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Will Single Family Home Sales Ever Return to 2016 Peak? |
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![]() I actually asked the same question last year. Thus far, the answer is still -- NO -- detached homes might not (??) ever (??) return to their 2016 peak. Actually, I don't completely hold to that conclusion, but read on for a moment. After three years straight (2013, 2014, 2015) of seeing a *very *consistent number of detached homes in the City and County (813-819) there was a 20% increase in 2016 to 978 home sales! But then, in 2017 -- sales of detached homes fell 10% to 884 sales. This could have partially been an inventory issue -- with fewer and fewer homes available for buyers to purchase -- but I have recently concluded that home sales can remain stable even with declining inventory levels. So -- getting back to it -- will we return to that 2016 peak of 978 detached home sales? Or will we beat it and hit 1,000 detached home sales at some point soon? We did see a few years of those sales levels in 2004 (1024 sales) and 2005 (1025) but that was amidst the real estate BOOM. I'm going to say that YES we can expect to get back up to those 2016 levels -- and even beyond that -- but it might take another year or two AND we probably need some new detached homes to be built. If that is even possible. As always, let me know what you think! Are you more optimistic (or pessimistic) than I am about detached home sales? | |
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What Would It Take For New Construction (For Sale) Housing To Be Built, At Scale, In or Around Harrisonburg |
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![]() As you may have heard -- the market is hot -- sales are stead, inventory levels are declining and homes are selling more and more quickly. Perhaps, just perhaps, we need some new homes to be built to add to the supply side of the equation? So -- after all that -- what would it take for us to see more new construction (for sale) housing in and around Harrisonburg? 1. More highly motivated sellers of development land. 2. Fewer student housing, rental housing and mixed use developers. You see, there are parcels of land for sale in and around Harrisonburg right now -- or parcels of land that could be purchased where a builder could build homes and buyers could buy those homes and everyone would live happily ever after. But -- most sellers of development land aren't overly motivated to sell quickly AND they are convinced that their land should be valued as if it is being sold to a student housing, rental housing or mixed use developer. And, so long as there are student housing, rental housing or mixed use developers willing to buy land at a high price/acre AND/OR as long as owners of development land are willing to hold out for that high price/acre -- then land is not likely to be sold to developers or builders at a price/acre that would allow them to build homes for buyers to buy. I think it is important that our local housing stock increase over the next five years with more options for buyers (especially first -- or second -- time buyers) to make Harrisonburg their home. But right now, we seem to be at a bit of a stalemate -- sellers of development land don't want to sell their land at prices that would allow a builder/developer to build homes for sale -- and builders/developers don't want to pay (can't pay) overly high prices/acre and still deliver a product to the market at a price that a buyer would be able to afford. | |
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Will We See Modest Sized New Homes Built Anytime Soon? |
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![]() Between 2000 and 2012, three centrally located townhouse developments were built in Harrisonburg:
Some of these townhomes were purchased by investors. Some were purchased by folks who have since sold and left the area. Some were purchased by folks who have since sold and bought a new, larger home, in or near Harrisonburg But I believe a lot of the original (or second) owners of these 614 townhouses are now looking around Harrisonburg wondering where they will, where they can go next. I believe our market desperately needs mid sized detached homes to be built, as these many townhouse owners are now older, often have started a family, and are looking for more space -- but can't jump up to buying a $350K to $400K home. What might these mid sized detached homes look like? Perhaps....
