I was recently asked about the rate at which commercial properties are appreciating (growing in value) in downtown Harrisonburg. 



Getting to an answer took quite a bit of data collection and analysis, but here's what I have compiled . . .

Methodology
Properties meeting the criteria below were considered in this study, which resulted in a data set of 145 properties:

• B-1 zoning (downtown central business district)
• Current commercial use categorization
• Property improvements of $50,000 or greater

Point-to-point Sales Analysis
A point-to-point sales analysis was completed of all properties for which two historical sales prices and dates were available, where the sale dates were at least two years apart.  This resulted in a data set of 8 properties:

• Appreciation per year ranged from 7% to 26%.
• Average appreciation per year was 16%.

Five-Year Comparison of Assessed Values
The 2003 assessed value and 2008 assessed value were compared for each of the 145 properties.

• Appreciation per year ranged from 1% to 56%.
• Average appreciation per year was 12%.

NOTE: The 12% per year increase in assessed values includes a number of properties purchased and rehabbed by investors (which, in some cases, caused major increases in assessed values).  So, added value by investors is part of the 12% (not just perceived market appreciation by the assessor).

From today's Daily News Record, Lake Shenandoah, a.k.a. "Shen Lake," needs to be saved!  Some key points of this story include:

• The 36-acre lake is man-made, and has been building up sediment making it difficult to navigate by boat, and more difficult for plant and animal life to survive.
  
• State officials have recently lowered the water levels to assess the situation and determine possible courses of action.
• "The game department won't dredge the lake any time soon" according to Steve Reeser, with the Virginia Department of Game and Inland Fisheries. Why? "The project could last up to a year, cost a substantial amount of money - funds the department doesn't have - and possibly spark concern among residents."
• Herman Hale, president of the Lake Pointe Village Property Owners' Association indicates that the neighborhood values the lake and "is willing to do what it takes to improve the lake."

My first question was --- what would it mean to "dredge" the lake? Per Wikipedia, to "dredge" is to "repositioning of soil from a marine environment, using specialized equipment, in order to initiate infrastructural and/or ecological improvements."

Again --- read the full story here --- or contact:

Steve Reeser, Fisheries Biologist
Virginia Department of Game and Inland Fisheries
(540) 248-9360
reesers@dgif.state.va.us

Another key thought from last week's Smart Growth Symposium put on the Shenandoah Valley Builders Association is that . .  .

Distributed neighborhoods, that are not integrated into the community, lead to more driving, and thus, more traffic.

Many new residential developments in this area (think of Route 33 East) are:

• built as islands, connected to the rest of the community by one main arterial road,
  
• don't have any green spaces or even sidewalks, and
  
• don't incorporate any commercial lots.

As a result, the residents have to drive to get to work, school, recreation, shopping, dining, etc.  This driving leads to greater traffic on a community's principal roadways, that could be minimized with the appropriate planning.  Some such principles are:

• Connect new developments to the larger community with more than one road.
• Incorporate green space and sidewalks into new developments for recreation and exercise.
  
• Create mixed-use developments where residents can access shopping, dining and even employment, without leaving their neighborhood.

Creating new developments adhering to the principals above, and others, will have many wonderful long term benefits to our Valley.

Property To Be Sold:  1182 Portland Drive, Harrisonburg

Date/Time of Sale:  Friday, March 5, 2008 at 3:15 p.m.

Original Principal Amount of Deed of Trust:  $177,882

Assessed Value:  $193,000

Deposit:  $15,000 or 10% of the sales price, whichever is lower

For Information Contact:
Samuel I. White, P.C.
5040 Corporate Woods Drive, Suite 120
Virginia Beach, VA 23462
757-457-1460 (call between 9:00am and 11:30am)
ASAP# 993440

Per the Daily News Record, February 21, 2008

Most homeowners, or those who hope to be homeowners in the future may not have paid too much attention to the news earlier this month that Harrisonburg water and sewer connection fees will be increasing. But maybe we all should have taken note . . .

