Below are several highlights from the September 2010 Harrisonburg & Rockingham County Real Estate Market Report.  Read on, or click here to download a PDF of the entire report.

Home sales in Harrisonburg and Rockingham County... Are they up? Down? Stable? 



In fact, they are up, down AND stable!  A mix of indicators this month:

• Home sales in August 2010 increased compared to July 2010.
• Home sales in August 2010 decreased compared to August 2009.
• Though not shown above, 2010 YTD home sales are nearly equivalent with 2009 YTD home sales.

The third is perhaps the most important indicator of the trend of our local housing market.  After four straight years of declines in the number of home sales in our market (2005 to 2006 to 2007 to 2008 to 2009) this year still appears to be the year when we'll see that decline in home sales finally cease and possibly reverse itself.  January 2009 through August 2009 showed 531 home sales, while January 2010 through August 2010 showed 530 home sales.



Another good indicator, as shown above, is that the local housing inventory has peaked --- at least for now.  A few months ago the number of homes for sale in Harrisonburg and Rockingham County broke 1,000 for the first time -- but it has now started to decline again, as is typical for this season of the year.



Lot sales (less than an acre) have been very, very slow over the past several years, falling from a peak in 2004 of 408 lot sales to only 58 lot sales last year.  As shown above, lot sales might actually rebound this year!

There is even more in the 19-page September 2010 Harrisonburg & Rockingham County Real Estate Market Report. Download the entire report by clicking on the image below.



Thanks for reading, and if you have any questions, or if I can assist you with buying or selling real estate in Harrisonburg or Rockingham County, please contact me at 540-578-0102 or scott@HarrisonburgHousingToday.com.

First of all, I should point out that there are LOTS of homes on the market right now, so this blog post is not intended to broadly encourage anyone and everyone to put their house on the market.  However....I have been asked several times in the past two weeks about whether it's really too late at this point to try to sell a house this fall.  It seems that this assumption is based on:

• The common knowledge that more homes sell in the summer than in the winter.
• The big drop in home sales (nationally) that makes many people assume the rest of this year will be quite slow as it comes to buyers committing to properties.

On the first point, let's compare the summer to the winter:

• May 2009 - Aug 2009 shows 333 home sales
  
• Nov 2009 - Feb 2010 shows 251 home sales

Surprised?  Looking at the data, there is a lot less variation between the summer and winter than I had assumed.  Sure, winter homes sales are 25% lower than summer home sales, but I expected it to be much more of a difference.

On the second point, I haven't given up on 2010 yet.  If the rest of the year is going to be quite slow, we should see it in the number of contracts being ratified.  Here are the past four Augusts....

• August 2007 = 77 homes under contract
• August 2008 = 66 homes under contract
• August 2009 = 85 homes under contract
• August 2010 = 61 homes under contract

So, I guess here, it depends on the headline writer.  While it would be fair to say "Buyer commitments in August lowest in four years" -- I would have expected August contract numbers to be lower if we were indeed driving off a cliff for the rest of 2010.

My full market report will be coming out in about a week after additional data is available.  Stay tuned!
 

You may haven noticed the depressing news in the Daily News Record today -- on the front page -- home sales dropped 27% in July! 

But wait -- those are national numbers, and may not have much to do with what's going on in Harrisonburg and Rockingham County. 

The chart to the right is from the DNR, showing the 27% decline in July.  The chart below shows essentially the same data for Harrisonburg and Rockingham County.  The only difference is that the national figures only include existing home sales (it excludes new homes) and the local numbers are both new and existing homes.

Here is the local data:



Despite a 27% decline nationally, local home sales only showed a 5% annualized decline!

This is a question that many home sellers are wondering these days in and around Harrisonburg -- and perhaps all across the nation.  Let's see why....