Note: This was written a year go -- and republished today -- and sadly, I don't think much has changed or improved over the past year. | |
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Is Overbuilding Occurring In Harrisonburg That Will Affect Buyers Of Investment Properties |
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![]() I am working with several real estate investors who are considering the purchase of townhouses in the $140K - $170K price range that they would intend to rent to young professionals / recent college graduates / young families, etc. A reasonable question for a thoughtful investor considering this type of purchase is whether our market is being overbuilt such that they may have difficulty renting their investment property in the future (higher vacancy) or that they may not be able to maintain their rental rate in the future. I do not believe that type of overbuilding is currently happening in our market -- though it could certainly happen in the future. But let's explore it together... Most of what one would see being built in Harrisonburg right now is either student housing or high end rentals -- and I don't believe either of these draws in the potential tenants described above -- and thus this construction would not negatively impact the investors purchasing the type of property described above. Student Housing - We continue to see more and more of this being built in our market. Young professionals are certainly not going to rent in a student housing complex -- and historically, when student housing supply has exceeded demand, the oldest and least desirable complexes have seen the biggest swings in vacancy rates (up) and rental rates (down) -- which again is not going to draw in the potential tenants we are discussing above. High End Rentals - The most obvious spot where these are being built is at The Reserve at Stone Port, though others are also planned at Preston Lake. These are apartments (instead of townhouses as discussed above) and the rental rates are much higher (for the amount of leased space) than our target tenant population would be finding in a townhouse. Again, I don't think these draw potential tenants away from the type of property that my investor clients are considering. Now -- even if the majority of what is currently being built is not likely to have a negative impact on the buyers of investment properties -- that's not to say that some other near-term construction would not have an impact. If a developer/builder started building (100) townhouses with 1400 SF, 2 or 3 bedrooms, 2 full bathrooms and intended to rent them for $950 - $1100 per month, that could impact the investment market I am describing. If a developer/building started building (100) townhouses with 1400 SF, 2 or 3 bedrooms, 2 full bathrooms and intended to sell them for $150K - $170K, that could impact the investment market I am describing. Neither of these types of developments are currently underway, though they are certainly both theoretically possible. So - given all of the above, it would seem to be a reasonable time to buy an investment property in that $140K - $160K price range, as I do not believe current inventory levels or new construction trends (for sale or for rent) are negatively impacting the buyers of these types of investment properties. | |
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Home Construction Nearing Completion The Glen at Cross Keys |
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![]() The Glen at Cross Keys is a new home development just East of Harrisonburg -- on Cross Keys Road with 78 duplexes and paired homes. The final nine homes in the neighborhood are at various stages of construction -- and seven of those nine are already under contract! The final two homes to be built in The Glen at Cross Keys just came on the market. These 2100 SF homes have been popular with a retiring, down sizing demographic -- with an open layout on the first level with the kitchen, dining area, living room, master suite, laundry room, an office/den and a two-car garage all on the main level. The partial second level features two large bedrooms and a full bathroom. Buyers interested in The Glen at Cross Keys have two more opportunities to buy a new home -- and then it will be a matter of patiently waiting for a resale home to become available. Find out more about The Glen at Cross Keys here. | |
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Lots (and lots) of High End Apartments Being Built |
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In addition to the 168 apartments about to be built at the intersection of Stone Spring Road and East Market Street (near Preston Lake) -- there are already hundreds now complete at The Reserve at Stoneport. Per my earlier research, it seems this community may contain 408 apartments, with rental rates from $1000 - $1800. How many high end apartments are needed in this area? While only a few years ago no high end apartments existed in our local market, now I believe Stoneport is already nearly entirely leased. How much unmet demand is there for these apartments? Apartment developers don't seem to have met the demand yet. Oh, and also of note in the aerial image above, it seems Dupont Community Credit Union put some solar panels on the roof of their new bank. Nice! ![]() | |
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179 Building Lots For Sale in Harrisonburg, Rockingham County |
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![]() Where will you build your new home? There are 179 building lots for sale in Harrisonburg and Rockingham priced under $200K. The list below shows the subdivision / location of the lots. If you're interested in further details about any of these lots or locations, let me know! As an aside -- how does 179 strike you? It was more building lots that I thought I'd find when a client asked about this. Of note -- these are lots where "public water" and "public sewer" are available -- there are countless other lots where you would need to drill a well and install a septic system. ![]() | |
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Only Four New Homes Remain at The Glen at Cross Keys |
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Construction is moving along steadily at The Glen at Cross Keys -- with 74 out of 78 homes now sold or under contract. Most of the recent builds have been the Sycamore and Paired Sycamore model that feature an open first floor plan with a two story great room. Click on the image below to view a photo set from a recent Sycamore home at The Glen at Cross Keys. ![]() Click here to view available homes at The Glen at Cross Keys. | |
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Are You Thinking About Purchasing A Modular Home? |
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![]() According to Wikipedia, a stick-built structure is "one constructed entirely or largely on-site," as opposed to a modular home that is "divided into multiple modules or sections which are manufactured in a remote facility and then delivered to their intended site of use." My experience in chatting with buyers over the past 15 years has been that there are mixed opinions on modular homes. For example, some would suggest that . . .
