Construction is moving along steadily at Urban Exchange in downtown Harrisonburg.  This exciting new mixed-use community will include 194 condos, two levels of structured parking, and approximately 12,000 square feet of retail space.  

Over the past 16 months, we have been excited to see that people crossing nearly every demographic have interest in living at Urban Exchange.  Those having committed to living at Urban Exchange span an age range of 20 to 80, and include retirees, young professionals, university faculty and staff, undergraduate and graduate students, families with children, employees of growing local companies such as Rosetta Stone, SRI, SI, RMH, and more.  

Urban Exchange is comprised of two wings with approximately 100 condos in each, and when we broke ground in February 2008, we did so with the vision of selling the condos in the West Wing, and leasing them in the East Wing.  This past week, however, we made the decision to lease all 194 condos instead of selling half of them --- primarily because of the significant changes in the condominium financing market that have taken place over the past 12 to 18 months.

The West Wing of Urban Exchange is comprised of 98 condos, and Fannie Mae and Freddie Mac guidelines dictate that 51% (soon to be 70%) of such condos must be owner-occupied in order for any purchaser to use a conventional mortgage for purchasing at Urban Exchange.  Furthermore, Fannie Mae and Freddie Mac will not allow loans to close on any condos until 51% of the condos are reserved.

Given these guidelines, we knew that it would be difficult to orchestrate the sale of 70 condos nearly simultaneously, but we were determined to attempt to do so.  Unfortunately, a few timing and logistical factors conspired against us:

1. Construction on the East Wing (for lease) was started two months prior to construction on the West Wing (for sale).
2. Prospective Urban Exchange tenants were willing to sign leases well before their condo was close to being complete.  (In fact, I believe the first leases were signed before we even had a single piece of lumber on the work site!)  As of last week, 75% of the East Tower was leased, and 25% of the West Tower was leased.
3. Prospective Urban Exchange buyers were hesitant to sign even a non-binding reservation agreement until their condo and the building as a whole was nearly complete if not entirely complete.  As of last week, 15% of the West Tower was reserved for purchase.

Last week, when this decision was made, we were at the crossroad we had anticipated for several months.  We were seeing 5 to 6 new leases a week, yet nearly all of the prospective buyers (without reservations) were waiting to commit until construction was nearly complete.  We realized that within the next few weeks we would have to start turning prospective tenants away if were to preserve enough owner-occupied units in the West Tower to achieve the occupancy standards from Fannie Mae and Freddie Mac.  

Given the vast, early demand from tenants to live in Urban Exchange, and the delayed, hesitant demand from buyers --- last week we decided to move forward with leasing all of the condos at Urban Exchange.

We have discussed this change at length with all of the buyers who had reservations at Urban Exchange, but we know that there were quite a few other prospective buyers who had not yet committed to purchase.  If you are one such person, and are still excited about the possibility of buying a condo in downtown Harrisonburg, we'd like to stay in touch with you.  

The developers of Urban Exchange own several other properties in downtown Harrisonburg where they will be developing condos after Urban Exchange is complete.  The next two projects that they will be developing will be considerably smaller than Urban Exchange (15-25 units) and thus will be much more feasible for condo sales.  In approximately six months we will be starting to hold focus groups with any such interested downtown condo buyers, as we begin the design and planning stages of these next projects.  If you would like to know when these focus groups begin, please click here.

Thank you for your continued support of and excitement for Urban Exchange --- while the decision to lease all of the condos marks a slight change in direction, it will still be bringing dynamic change to our downtown district.  In just over a month, the first residents will be moving into Urban Exchange, and as the next few months unfold, we will be building up to over 300 new residents of downtown Harrisonburg in an exciting and diverse community at Urban Exchange

If you have any questions about this change in direction at Urban Exchange, please contact me (Scott Rogers, 540-578-0102, scott@LiveUE.com), and if you have interest in further details on leasing a condo at Urban Exchange please contact Mary Messerly (540-421-9341, mary@LiveUE.com).