The Change

Example #1: three-quarter-inch water meter --- in this example, the sum of the water and sewer connection fees will soon be $7,000, instead of the existing $2,000. This size would be typical for a single family residence.

Example #2: a six-inch water meter --- in this example, the sum of the water and sewer connection fees will soon be $300,000, instead of the existing $17,500. This size would be typical for a large commercial project.

Peruse the current fee schedule here, and the new schedule here (effective July 1, 2008).

The Effect

As Todd Rhea, of Clark & Bradshaw, commented at last week's Smart Growth Symposium, when builders or developers are faced with new fees, we're fooling ourselves if we think they absorb those costs. They ultimately get passed on to the buyer. With this logic, one could argue that city housing costs will increase universally by $5,000 come July.

Action Item

Builders and developers should note that the fees are charged at the time of obtaining the building permit --- so as long as a lot has a building permit prior to July 1, 2008, you can take advantage of the lower fee schedule.  For a developer of a major residential or commercial project, this could equate to hundreds of thousands of dollars of savings.

I have heard some people talk about development as if in the next few years, or decades, all of Rockingham County will be developed --- with the farm land destroyed, and our history no longer preserved.

Below I'll try to put that thought in the context of actual land use, but for the record --- I don't think many at today's Smart Growth Symposium thought that the above statement is true.  (Lest anyone conclude that I am referring to any of the attendees).



The data above is extracted from the Rockingham County Comprehensive Plan, particularly page 18 of the section on Strategies, Policies and Actions.

Here's the full list of how Rockingham County land is being used:

• Agriculture - 248,000 acres (46%)
• Forest - 50,000 acres (9%)
• Commercial - 4,000 acres (0.7%)
• Industrial - 1,400 acres (0.3%)
• Single Family Residential - 44,000 acres (8.2%)
• Multi-family or Duplex - 175 acres (<0.1%)
• Mobile Home Park - 1,100 acres (0.2%)
• Federal Government - 178,000 acres (33%)
• State Government - 500 acres (0.1%)
• Local Government - 1,700 acres (0.3%)
• Regional Government - 130 acres (<0.1%)
• Charitable/Religious/Education - 2,300 acres (0.4%)
• Other - 7,000 acres (1.8%)

As you can see --- much of Rockingham County will likely never be developed (33% is owned by the government) --- and we still have an extraordinary amount of undeveloped land.

Are builders gearing up?  (Daily News Record)

Yes, and no!  Read on...

Building Permits Issued Per Year:

Year	Harrisonburg	Rockingham County
2007	748	558
2006	219	673
2005	388	785
2004	287	745

So....the number of building permits has definitely increased, BUT a large portion of the City of Harrisonburg building permits are for multi-family student housing projects.

Though not having conducted a wide survey, I would guess:

• local subcontractors might be doing o.k., if some of the out-of-town student housing developers are using them for their projects, but,
  
• local builders aren't doing as well, with much higher inventory levels (which varies by price range).
  

Wow!  Today's Smart Growth Symposium, orchestrated by the Shenandoah Valley Builders Association was a fantastic primer on growth issues and how to plan for them in the central Shenandoah Valley. 

Stewart Schwartz, the Executive Director of the Coalition for Smarter Growth, provided a great overview of smart growth principles and policies that provided a helpful framework for thinking about and planning for the future of our area. 

One key point that he made, that stuck with me, was a need to focus on developing in the right place. 

Those present included conservationists, builders, farmers, real estate agents, bankers, local planning staff, elected officials, engaged citizens, and more.  There seemed to be a great desire for and capacity to consider working together for the best future for our valley, despite the varying perspectives each of us bring to the table.

I recently posted 2007 sales trends for Harrisonburg and Rockingham County.  Here's the rest of the story . . .



OK --- that was just for visual effect --- admittedly, none of us can read the graphs above, but hopefully you can see that this market report is chock-full of usable data.

