I just published my monthly market report, which you can download as a PDF here, or read on for the highlights of what is happening these days in our local housing market. But first, check out the details of the house shown above, located adjacent to the JMU campus, by visiting 80MaplehurstAvenue.com. Now, let's dive into the housing data and see what we can learn about the latest trends in the Harrisonburg real estate market... As you can see above, the pace of home sales dropped off a good bit in April 2020 (see #1) as there were only 91 closed sales as compared to 112 last April. This is not altogether surprising, as we had seen contract activity starting to decline slightly in March. The year-to-date pace of sales (see #2) is actually still quite a bit higher (8.36%) this year as compared to last year. There was a surge of home sales in January 2020 which has kept us ahead of last year when it comes to year-to-date sales despite slower sales in April. The median sales price is still on the rise (see #3) over the past year -- having risen from $214,900 a year ago to $229,250 at the end of April. Homes are selling faster and faster and faster (see #4) with a 33% decline over the past year in the median days on market. And now, let's look at how sales have bounced all over the place thus far in 2020... If you're feeling dizzy in 2020 trying to keep track of how the housing market is doing, you're not alone...
So, yeah - the net effect is still an increase between 2019 and 2020 - but that might shift when we include May home sales. We are likely to see fewer than 130 home sales in May based on contract activity in April. Only time will tell whether these short term interruptions of long term trends will impact those long term trends, as shown below... As you can see (in green) the median sales price has been steadily rising over the past year (quite a bit longer actually) to the current median sales price of $229,250. So far, we're not seeing any indications that we'll see a flattening or decline in market values in this area. Over the past year, we have seen an increase (even if choppy) in the pace of home sales, but that dropped a bit in April 2020, and might drop a bit more in May 2020. I think this is mostly related to fewer sellers being willing to sell which is resulting in fewer buyers being able to buy. It's also helpful to look at values over time just for single family homes, as the townhouse/condo market often includes investors which doesn't show owner occupant buying activity as clearly... The figures above are showing the median sales price of detached homes over the past six plus years. The median sales price has risen between 2% and 7% for each of the past five years, and seems to be ready to increase again in 2020, perhaps by around 3%. Part of the reason that prices are going up is because we're seeing steady buyer demand amidst fewer and fewer options of homes for sale at any given moment... Above, we're looking at the number of buyers buying in a six month period -- which has been relatively steady over the past few years -- as compared to the number of homes on the market at any given time. The buyers are consistently ready to buy -- but they're fighting over fewer and fewer homes for sale. All that has made this an increasingly strong seller's market over the past few years. That said, buyer activity has faded a big over the past two months... Last year, April was the strongest month of buyer activity for the entire year -- this year, not so much. We've seen an increase each month this year in the number of buyers buying -- but it has only resulted in a total of 440 contracts, as compared to a slightly higher pace of 466 contracts last year. So, slightly fewer buyers have contracted to buy in 2020, which will eventually result in a slower year-to-date sales figure, though that hasn't shown up yet. And why are fewer buyers buying, you might ask? I think the largest factor is fewer sellers being willing to sell... As shown above, we have seen a 13% decline in the number of homes for sale over the past year. Last year, the number of homes for sale rose to around 270 homes and stayed around that number between March and October. This year, it is not clear that we'll see inventory levels get that high. Those buyers that are able to buy, though, are financing their home purchase at a historically low mortgage interest rate... The mortgage interest rate at the end of April was 3.23%, which is the lowest on record -- ever. If you are buying in today's market, and are able to secure a contract on a house in this low inventory environment, you are certain to be pleased with your mortgage interest rate. OK, well, I'll leave it at that for now. You can review all of the trends and graphs by downloading a PDF of my market report here, or follow my blog at HarrisonburgHousingToday.com where I'll continue to monitor trends in our local market. In summary, the local housing market continues to see more homes selling, faster, at higher prices - but a small slow down in seller (and thus buyer) activity over the past two months will likely start to translate into slightly slower pace of sales, even if prices are not affected. Until next month, stay healthy, stay sane, and be in touch if I can be of any help to you or your family - with real estate or otherwise. | |
Home Buying Activity Continues To Slowly Slow, But Low Inventory Likely A Contributing Factor |
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The pace of buyers signing contracts to purchase homes continues to slowly slow in 2020 -- with year-to-date contract activity in 2020 now 7% lower than during the same timeframe in 2019. A few contextual notes...