I am asked this question quite frequently, often from buyers who are relocating to the Shenandoah Valley from other areas of the state or country.  Since 2006, Harrisonburg and Rockingham County has not seen an increase or decrease in median home prices.  This is in contrast to the nation (as a whole) and most metro areas around the country who have seen 20% to 40% declines in median home values during the same time period.

So....why aren't home values falling here in the Central Shenandoah Valley?  Here are some factors that are certainly at play...

• Home values did not increase as much nor as quickly in this area as compared to most other areas of the country.
• Since home values were not increasing as quickly here, fewer buyers obtained "risky" loans --- stretching well beyond their means to buy a home.
• Fewer risky loans resulted in fewer foreclosures.  High foreclosure rates in other areas of the country resulted in large price declines as banks re-listed homes well below their prior value.
• In many other larger markets, investors were speculating heavily on new construction --- entering into contracts to purchase with the intent of flipping the homes when they were complete before they even closed on the houses.  This injected a false (temporary) demand into these markets, which created excess inventory when the market frenzy began to slow.
• Our local economy is very diverse (many jobs across many sectors), and we have a very low unemployment rate.  This reduced the number of families that "had to sell" their homes.

These are but a few of the reasons why we haven't seen overly significant declines in home values in Harrisonburg and Rockingham County.

This is not to suggest that all homes have "held their value" over the past few years --- some homeowners have certainly seen declines, but any such declines are quite modest in comparison to most other real estate markets across the country.

Without a doubt, we're in a very challenging real estate market right now --- we've seen fewer and fewer home sales over the past several years.  Thankfully, we haven't seen a significant decline in home values (as has been seen in most areas of the country) --- but it's still a difficult time to sell a home.

Amidst this, it's great to be working with seller clients who are dedicated to working hard to do everything possible to sell their home:

• The owners of one of my current listings spent multiple late, late (2am) evenings cleaning, organizing, painting, and doing small carpentry to prepare their home for sale.
• The owners of one of my upcoming listings is currently working their way down a list of 15-20 repairs and improvements to make their townhome ready to sell.
• The owners of another of my upcoming listings are moving some of their belongings out to to storage, painting, changing light fixtures and more to prepare their duplex for sale.

This isn't to say that my buyer clients aren't also working hard --- to make sure they are getting a great deal on on the homes they are purchasing:

• One of my current buyer clients has a detailed spreadsheet that they use to keep track of homes they might potentially buy, and they are conducting a detailed analysis of comparable sales and listings as they decide on an offering price for the home for which they will make an offer to purchase.
• Another set of my buyer clients takes multiple (20+) photos of each home that we view, and then sorts and archives those photos after the showings to keep track of each home they might potentially buy.

If you're willing to work hard, and become educated on our local real estate market, you can find a good buying opportunity, or maximize the value of your home when you sell.

We've experienced several years of significant declines in sales activity in Harrisonburg and Rockingham County. 

• There were 14% fewer home sales in 2006 as compared to 2005.
• There were 13% fewer home sales in 2007 as compared to 2006. 
  
• There were 25% fewer home sales in 2008 as compared to 2007. 
  
• Thus far (Jan-Apr) there have been 28% fewer home sales in 2009 as compared to 2008.

My hope for this year, however, has been that we'll be able to at least have as many home sales as there were last year (2008).  As mentioned above, we're not doing so well at meeting that target --- being 28% below last year so far.

However, we (Coldwell Banker Funkhouser Realtors) continue to see a strong increase in the number of properties being viewed on our collection of (65) web sites.  This is often a leading indicator of forthcoming sales activity.



So, I'll remain optimistic for the last 10 days of this month and see where we end up.  So far this month there have been 45 home sales in our market, and last year during the same time period there were 46 home sales.  Perhaps we'll catch up with last year this month, and then stay ahead or surge ahead!?

As a brief variation from my typical long and detailed analysis, here are two quick market observations...

1. BAD: Only 11 residential properties sold in the entire month of April in the City of Harrisonburg.  There are 338 for sale right now, which makes this particularly unexciting.
    