The report covers the following areas:

• Harrisonburg & Rockingham County
• City of Harrisonburg
  
• Rockingham County NW [ N of 33, W of 81 ]
• Rockingham County NE [ N of 33, E of 81 ]
• Rockingham County SW [ S of 33, W of 81 ]
• Rockingham County SE [ S of 33, E of 81 ]
• Massanutten
  
• Shenandoah County
• Page County
• Augusta County

Download the full report here, and call (540-578-0102) or e-mail (scott@cbfunkhouser.com) me with any questions.

Some buyers make offers including a condition that the seller pay all or some of the closing costs.

Some sellers offer the incentive of seller-paid closing costs to try to entice buyers.

What's really going on here?  There are a few ways to look at it:

• For some buyers, it can make all the difference in the world!  Some buyers are pursuing 100% financing (which is getting harder), and may not even have funds to pay their closing costs.  For these buyers, if the seller won't pay the closing costs, the deal won't happen.
• For most sellers, it doesn't make a bit of difference!  Paying a buyer's closing costs changes the net proceeds to the seller -- but the amount of the closing cost allowance simply becomes another term of the negotiations.  The seller subtracts the closing cost allowance out of the contract price, and negotiates accordingly towards their desired net proceeds.

I am frequently asked whether PMI (private mortgage insurance) is a good thing, or something to avoid.  To start with --- private mortgage insurance is an insurance policy that protects the lender in the event that a borrower stops making payments, the lender has to foreclose, and they can't recoup all of their costs.  Despite the fact that the lender is the beneficiary of the insurance policy . . . you guessed it, the borrower gets to pay for the policy!

PMI is required (by most lenders) for any mortgage where the loan-to-value ratio is greater than 80%.  In other words --- if you have less than a 20% down payment, you will likely have to pay PMI.

PMI is typically paid on a monthly basis --- with every mortgage payment.  However, with most lenders, you can avoid paying PMI by paying a slightly higher interest rate.  Don't be fooled --- the intent and result are essentially the same. 

When a borrower has to finance more than 80% of the purchase price, a lender is a bit more worried about their future ability and likelihood to repay than if they are financing 80% or less.  The lender mitigates this risk by taking out an insurance policy, and having the borrower pay for it.  The policy can either be paid for (by the borrower) each month, or up front.  Thus the option of either paying every month, or over the life of the loan (in the form of a slightly higher interest rate).

I suggest that most of my clients pay the PMI each month.  Typically, the monthly payments are about the same regardless of whether you pay PMI each month (with a lower rate), or do not pay PMI (and have a higher rate).  So . . .

• If you are paying PMI, you can eventually have the PMI portion of your loan payment removed, and lower your monthly housing cost --- as soon as your mortgage balance is 78-80% of the appraised value of your home. 
• If you are not paying PMI, you will always have the higher monthly payment, despite the fact that you will (at some point) owe less than 80% of the appraised value of the property.

And...don't forget that the PMI cost is tax deductible.

One final note --- if you have monthly PMI costs, at some point you will want to have that part of your payment removed.  Before you hire an appraiser to appraise the property and prove that your loan balance is less than 80% of the appraised value, check with your bank on their process.  Many banks have a list of appraisers that are acceptable for this process, and some banks insist that they generate the appraisal request.

If you hadn't figured it out yet --- I love data analysis. In the world of real estate, there is a lot of data that can help buyers and sellers make intentional, intelligent decisions. Ask me a question, and I'll work to find the data that can give you a thorough and factual answer. But, there is more to the story than the numbers...

Many Sellers Are Standing Firm

The past year (2007) showed lower real estate activity than the several years prior, and one significant factor in that reality is sellers who stood their ground on price. It is reasonable to think that we may have seen more real estate activity if sellers had accommodated in their asking or selling prices. Average sales prices increased between 2006 and 2007 in almost all segments of our market. If sellers (collectively) had been willing to sell for a small percentage less, I suspect that sales activity would have increased accordingly.