Overall, my experience indicates that modular homes sell at slightly lower prices as compared to stick built homes -- and some of that is solely as a result of some buyers being hesitant to purchase a modular home. | |
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220 Detached Homes, 175 Duplexes, 225 Townhouses To Be Built in County? |
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![]() Two rezoning proposals are going before the Rockingham County Planning Commission this week.... 54 Acres on Island Ford Road in McGahesyville (shown above)
Update after Planning Commission meeting.... Island Ford Road rezoning recommended by Planning Commission "In other business, the commission unanimously recommended approval of Gary Sandridge's request to rezone 54 acres on Island Ford Road in McGaheysville from agricultural use to planned single family. Sandridge plans to build 220 units that would connect to the existing Whispering Springs subdivision, which is at the intersection of Island Ford Road and McGaheysville Road." Pear Street rezoning tabled by Planning Commission "Commissioners Brent Trumbo, Rodney Burkholder and Keith Sheets voted to table the request. Commissioner Bill Loomis, who raised concerns over the density of the project and its compatibility with planned development in the city, abstained from voting. Commissioner David Rees was absent." Read more here.... County Planning Commission Tables Housing Request | |
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What homes are NOT being built? |
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![]() The graph above is not based on any actual data -- it's based on my experience of our local market, and conversations with a variety of buyers over the past few years. It seems that most of what has been built as new housing stock in this area over the past 15 years has either been townhouses -- or high end homes. This has left quite a gap in the middle of the market, where there is a LOT of buyer demand, but where there is NOT a lot of new housing stock to help meet this demand. How and when will this change? What will these buyers buy if they can't buy a home in that middle of the market price range? | |
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Only Six Lots Remain at The Glen at Cross Keys |
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![]() Only six lots remain at The Glen at Cross Keys - located just East of Harrisonburg, these 2100+ SF newly built homes feature an open floor plan with a two story vaulted ceiling in the kitchen, dining area and living room, which lead out to concrete patio. Buyers select from several upscale cabinet options from Classic Kitchen & Bath, granite kitchen counter tops, ceramic tile in the bathrooms, and much more. This Sycamore floor plan features the master suite on the main level, plus an additional room (office? studio? den?), plus two additional bedrooms and a full bathroom on the upper level. Check out more about this community at TheGlenAtCrossKeys.com - before they have all been built and sold! | |
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Hey Builders, Harrisonburg is an Increasingly Popular Place to Live, Keep Up, Please! |
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![]() OK -- no numbers today. Just a few thoughts that have been coming up in conversation after conversation over the past year. Inventory levels (the number of houses for sale at any given time) have been quite low when looking at the City of Harrisonburg and immediately surrounding areas. Many buyers are having a tough time finding a home to buy. Many houses are selling quickly because there are many buyers who want to buy them when they hit the market. I believe a significant reason why housing inventory levels are so low is because people are deciding they want to live in (or stay in or move to) Harrisonburg faster than builders are building new homes for them to purchase. Sometimes it is young adults who just graduated from JMU, EMU, or Bridgewater College and who want to stay in the area. Sometimes it is a local college grad moving back after having had a taste of life in the big City. Sometimes it is parents of these college grads turned Harrisonburg residents who are moving to Harrisonburg to be close to the grand kids. Whomever it happens to be -- more and more people are deciding they want Harrisonburg (or close to it) to be their home. And I believe they are deciding this at a faster rate than new homes are being built. Side note -- lots of rental housing is being built right now. This sort of helps -- people can rent if they can't find something to buy -- but it is not a viable long-term solution. So -- builders -- let's get to building some new homes, why don't we? It is time -- the home buying population is growing, and needing housing.... | |
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Buying vs Building A $400K+ Home |
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![]() Most buyers looking to spend over $400K (or certainly those looking over $500K) will also be considering building a new home. Typically, the tension between buying vs building is one of: 1. Goals 2. Money 3. Timing If you build, you can get the house you want, but you'll pay more for it and it will take a lot of time and attention. 1. Goals = Win 2. Money = Lose 3. Timing = Lose If you buy an existing home, you won't get exactly what you want, but you will pay less for the house and the process will not be a drain on your time. 1. Goals = Lose 2. Money = Win 3. Timing = Win Don't let my oversimplification of this issue fool you -- this is something that buyers can get stuck debating for months, or even years, often while looking at resale homes to try to convince themselves to buy instead building. If you are stuck in this quagmire, I'd be happy to meet with you to talk through some of the pros and cons and try to help you come to a decision you'll be pleased with in the short and long term. | |
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Rising Lumber Costs May Drive New Home Prices Higher |
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![]() Wood is just one component of a new home -- but it is a rather central component, and increases in the price of lumber can and will eventually impact the prices of new homes in our local market. Just how much have lumber prices increased? Try more than 50% over the past 14 months! The chart above shows the increases over the past year from below $350 (per 1000 board feet) a year ago to over $500 today. Why have lumber prices been increasing?