   
2. GOOD: Thus far in May, 44 residential properties have sold in Harrisonburg and Rockingham County --- this is in contrast to 46 properties in the same period last May.  Perhaps our year-to-date sales trend (29% decline) won't continue into the summer months!?

Perhaps we're starting to see the impact of the $8,000 first time buyer credit?  Or the historic low interest rates?  Or the huge selection of properties for sale?

We've all (hopefully) heard of the $8,000 tax credit for first time home buyers --- if you haven't owned a home in the past three years you can receive $8,000 if you buy one by November 30th of this year (6.5 months to go).

But yesterday, the HUD Secretary announced that the Federal Housing Administration is going to permit buyers to use the $8,000 tax credit as a downpayment! 

More details will be forthcoming -- check with your lender in the coming weeks to see how this might work for your situation.

Construction at Urban Exchange is flying along quickly!  In a mere 51 days, the first residents will be moving into these beautiful new condos in downtown Harrisonburg.  Click on any of the photos below to view updated construction photos.







Find out more about Urban Exchange:

• View Office Hours
• View Construction Photos
• VIew Video Interviews
• View Renderings
• View Sales Prices
• View Reservation Agreement
• View Rental Rates
• View Lease Application
• View Floor Plans
• Learn about Living Green

Read on for a full review of the state of the Harrisonburg and Rockingham County residential real estate market.  Or....download the full report:
April 2009 Harrisonburg & Rockingham County Real Estate Market Report



Homes in Harrisonburg and Rockingham County are continuing to sell more slowly than in recent years -- when examining January 2009 - April 2009, we see a 29% decline compared to 2008.  However, we continue to see median and average sales prices staying relatively level, with a 3% decline in median sales price and a 3% increase in average sales price.  The homes that have sold this year took, on average, 21% longer to close than in 2008.



As with each of the past three years, we saw a decline in home sales as compared to last month (March).  April 2009 home sales (50 sales) were 38% lower than April 28 (80 sales).  We will likely start to see an increase in May, as we have each of the past three years.  The important thing to note will be how quickly sales increase, and whether we will be able to match the 2008 sales pace.



This graph shows a normalized trend of home sales by charting the ongoing sum of the preceding 12 months' sales.  We continue to see a decline in this metric, and likely will until the pace of sales stops its decline.



Some people have noticed an increase in activity in the real estate market, but it is likely simply an increase in homes for sale that they are noticing.  These increasing inventory levels are not welcome news to sellers, as it continues to over saturate our market.



Unfortunately, the increased inventory of homes on the market over the past several months has not been matched by a corresponding increase in sales.  Thus, the number of months of supply has started to increase again in all price ranges.



This graph captures all residential real estate activity as reflected in the Harrisonburg/Rockingham Multiple Listing Service.  The 2009 year-to-date sales figures now include four months of sales data, and show only a slight decline in median sales prices.  This is positive, however, the pace of sales continues to decline.



When examining only single family home sales in Harrisonburg and Rockingham County we see that the median sales price is holding steady as compared to last year and has not had a significant net increase or decrease since 2006.  This is occurring despite a drastic reduction in sales pace between 2006 and 2009.



Sales of townhomes in Harrisonburg and Rockingham County continue to slow, and median prices have started to slip ever so slightly down to $156,500.  This marks a median value slightly below the 2006 median value of $160,850, and is coupled by a continued decline in sales pace for townhomes.



Examining the median price per square foot of sold single family homes in Harrisonburg and Rockingham County shows that homes have started selling at a somewhat higher rate when examining their cost per functional space.  We are now approaching mid-2005 levels, at $123 per square foot.



The chart above examines time on market for homes sold in Harrisonburg and Rockingham County during the past six months.  Homes with the lowest price points are selling the quickest, and homes in the upper price ranges are taking the longest time to sell. 

For example, overall only 10% of homes took longer than 1 year to sell, but 34% of homes selling over $400,000 took longer than a year to sell. 

In contrast, only 10% of these homes over $400,000 sold in the first three months, while 39% of homes selling for less than $200,000 sold in the first three months of being on the market.