A real estate market is considered to be balanced (between buyers and sellers) if there are six months of supply available.  Depending on the price range, there is quite a bit of excess supply in the Harrisonburg and Rockingham County housing market:

• 11 months of supply under $200k
  
• 17 months of supply between $200k and $300k
  
• 20 months of supply between $300k and $400k
• 28 months of supply above $400k (yes, that's more than 2 years)

Many months of supply means that a small percentage of homes go under contract each month in any given price range:

• 1 of 11 homes under $200k will go under contract each month (9%)
• 1 of 17 homes between $200k and $300k will go under contract each month (6% of inventory)
• 1 of 20 homes between $300k and $400k will go under contract each month (5% of inventory)
• 1 of 28 homes above $400k will go under contract each month (4% of inventory)

Again, if your home is priced above $400k, then you have a 1 in 28 chance of selling your home each month.  Ouch!  And thus, given these long odds, the question "Is My House Overpriced" starts to have new meaning. 

It was said by some, at one point, that if your house hadn't sold in 60 days, lower the price, and repeat.  Thus, if you started at $300k, and you hadn't sold it within 60 days, you might lower it to $290k, and wait another 60 days and lower it again, etc.  Eventually, you'd reach the point where the market (buyers) would respond to your price, and you'd sell the house.

That logic might work in a balanced market, but when the market is so flooded with sellers, and so void of buyers, the logic doesn't work as well.  Homes now sometimes sit on the market for months priced well below comparable homes, and don't sell.  Will they sell if the price is lowered?  Maybe, but maybe not! 

Time on the market is quite unpredictable at this point, and price is no longer the trump card.  In many markets, if a price was lowered to a certain place, a house would definitely sell.  If it appraised at $300k, and you lowered it to $280k, it would more than likely sell.  Now, you could lower it to $260k, and it might sell, but it might not.  You could then lower it to $240k, and it might sell, but it might not. 

Thus, as you can hopefully see, the answer to the aforementioned question (Is My House Overpriced?) is very difficult to answer.  I suppose the answer is that if it has been properly marketed, and it hasn't sold, then it is probably overpriced, but even if the price is lowered, it still may not sell.  One last illustration to explore this dilemma...

Three comparable houses on your street sell for $245k, $250k and $255k.  You assume your house is worth $250k, and put it on the market for $245k to be aggressive.  It doesn't sell after four months, so we assume it is overpriced -- even though recent sales would not suggest that.  After another four months at $235k, it still hasn't sold.  Is it overpriced?  I suppose the market would say yes, even though recent comparable sales still do not agree.  If, after another four months at $215k it has still not sold, do we STILL say it is overpriced???

In these crazy times, it's possible to "beat the market" and yet still be hurting financially...



The blue line above shows the trend in single family home prices over the past five years in Harrisonburg and Rockingham County.  As you can see, prices have declined, though only a total of 12% over the past five years.

The red line shows the purchase and sale of a single home in Harrisonburg, as experienced by some of my clients. 

You'll note that while the red line declines, it's not by anywhere near as much as the blue line.  Thus, my client's home outperformed the market --- they beat the market, and experienced a smaller decline that perhaps they should have.  How exciting, right??

But no, actually, it wasn't too exciting.  The heroic act of selling the house at a higher price than the market suggested would be possible was still painful.  My clients had financed most of their home purchase in 2007, so they actually had to bring thousands of dollars to closing in 2010 in order for the sale to proceed.

You see, it's not as simple as the purchase price minus the sales price --- you also have to factor in the closing costs on the buying side (2007) and the closing costs on the selling side (2010).

So....when the market is declining, even if it is declining slowly, it can be difficult to purchase and then sell within a short time period.  Thus, buyers and sellers should note that:

• If you're thinking about buying now, and only staying for a few years, and financing most of your purchase price -- you might find yourself in the situation described above.
• If you bought a few years ago, and financed most of your purchase price, your house's value might have performed well, and yet you'll still have trouble selling without bringing money to the closing table.

Hopefully, we'll soon return to predictable, rosier times, when home values are steadily increasing by 3% to 6% per year.  Soon, I hope, on behalf of all of my clients!

Click here for the full August 2010 Harrisonburg & Rockingham County Real Estate Market Report.

If we only looked at July 2010 home sales (and ignored several other key indicators, and the bigger picture) we might get a little worried about our local housing market.



As can be seen above, there were very few home sales in July 2010.  This is likely because of the original June 30th deadline for closing under the home buyer tax credit (the deadline has now been extended to September 30th).  But after a very slow July, we'll probably start to see things pick back up, since contracts looked healthy in July 2010.