Read more about rising lumber prices at the Wall Street Journal.... With Lumber in Short Supply, Record Wood Costs Are Set to Juice Home Prices Only time will tell how much these increases in lumber costs will affect new home pricing in this area. Stay tuned! | |
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The mid sized homes that ARE being built |
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![]() Last week I spent some time discussing the market need that I perceive for mid sized detached homes in or near the City of Harrisonburg. I went further, to suggest that these might be 1750 - 2150 SF homes for less than $300K. Thinking further about it over the weekend, I think it is important to note that there are actually SOME homes being built that meet these criteria. Below are the three homes that sold with these specs thus far in 2017.... ![]() 1240 Cottage Lane (just outside Harrisonburg) 3 BR / 2.5 BA / 2336 SF / $275,230 ![]() 246 Dylan Circle (Bridgewater) 4 BR / 2.5 BA / 1818 SF / $247,000 [no photo available] 395 Acme Company Street (Broadway) 3 BR / 2.5 BA / 2257 SF / $277,000 And if we relax the criteria a bit, down to 1600 SF, we pick up a few more.... ![]() 365 Coyote Run (Broadway) 3 BR / 2 BA / 1600 SF / $$222,500 ![]() 2587 Calico Drive (Broadway) 3 BR / 2.5 BA / 1639 SF / 5 Acres / $249,100 ![]() 190 Grouse Drive (Massanutten) 3 BR / 2 BA / 1700 SF / $287,500 So, clearly, none in Harrisonburg proper, and most quite a ways from Harrisonburg -- and most importantly, VERY FEW homes at all that are being built and sold in this price range (under $300K) with these specs (1600+ or 1750+ SF). Switching, then, to what is currently available -- we find three options under $300K with 1750+ SF for buyers currently in the market.... ![]() 265 Dylan Circle (Bridgewater) 4 BR / 2.5 BA / 1808 SF / $246,900 ![]() 4150 Tanners Court (just outside Harrisonburg) 3 BR / 2 BA / 1830 SF / $279,900 ![]() 1250 Cottage Lane (just outside Harrisonburg) 4 BR / 2.5 BA / 2266 SF / $299,400 So, indeed, extremely limited options for new homes under $300K with 1750+ square feet in or near Harrisonburg. This brings me back to my same conclusions as I mentioned last week, and I'll mention again here....
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Can New Homes Be Built That Buyers Will Want and Can Afford? |
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![]() OK -- lots of great thoughts from folks over on Facebook yesterday, and in person as I talked to people around town yesterday, after I suggested that our market needs lots of mid size detached homes to be built. I'm going to think aloud about all of that by capturing a bit of that conversation here.... --- WHAT TYPES OF HOUSES? I had suggested that homes along these lines were needed for current townhouse owners that want to buy their first detached home....
These types of homes have not been built in large quantity over the past ten years, and I believe there are plenty of buyers who would love to buy this type/size of home. --- COSTS ARE HIGH BEFORE THE ACTUAL CONSTRUCTIONAs Jim, Jerry and Keith pointed out, It is expensive (!!!) to create a developed lot. The cost of building roads, installing water an sewer lines, utility hook up fees, etc. all add up to make the costs quite high even before construction (pouring the foundation, framing the home) begins. And as Nate points out -- if the land cannot be purchased by a builder at an affordable price, the rest of the equation downstream won't work out. High costs for land, plus development costs, plus building costs, will result in unrealistically high prices for homes, that then won't be affordable (or desirable at that price point) to buyers. Nate then ponders whether larger, regional builders can do better than local builders in this regard based on economies of scale. I'm not sure if the savings would be in buying a larger tract of land, lower development (infrastructure costs), or lower building costs -- but I wonder the same. Gary and Renee also point out that some of these "costs before you even start building" are high because of utility connection fees, requirements for stormwater management, proffers, etc., that are coming from government regulations and development requirements. Ginny points out that the final cost of a house is largely dependent on the initial land and development costs. Thus, to have smaller single family homes built, we may need to see smaller lots, to keep those initial costs down. --- DEMAND NEEDS TO DISCUSSED WITHIN THE CONTEXT OF PRICE As Jim succinctly puts it, "If I want something I can't afford then it isn't really demand." An excellent point -- which means that we need to think about (and talk about) the demand for the homes I outlined above (for example) within the context of the price for bringing such a home to market. If the houses I described (1750 / 1950 / 2150 square feet) were able to be sold for $150K, $175K and $200K (obviously not realistic) then clearly, there would be a ridiculously high demand for them. I believe that if the houses I described could be sold for $250K, $275K and $300K there would still be a strong demand for them. But, clearly, if the homes could not be sold for any less than (I'm exaggerating again) $400K, $425K and $450K then likely NOBODY would want want to buy them. So, yes, when we talk about demand for a particular type of housing, it likely should be -- as best as possible -- set within a context of price. That price-based demand can then be compared to development and building costs to see if developer and builders can bring such a product to market at a price that it will sell. --- WHAT SHOULD WE BE ADDING TO OUR HOUSING STOCK? As Jim also points