Many Buyers Are Bashful

In working with buyers, and talking to possible buyers, I have come to realize that buyers in our market are (collectively) hesitant to make the "crazy offer." While there are some buyers who do indeed make those offers, many buyers do not make an offer significantly lower than asking price if they think the price is too high. This, coupled with resolute sellers, has led to a stalemate of sorts. Buyers hesitate to make the offer, and sellers hesitate to lower the price.

Excitement Turned Into Trepidation

Real estate values escalated rapidly between 2002 and 2006. Buyers and sellers in our market became very excited about the extraordinary gains being imagined and realized by owning real estate. It seemed like people couldn't buy enough real estate fast enough. Nobody wondered or questioned whether values would increase -- they stayed awake at night marveling at the 10%, 20%, 30% that they had or would gain by owning real estate. These days, buyers and sellers stay awake at night for a different real estate related reason. Sellers wonder if their house will ever sell. Buyers wonder if they should really be buying. We don't feel the same excitement level for buying and selling real estate.

The Effect of National News

We hear terrible things about plummeting home prices in other communities across the county --- or about foreclosures --- or bankruptcies. National news outlets are excitedly covering the worst of the worst situations --- which many people locally assume are happening in our local market as well.

Where Do We Go From Here?

It is essential that buyers and sellers have a firm understanding of their segment of our local market. Don't be distracted by other areas of the country, or other price ranges locally. It is important to make decisions based on market realities, and out of the context of your personal situation. Owning real estate is a good investment, but buying and selling decisions must be made thoughtfully.

Property To Be Sold:  111 Middlebrook Street, Harrisonburg

Date/Time of Sale:  Friday, February 29, 2008 at 9:30 a.m.

Original Principal Amount of Deed of Trust:  $260,775

Assessed Value:  $260,400

Last Sale:  $274,500 (April 3, 2006)

Deposit:  $26,000 or 10% of sales price, whichever is lower

For Information Contact:
Glasser and Glasser, P.L.C.
Crown Center Building, Suite 600
580 East Main Street
Norfolk, VA 23510
File No. 61895
757-321-6465

Per the Daily News Record, February 18, 2008

I have had several clients inquire about Preston Lake, a mixed-use development underway just east of Harrisonburg.  I have sent a variety of information and links to online resources to these clients, but thought I'd group all of that information together in one place. 


General Information

• Official Preston Lake web site
• The Hine Group  (the developer)
• Homes for sale in Preston Lake

News Articles / Opinion Pieces

• Preston Lake 2.0  (i'm spatial, 2-16-2008)
• Smooth Sailing  (DNR, 12-14-2007)
• They're Getting Their Fiber  (DNR, 3-27-2007)
• Preston Lake, Harrisonburg, Virginia  (i'm spatial, 1-22-2007)
• Southern Northern Virginia?  (DNR, 1-11-2007)
• Preston Lake: Harrisonburg 2.0?  (hburgnews, 1-9-2007)
• Preston Lake To Wed Homes, Retail  (DNR, 1-6-2007)
• Development Seeks Specialty Shops  (DNR, 5-30-2006)

A few more notes and disclaimers:

• I have certainly not found everything that is out there --- feel free to add other links in the comments, or e-mail them to me.  (scott@cbfunkhouser.com)
  
• I have not verified the information on the web sites where these links will take you.
• The opinions expressed on said web sites are not my own.

Some times, when I am working with a buyer, they or I will become aware of a "for sale by owner" property of interest to them.  They almost always have the same question --- how would it work if we wanted to pursue that property?  Here's how I see it . . .

In Virginia (and in most places) when a homeowner decides to sell, and work with a Realtor in doing so, they typically negotiate a percentage of the purchase price that will be paid as a "brokerage fee" at closing.  This brokerage fee (call it 20% of the sales price, for the sake of absurdity, and because there is not a standard brokerage fee) is almost always split between the Realtor (and his/her company) representing the seller, and the Realtor (and his/her company) representing the buyer.  So, in my absurd example, 10% to the seller's Realtor and realty company, and 10% to the buyer's Realtor and realty company.