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Mortgage Applications, Often A Good Leading Indicator Of Buyer Activity, Rising Quickly! |
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The number of people making applications for mortgages tends to be a good indicator of current and future buyer activity. The graph above shows that mortgage applications in 2020 were a good bit above 2019 through the middle of March and then they took a nose dive. That said, over the past two weeks, the rate of buyers making mortgage applications has started to rise quickly again -- and is nearing the same place it was a year ago at this time. Mortgage applications precede close sales by a month or two (or more) so this may be an early indicator that buyer activity is starting to stabilize and increase again. of note -- this is a national trend - locally, we did not see as much of a drop off in buyer activity in March and April as this graph would suggest. | |
Looking At The Big Picture, Financially, Of Both Selling AND Buying a House |
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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. | |
The Value Of Your Finished Basement Depends On How It Is Finished |
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There are a lot of types of basements - and they have very different values to buyers and appraisers. Here are a few examples, to get you thinking...
You get the idea. :-) To say "this house has a basement!" can mean so many (so many!) different things. And, the value of that basement (to a buyer or an appraiser) will vary quite significantly. | |
Home Buyer Activity Still Slowing, Slowly, in 2020 |
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Are home buyers contracting to buy homes as quickly as we would have expected them to be in 2020? No. Has the pace of home buying activity dropped drastically given the current public health situation? No. As shown above, home buyer activity (this year is the red line) continues to trail off a bit as compared to the past two years.
The timing of contracts is different every year, so if we average out the past two years we see a pace of 485 contracts through May 7th. Thus, this year's pace of buying activity is only 4% slower than the average of the past two years. So... Is COVID-19 affecting the pace of home buying (and selling) activity in our local market? Yes. Is it still relatively likely that this year's total number of home sales will be within 5% - 10% of last year? Yes. Stay tuned for further analysis as we progress through this unusual time. | |
More Home Buyers Purchase In The County Than The City |
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Each year, right around twice as many home buyers purchase homes in Rockingham County as compared to in the City of Harrisonburg. That said, the home buyers in the City are much more densely situated -- since the City is comprised of only 17.42 square miles -- while the County spans 849.09 square miles! As a random aside, Rockingham County is the third largest county in Virginia! Not necessarily, as there are more than THREE as many homes for sale in the County as compared to the City. Where will you purchase your next home? In the City or the County? Why? Based on the lot size, privacy, school district, age, property type? | |
Focus On The Big Items When Drafting A Repairs Request |
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After a home inspection, a buyer knows more about the house than when they agreed to pay $X to purchase the house. In order for them to still want to pay $X for the house, they may ask the seller to address some of the deficiencies found during the home inspection. Imagine a hypothetical scenario where the following deficiencies are found:
So - which items should the buyer ask the seller to repair? Some could say ALL of them - the buyer didn't agree to pay $X for the house with all of these large and small issues. But I'd advise most buyers to only request that the seller address a subset of those issues:
All of the other items (3-7) are minor issues that won't cost too much (in time or money) to repair after you buy the house. But why not ask the seller to repair these items?
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Always Look At The Larger Context When Considering House Price As A Buyer Or Seller |
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THE BUYER'S STATED PERSPECTIVE I know that your house is listed for $400K, but this one other home a few streets over sold for $350K last month, and it was a larger, so I'm not paying any more than $350K for your home. THE LARGER CONTEXT Just a few items...
Furthermore, aside from all of these differences in the two houses --- the other ($350K) house is not available any longer --- and there aren't three other houses just like it that the buyer can decide to buy. In this case, by focusing on this one not-actually-that-similar sale, the buyer has put themselves in a situation where they might miss out on purchasing a great home because of how they are viewing the market based on one comparable sale. THE SELLER'S STATED PERSPECTIVE I am confident that I can sell my house for $350K. After all, my friend owned a very similar house and he just sold it in a week, with multiple offers, for $360K! THE LARGER CONTEXT Just a few items...