out, the high demand and low supply environment we're in right now COULD cause a large quantity of under-qualified builders to start building homes. This doesn't help, in the long-term, as it is adding lower quality homes to our housing stock, which I do not believe helps our community in the long-term. Jim goes on to suggest that we should be ensuring that we are adding quality homes to our housing stock. I agree -- though I do think that we need to find a balance. If the quality of materials and finishes is too high, we're pricing ourselves out of the ability to meet the demand we're discussing. Michael takes us in a different direction when considering what should be built. He points out that even beyond building for all of those townhouse buyers (the original reason for my suggestion that we need to build mid sized detached homes) that he believes there is also a significant demand for affordable housing for the elderly in our community. He points out that retirement communities are not affordable for everyone, and plenty of older adults in our community would love to move into an affordable, (one-level), wheelchair accessible home. Again -- another market segment where we are not seeing much new construction. --- WHAT ARE PEOPLE GOING TO DO IF WE DON'T BUILD THESE HOMES? Ginny suggests that homeownership may be delayed for some families. A good point -- if the homes they want aren't available at the prices they can afford, perhaps they'll keep renting or keep living in the townhome they purchased. Ginny also suggests that we'll see more remodeling or upgrading of current homes to accommodate growing families, which also makes sense. Keith suggests that people will just have to move to some of the more affordable towns surrounding Harrisonburg. There are more affordable detached housing options when you look to Broadway, Timberville, Elkton and Grottoes. So, perhaps the townhome owners will just have to settle for a bit of a commute in order to buy a mid sized detached home that fits their budget. Jim suggests that maybe higher costs for new homes means that it will take much longer for families to be able to buy a home -- and perhaps they will have to stay in one home for a lifetime, instead of moving every 5 - 7 years. Gary concludes that many in our community may simply have to rent, or keep living in a townhouse, because of the cost of building new homes. --- CONCLUSIONS There were many other great points made, and discussions beginning, so thanks to all who engaged in this topic. A few big picture thoughts that come to mind for me....
Keep the conversations going, folks, on Facebook, with me, with each other. As Jim points out, "we're going to have to do housing differently than it has been built in the past 30 years if we are going to provide sustainable, affordable housing." | |
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We need mid sized detached homes, and lots of them, soon! |
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![]() Between 2000 and 2012, three centrally located townhouse developments were built in Harrisonburg:
Some of these townhomes were purchased by investors. Some were purchased by folks who have since sold and left the area. Some were purchased by folks who have since sold and bought a new, larger home, in or near Harrisonburg But I believe a lot of the original (or second) owners of these 614 townhouses are now looking around Harrisonburg wondering where they will, where they can go next. I believe our market desperately needs mid sized detached homes to be built, as these many townhouse owners are now older, often have started a family, and are looking for more space -- but can't jump up to buying a $350K to $400K home. What might these mid sized detached homes look like? Perhaps....
So -- who is going to build them? And where can the be built? In many conversations I have had lately, one of the main challenges is finding land that can be purchased at a price that will allow for the development and construction of this type of housing without making them $350K homes. | |
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Paired Homes Selling Quickly at The Glen at Cross Keys |
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![]() Sales are booming at The Glen at Cross Keys -- a paired home community, located just east of Harrisonburg. The main level of these homes feature an open floor plan, a cathedral ceiling in the great room, a master bedroom, the laundry room and a den / office on the main floor, plus two additional bedrooms and a full bathroom upstairs. Four homes are currently under construction (and under contract!) on lots 75, 76, 53 and 54 at The Glen at Cross Keys. Construction is about to begin on lots 51 (under contract) and 52, which will be followed by lots 33 and 34. You can find an overview of available homes here. And you can explore the most recently completed home in 3D here.... ![]() | |
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New Detached Homes in the City of Harrisonburg |
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![]() If a builder were to start building new homes in the City Harrisonburg -- what should that look like? Large lots? Small lots? Large homes? Small homes? Sound off: scott@HarrisonburgHousingToday.com There haven't been many new houses built in the past few years in the City of Harrisonburg! If we look at the past (12) months -- there have only been nine sales of homes built in the past five years....
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Scott Rogers
Funkhouser Real
Estate Group
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scott@funkhousergroup.com
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