As can be seen above, there weren't too many buyers committing to buy properties last month, but there was a return to the contract-signing-table in July 2010.  This month's buyer commitments actually exceeded last July's data, showing a reversal of the downward trend of the last several years.  For another reversal, read on.



The yellow bars above show the number of home sales over the past ten years -- it is very likely that after four years of declining home sales, we might finally see an increase in 2010.  Year to date, 2010 shows a 3% improvement over 2009 to date.  The blue line above shows the change in median sales price over the past ten years.  The median sales price declined by 5% between 2008 and 2009, but the decline appears to be much smaller this year.

Learn even more about what's going on in the Harrisonburg and Rockingham County real estate market by reading the full report.



Do you have questions about this report, or about the Harrisonburg and Rockingham County real estate market?  Or about your house?  Or about a house you might buy?  Be in touch . . .

Scott Rogers  |  540-578-0102  |  scott@HarrisonburgHousingToday.com
 

Over the past few weeks I have received (on behalf of my seller clients) quite a few offers that I considered to be quite low:

• $30,000 under asking price on a $300,000 house (10%)
• $30,000 under asking price on a $200,000 house (15%)
• $40,000 under asking price on a $250,000 house (16%)
  
• $60,000 under asking price on a $300,000 house (20%)

A few of these were negotiated successfully, and a few were not.  It made me wonder, however, how often buyers were really negotiating 10% or more off the asking price of a home.  So, let's take a look at a ridiculously small sample size (home sold in the past 10 days) and pick out the 5 best deals as far as the percentage that was negotiated off the listing price:

First, do note that of the 27 homes sold in Harrisonburg and Rockingham County over the last 10 days, on average, 5.4% was negotiated off of the list price. 

Now, for the houses where the buyers negotiated the highest percentage off of the list price....



4377 Hilltop Road (Massanetta Spring)  -  sold for 22% less than the list price




160 Wildwood Drive (Bridgewater)  -  sold for 15% less than the list price




253 S Sunset Drive (Broadeway)  -  sold for 11% less than the list price




2965 Pin Oak Drive (Belmont Estates)  -  sold for 10% less than the list price




545 Tabb Court (Preston Heights)  -  sold for 10% less than the list price

So, with average negotiations of 5.4%, what do you think?  Where the four offers of 10%, 15%, 16% and 20% below asking price reasonable?  Perhaps negotiations have to start somewhere!

Investing in real estate isn't for everyone --- and it isn't without its risks.  But if you have some money to put into an investment as a down payment, and if you have financial reserves with which to cover maintenance costs and months without rental income, you might be interested in learning more.

The easiest case study of real estate investing in Harrisonburg is to consider the purchase of a two-story townhome built in the last ten years.  There are quite a few neighborhoods where these townhomes can be purchased, somewhere between $130k and $160k:

• Avalon Woods
• Beacon Hill
• Blakely Park
  
• Harmony Heights
• Liberty Square
• Wellington Park

These two-story townhouses in these neighborhoods will likely rent for between $850 to $950 depending on the age and condition.  View them on a map here.

Next, let's assume a great deal on the purchase (we'll shop until we find that deal) with a purchase price of $129,900.  However, we'll make lots of conservative assumptions as we continue.  For the time being, assume:

• $850 / month rental income
• Half a month's rent lost each year between tenants
• 20% down payment, the balance financed at 5%

This results in an estimated $927 of positive cash flow in the first year...



This might not seem like much, but when combined with a few other investment benefits, it starts to add up, even in the first year.

Year 1 Investment Benefits

• $926 positive cash flow
• $1,533 principal reduction via rental income
• $638 tax benefit for loss based on depreciation
• Total "Gain" = $3,097

It gets even better when considering the property over five years:

• $6,990 positive cash flow
  
• $8,492 principal reduction via rental income
  
• $2,394 tax benefit for loss based on depreciation
• Total "Gain" = $17,876

And if we assume a meager 2% of appreciation per year, then, over five years we'll see:

• $6,990 positive cash flow
  
• $8,492 principal reduction via rental income
  
• $2,394 tax benefit for loss based on depreciation
• $13,520 appreciation
  
• Total "Gain" = $31,396

Do recall, that you put 20% down ($26k) and paid some closing costs ($4k), so after five years you have more than doubled your money.