Again, by focusing on this one not-actually-that-similar sale, the seller has put themselves in a situation where they might miss out on selling their home because of how they are viewing the market based on one comparable sale. The Main Takeaway As a buyer or as a seller -- don't focus on just one comparable sale when deciding on a reasonable price to pay or to ask -- look for the larger context! | |
Homebound and Baking? Put Those Skills To Use When Selling Your Home! |
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When the home buyers walked into the next home, they were greeted by the pleasant, and heart-warming fragrance of freshly baked cookies. They walked into the kitchen and were delighted to find cookies, indeed -- freshly baked cookies -- prepared especially for them. This house already felt like a home, as they started enjoying a tasty cookie while touring the kitchen and beyond. :-) I always have a few clients each year who prepare a large batch of cookie dough when they list their home and they then pop several cookies into the oven to bake before each showing. Full disclosure -- I do love cookies -- so it's a win/win/win if I'm showing the house... | |
Contract Activity Slows In April 2020 But Perhaps Mostly Because April 2019 Was A Wild Month? |
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Contract activity declined 27% in April 2020 -- there were 157 contracts signed last April, and only 115 signed this April. Perhaps this is not surprising given the impact of COVID-19 -- or -- perhaps April 2019 was just a crazy month of contract activity and is not a great month to use for a comparison. When comparing April 2020 (115 contracts) to April 2018 (124 contracts) there was only a 7% decline in contract activity last month. Only time will tell whether this (fewer contracts) is a lasting trend -- but below you'll see how the year has shaped up thus far... As you can see, the 439 contracts thus far in 2020 is 5% lower than in 2019, but 3% higher than in 2018. So, let's keep on moving along and see what May will reveal! | |
Yes, House Showings Are Still Happening |
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Every home owner (house seller) likely feels a bit differently about whether house showings should happen and if so, how they should happen - but the majority of houses currently on the market can, indeed, be viewed by buyers. Below are recommendations for being considerate to home sellers... Prior to scheduling a tour:
During a property tour:
ALSO -- if it would makes you more comfortable, I can start by touring the house for you (taking precautionary steps as outlined above) and can take you along with me via FaceTime or Zoom. | |
Do Not Obsess Too Much Over The Zestimate For Your Home |
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Awesome, my Zestimate is X! Oh my, my tax assessment is only Y! Don't worry too much -- neither is necessarily very close to your home's value -- especially if there is a great variance in the values, as shown above. Of the multiple values shown on the graph above, the market value of the imaginary home in question 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. | |
Sold Price Per Square Foot On The Rise In 2020 |
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In addition to watching how the median sales price changes over time, it can be quite insightful to see how the median price per square foot of sold homes changes over time. The graph above tracks the median price per square foot of single family homes (not townhouses, duplexes or condos) in Harrisonburg and Rockingham County over the past 19 years. Price per square foot fell 22% between 2006 and 2011 as the market cooled back off. Since that time, however, we have seen a slow and steady increase in this metric -- from $101/SF in 2011 to $129/SF last year -- which marks a 28% increase over the past eight years. I wouldn't necessarily expect that we would see drastic increases in this metric in the next few years, but an increasing number of buyers (more demand) and significantly fewer sellers (less supply) does make you wonder if we will start to see more rapid increases in sales prices, and thus in price per square foot. Thus far in 2020, we are seeing a 6% increase in the sold price per square foot in Harrisonburg and Rockingham County! ALSO OF NOTE -- this metric is most helpful in understanding value trends over time -- not in calculating the value of one particular property. This median price per square foot is the mid point of many very different homes -- new homes, old homes, homes with garages, homes without garages, homes with basements, homes without basements, homes with acreage, homes on small lots, etc. A median price per square foot can be more helpful in understanding the potential value (or value range) of a single property if we pull that median value based on a smaller data set of more properties more similar to the single property. | |
City Homes Between $150K and $250K Are Selling FAST |
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Even in the midst of a pandemic, City homes between $150K and $250K are selling fast! I have experienced this several times lately either representing a seller or buyer, so I though I'd see if the data lined up with my experiences. It does. I took a look at all properties (attached or detached) between $150K and $250K that have gone under contract during the past 60 days in the City of Harrisonburg. There have been (24) such properties -- and they have gone under contract in a median of 3 DAYS. And of those 24 properties, 16 of them were under contract within a week! If you are selling a City property between $150K and $250K, you are likely to see plenty of buyer interest. If you are hoping to buy a City property between $150K and $250K, you had better be ready to act fast, and you are likely to have plenty of competition. | |
YTD Home Buying Activity Slows Slightly in 2020 |
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This is my first weekly check-in with contract activity where we're seeing a slight decline in contract activity in 2020 as compared to 2019. The data...
So, slightly fewer buyers have contracted on homes this year (to date) as compared to last year (to date). Is it significant? No, at least not at this point. There has been a 2.8% decline in buyer activity in 2020 -- which is a relatively small decline given how much of our daily lives has temporarily changed due to COVID-19. Happy Friday, and I'll check in on this metric again about a week from now. | |
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Scott Rogers
Funkhouser Real
Estate Group
540-578-0102
scott@funkhousergroup.com
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Commonwealth of Virginia
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