An interesting byproduct of this typical business practice is that a buyer isn't counting on "paying their Realtor."  As a buyer works with their Realtor to identify, view, evaluate, negotiate and close on a property --- they aren't necessarily thinking "and in addition to buying the house, I'll be paying my Realtor 10% of the sales price."  Here, some people would interject to point out that the buyer pays both Realtors, as they are the ones bringing the money to the transaction --- the seller just brings the house.

And thus, the questions begin when a buyer client becomes interested in a "for sale by owner" property.  As a buyer looks at the sales prices of homes listed by Realtors (for example, $200k), they don't think about having to pay a brokerage fee on top of the price --- since the seller will pay it out of the sales price.  But many "for sale by owner" sellers don't plan on paying a brokerage fee to any Realtors, and thus the sales price they would negotiate doesn't accommodate for the buyer's Realtor being paid.

So . . . if I have been assisting someone in looking for a home, and they decide they want to buy a "for sale by owner" property, here are the options I make available:

1. We can negotiate the contract with the seller to include a portion of the sales price to be paid as a brokerage fee to the buyer's agent (me).
2. We can negotiate the contract without the seller paying a brokerage fee, and you would pay my brokerage fee at closing in addition to the sales price.
   
3. You can pursue the property "solo" --- without my assistance or representation.

Every buyer makes the decision differently --- and reasonably so. 

Like many in Harrisonburg and Rockingham County, my sister and her family had the misfortune of becoming quite sick two weeks ago --- with bronchitis.  This happens --- but it became an issue --- because she moved to the area a few months ago.

Almost all doctors in this area (it seems) won't see a patient unless they are a current patient of that medical practice.  So, if you have recently moved to Harrisonburg or the surrounding area, you ought to schedule a "meet and greet" appointment with your physician of choice ASAP. 

It's actually rather humorous --- it's not too much of a problem to find a doctor that is accepting new patients, but you can't be a new patient until you have had an appointment with the doctor, completed the appropriate paperwork, etc.

So --- if you are new to this area, don't wait until you are sick to think about who your doctor will be --- otherwise, you'll be headed to Rockingham Memorial Hospital, as my sister did.

A few months ago, most lenders stopped offering "80/20" loans --- an 80% first mortgage combined with a 20% second mortgage.

Last week, VHDA suspended their 100% loan programs!

I have always sent first time buyers to lenders that offer VHDA financing programs.  These programs offer below-market rates for first time home buyers, with flexible financing up to 103%.  However --- as of April 1, 2008, these 100% loan programs will be suspended (i.e. not available) until further notice. 

The explanation, in an e-mail from Michele Watson (Director of Homeownership Programs, VHDA) was that it is "...an effort to best utilize our resources, maintain adequate long term funding for our loan programs and to mitigate the risk to our borrowers and VHDA..."

There are still some 100% options, but as the number of programs dwindle, it will become increasingly harder to finance a home purchase, especially for first time buyers.  Some remaining options include:

• VHDA/FHA 103% loan program (via any VHDA lender)
• Fannie Mae 100% program (via most lenders)
  
• 100% Community Homebuyers Program (via Coldwell Banker Mortgage)

So . . . if you need a 100% loan, and you aren't committing to it on or before March 31, 2008 --- prepare yourself to have fewer options, with not-quite-as-good interest rates. 

And if you're looking, below are several lenders I would recommend that you talk to, about 100% financing, or otherwise:

• Debbie Huntley, SunTrust Mortage, 540-578-1056, debbie.huntley@suntrust.com
• Tabatha Baker, Wells Fargo Home Mortgage, 540-335-5778, tabatha.baker@wellsfargo.com
  
• Jodee Lambert, SunTrust Mortgage, 540-568-1056