There are plenty of variables to consider when buying an investment property, but the basics of the cash flow are the first to thoroughly understand.  For a head start on everything else you need to learn, review this detailed investment analysis.

It's always good to get a different take on the data and situation in our market.  Feel free to share your own comments on the state of our market in the comment section below.



[From the Daily News Record, July 16, 2010]

Housing Market Enjoys Boomlet
But Area's Sales Surge Likely To Be Short-Lived

By Doug Manners

HARRISONBURG  - Buoyed by the expected expiration of federal tax credits, home sales in Harrisonburg and Rockingham County climbed in June to the highest monthly total in nearly three years. However, sales are likely to drop during the second half of the year, due in part to the expiration of the tax credit program.

According to a report released by Scott Rogers, associate broker at Coldwell Banker Funkhouser Realtors, 116 homes were sold last month, the most since August 2007, when 138 homes sold. It also marks a 35 percent increase over sales from June 2009.

To be eligible for the credits - up to $8,000 for first-time homebuyers and $6,500 for existing homeowners - buyers originally had until June 30 to close sales, but Congress extended the deadline to Sept. 30. Buyers still must have entered into a binding contract by April 30 to qualify.

‘Buffer' Needed

Local sales in 2010 are 16 percent higher than those from the first six months of last year, and Rogers said he believes that the area will reverse a four-year downturn in annual home sales.

"I think the 16 percent is enough of a buffer" to beat last year's numbers, Rogers said.

That buffer is key because sales are now expected to fall, with most tax-credit seekers having already made their home purchases (Congress didn't approve the extension until late June).

Furthermore, Rogers wrote in his report, "for most of the past four years, there is a steady decline in sales between June and December, so we will likewise probably see a decline month after month."

Contracts Plummet

In April, 121 properties went under contract, the most since March 2007. After the April 30 deadline expired, that number dropped to 84 in May and plummeted to 54 in June.

"This June's buyer commitment rate is notably lower than any of the past three Junes," Rogers wrote, "which is not a good indicator for July and August sales figures."

Rogers said it's too soon to say conclusively whether the tax credits provided a real boost to the housing market or simply shifted sales toward the first half of the year.

"Perhaps it's a wash other than the timing," Rogers said, "except that timing might have helped create some momentum in getting people feeling more positive and hopeful about the economy."

Values Continue To Drop

Despite the increased market activity, home values continue to decline, according to Rogers' report. The average median sales price is $186,450, down 8 percent from a year earlier. Rogers said median prices are not likely to start increasing until the year-over-year sales pace rises.

The average time a home stays on the market is holding steady at about six months.

Contact Doug Manners at 574-6293 or dmanners@dnronline.com

Can you spare 5 minutes?  Press play below, and I'll walk you through most of the graphs in my monthly report to provide some commentary on what we're seeing this month.

Have further questions?  Leave them in the comments below, or e-mail me at scott@HarrisonburgHousingToday.com.

Click here for the full July 2010 Harrisonburg & Rockingham County Real Estate Market Report.

We're not out of the woods yet, but several indicators are quite positive in the Harrisonburg and Rockingham County housing market. 



As can be seen above, June 2010 home sales soared up to 116 transactions -- the highest number of monthly sales we have seen in almost three years.  Many of these home sales were likely a result of the home buyer tax credit deadline, so we may see a decline in July home sales.



Above, you will note that long term indicators continue to trend very positively.  This graph shows a rolling 12-month sum of home sales to remove the seasonal variation in sales.  After several years of a declining market (in number of home sales), we have now seen a stabilization and increase for over six months.



Despite good signs as far as closed home sales go, the number of buyers committing to buy during June 2010 (contracts signed) declined, both compared to the last several months, as well as compared to the past three months of June (2007, 2008, 2009).  This will likely result in lower levels of home sales in July and August.



In addition to home sales, inventory levels also soared in June 2010 -- cresting above 1,000 homes for sale for the first time in recent past (and maybe the first time ever).  We should see a decline in inventory over the next six months based on historical seasonal trends.

Learn even more about our local housing market: click here for the full July 2010 Harrisonburg & Rockingham County Real Estate Market Report.



Do you have questions about this report, or about the Harrisonburg and Rockingham County real estate market?  Or about your house?  Or about a house you might buy?  Be in touch . . .

Scott Rogers  |  540-578-0102  |  scott@HarrisonburgHousingToday.com

Many people have asked me how much of an affect on our market the first time buyer tax credit has had over the past year.  It's a challenging question to answer --- some first time buyers who bought this year may have bought because of the tax credit, but some (or most?) may have bought even if the tax credit didn't exist.

One way that we should be able to tell if the tax credit had a big impact is to see if there are more first time buyers in the market now as compared to last year.  Thus, I decided to examine the breakdown of sales prices during May and June 2010 (it should be a lot of first time buyers) as compared to all of last year (2009).



As you can see, above, I assumed that I would probably find a pretty big increase in the proportional number of lower priced homes selling this May and June as compared to last year. 



Above, however, you'll note that there wasn't actually much of a change at all.  About 60% of the homes sold in the last two months were priced below $200k and the same percentage of the sales from last year were below $200k.

I welcome your suggestions for other ways to slice and dice the data to get at whether the tax credit had an impact on the market.  For now, we'll say the jury is still out...

Data Sources: Harrisonburg/Rockingham Association of Realtors MLS, Rockingham County Circuit Court Clerk's Office (Thanks Chaz & April!)

Many have asked me how foreclosures are affecting our local real estate market.  Absent hard data on the number of foreclosures in Harrisonburg and Rockingham County, I have always mentioned that there aren't an overwhelming number of foreclosures --- and certainly not enough to make a huge difference in home values.

Now, I have the data, thanks Chaz & April at the Clerk's Office . . .

What can be seen here is that the percentage of the home sales that are foreclosures has certainly been on the rise over the past several years.  However, despite this being based on hard data, there is still a bit of fuzzy math....

The "Sales" includes all home sales as recorded in the HRAR MLS.  This includes most foreclosures, because most such properties end up being bank owned properties that are then listed (and sold) by Realtors via the MLS.  However, if only 127 of the 177 foreclosures ended up in the MLS as sales, then the true number of total sales for 2009 would have been 866 sales, making foreclosures 20.4% of the market as opposed to 21.7% of the market.

This year (2010) and next year will be important to watch as we see how many home sales we'll have, and how many foreclosures will exist in the market.  I predict that home sales will level off this year (and thus, stop declining), but that foreclosures will increase over last year.

June has been a busy month in the local real estate market --- or at least on my end --- as a LOT of buyers close on their purchases of homes in and around Harrisonburg.  Quite a few of these buyers are first time buyers, who will receive an $8,000 tax credit when they file their taxes early next year. 

But the opportunity for this $8,000 tax credit has passed now --- the deadline to have a house under contract was April 30th, and the closing deadline is June 30th (though it may be extended).  So....what now?

The big question that remains is whether this was either:

• bringing buyers into the market who wouldn't have otherwise bought
• bringing buyers into the market earlier than they would have bought

If either, or both, of those were occurring, then slower times could be ahead. 

I've had this conversation with many people lately --- now that this whole tax credit has come and gone, can the real estate market stand on its own?  Will things slow back down again? 

The big picture is this -- fewer and fewer homes have been selling for quite a few years now:

• Only 1,438 homes in 2006 (a 14% decline from 2005)
• Only 1,248 homes in 2007 (a 13% decline from 2006)
• Only 936 homes in 2008 (a 25% decline from 2007)
• Only 816 homes in 2009 (a 13% decline from 2008)

But this year looks different!  Year to date 2010 versus year to date 2009 shows an impressive 10% increase!  That's a 23% swing in momentum, given the 13% decline from 2008 to 2009.  Certainly, home sales in the first part of 2010 could have been falsely inflated because of the tax credit --- but will the bottom really fall out of the market so much that we see another 10% - 15% decline in home sales when considering all of 2010?

I have made lots of predictions about the real estate market over the past five years, and most of them have been wrong.  I did not think we would continue to see the number of home sales fall as much as they have. 

In 2008, I thought for sure we'd see 2007 volume.  In 2009, I thought for sure we'd see 2008 volume.  So.....here I go again:

I predict that we will see 800 home sales in 2010.  That would show only a 2% decline since 2009 --- and would be a turn in right direction from the multiple years of double digit declines in sales volume.

But, as the image above alludes to, there is somewhat of an awkward pause now, as we see what the second half of 2010 has to hold.  I am thankful that the tax credit brought buyers into the market --- it helped to sell properties for many homeowners that really needed (or really wanted) to sell.  I am now hopeful as we move forward, that our local real estate market will continue to recover and strengthen through the balance of 2010.

Click here to view my full June 2010 Harrisonburg & Rockingham County Real Estate Market Report.

Exciting Fact #1 --- May 2010 home sales declined 5% as compared to May 2009, but year-to-date sales (January through May) are up 10% over last January through May.




Exciting Fact #2 --- After three and a half years of steadily declining home sales (quantity, not prices), we have now seen stabilization or increases in home sales for over six months.




Not-So-Exciting Fact #3 --- Sales volume has declined sharply for four years now (red line), and median home values have declined gradually for two years (green line).  Despite early positive indicators for the past several months, we're not out of the woods yet.




Other tidbits that you'll discover in my June 2010 Harrisonburg & Rockingham County Real Estate Market Report include:

• Average days on market is down in May 2010.
• Inventory levels have hit a new high.
• Land sales (1+ acres) are soooo slow this year.

Click the image below to read the full report...

Intrigued by a post over at RealCentralVA exploring the number of contracts for single family homes for each of the 10 past months of May in Charlottesville and Albemarle County, I thought I'd see how Harrisonburg and Rockingham County are performing compared to our neighbors over the mountain.

Reading Jim Duncan's article, you'll note that the number of buyers signing contracts for single family homes has decreased for the past several years.  Here is an overlay of Harrisonburg / Rockingham data with Charlottesville / Albemarle data....



Again, the data above is showing the number of contracts that were signed in the month of May (for the past five years) on single family homes in Harrisonburg and Rockingham County as compared to Charlottesville and Albemarle County.

To make it a bit clearer....



As you can see, the number of home sales (contracts in this case) has continued to decline for the past several months of May in the Charlottesville area, but those same measures have started to level off and increase here in Harrisonburg and Rockingham County.

Take a look at the graph below to see how buyer momentum is shifting in our market.  Do note, of course, that this is people looking at properties online, which is not the same as buyers committing to buy properties.


   click the image above for a higher resolution PDF

It will take several more months to know whether the Harrisonburg and Rockingham County real estate market really has turned the corner towards recovery, but the graph above shows yet another indicator that we may be headed in the right direction!

There are a LOT of homes for sale right now....995 residential properties in Harrisonburg and Rockingham County as I type.  BUT.... the current levels aren't too much higher than we've seen during the past two spring/summer seasons!


   Click the graph above to view a higher resolution PDF.

Peak Inventory Levels:

• Current inventory = 995 residential properties
• June 2008 inventory = 956 residential properties
• April/June 2009 inventory = 932 residential properties

I suppose we might see even higher inventory levels as we move into June (CAN WE HIT 1,000???) --- but that still isn't too much higher than recently past years.

If you're a buyer....what is your experience of the current inventory?

• Are there way too many houses to choose from right now?
• Can you still not find that perfect home despite many choices?

For the visual learners amongst us, here's a new take on the mix of homes for sale based on their price range, and the demand for such homes....



This (hopefully fun and self-explanatory) graph is based on inventory levels as of May 10, 2010, and average home sales per month from May 2009 through April 2010.

Questions?  Clarifications?

Home sales have certainly started to bounce back in 2010...



Skeptics certainly won't believe we're making any progress until we pass June 30th and the end of the tax credit season.

Big picture thinkers will want to delve into why our market has outperformed so many others across the country..

But now let's examine what is actually selling this year:



Sales of homes priced under $300k have increased compared to last year.
Sales of homes priced above $300k, however, have declined this year.

Is it because of the tax credit?  Is it because buyers of sub-$300k homes often don't have a home to sell before buying?  Plenty of possibilities --- but so far the market is looking strong for the spring and summer!