Download the full report here:
April 2009 Harrisonburg & Rockingham County Real Estate Market Report

Some of you think this, don't you?  For the past month I have been discussing this topic (via e-mail) with a statistician at JMU, and it has been a very helpful dialogue (for me) as I've explored some new perspectives from which we can examine home values. 

The statistician's hypothesis is that homes have increased so quickly in value here in Harrisonburg and Rockingham County, that they are now significantly overvalued and will need to decline by 30% - 50%.  I started to explore this a few weeks ago in this article:  Home Value Projections for Harrisonburg and Rockingham County.

But here's the latest...



Here's what we're seeing above:

• The blue line shows actual median home sales prices based on data from the Harrisonburg-Rockingham MLS. 
  
• The green line uses the 2000 data point from the blue line, and then tracks what the median sales price "should be" --- by accounting for inflation, as well as a 2.3% increase per year.
• The 2.3% increase per year is the average increase in home values per year (after inflation) per the U.S. Census Bureau.
• Per the chart above, between 2005 and 2008, homes were indeed "over-valued" in our market.  But with the relatively steady median sales price since 2007, we are now getting back towards the projected median sales price given normal inflation and normal home value increases.
• As you can see, the actual median sales price in 2009 and the predicted median sales price are very close --- in fact, there is only a 2.78% gap between the two data points.
  

My Conclusion:  Homes (as a whole) in Harrisonburg and Rockingham County are not significantly over-valued, but it may be until the end of this year, or into next year that we start to see a steady increase in prices again.

Your Conclusion:  Regardless of whether you are a statistician or someone who just barely understands the chart above, I'd love to hear your thoughts.  What do you think of the data presented here?   Do you think homes in our area are over-valued?

  For those of you who just have to see the numbers....

When preparing to sell your house, bear in mind that the value of your house is not (necessarily):

• what you paid for it plus X% appreciation per year
  
• what you paid for it plus the cost of your upgrades
• what you paid for it
• the tax assessed value of the property
• what it appraised for a year ago

Here's how I work with homeowners to determine the value of their home...


 click image above for printable (and legible) PDF

If you click on the analysis above, you'll see that I am comparing the property being evaluated to a set of recently sold properties and a set of currently available properties.  (Or, that's what I was doing at the time --- this analysis is from 2008). The theory is this --- we can best understand what your property is worth by evaluating it in the context of very similar homes that have recently sold, as well as in the context of what is on the market today.

A few notes about this general market analysis I perform before putting properties on the market:

• In most cases, the homes we're using as comparable properties ("comps") aren't exactly identical to the subject property.  Thus, you'll note in the analysis above that I make value adjustments to each comp based on how it is different (better/worse) than the subject property. 
  
• After adjusting each comparable sold (and active) property to bring it closer in line with the subject property, I then average the adjusted values to determine a market value as suggested by sold properties, and a market value as suggested by properties for sale.
  
• There are some cases where I don't conduct this thorough of an analysis, if there are multiple identical comps.  An example of this is a 4-bedroom condo at Hunters Ridge.  We don't need to conduct a detailed analysis of the characteristics of each condo that sold or is available --- they are all very similar.
• As a colleague of mine said to me today --- the best pricing strategy today is to be just barely above the highest sold comparable, and to make sure that the price is below the lowest active comparable. 
• After conducting the analysis shown above, I typically send a market analysis document to my clients with this spreadsheet as well as the full property details on each sold and active property.  We then discuss the entire situation to make sure we are seeing eye to eye on where we should be to price most competitively for the market.
   
  

A few days ago I mentioned that lot sales in Harrisonburg and Rockingham County (of less than an acre) have slowed dramatically.  In fact, the rate of such lots sales has fallen 82% since their peak in 2004.

Lane Chesley then asked about lot sales of over an acre, hypothesizing that such sales might not have fallen as much as those may be more desirable parcels.  Let's take a look....



As you can see above (click the graph for a PDF) --- sales have also fallen rather dramatically of parcels larger than an acre, but Lane was correct in his assumption.  Lot sales (larger than an acre) have only fallen 69% since their peak in 2005.  Also of interest is that even though less than an acre lot sales slowed 25% between 2004 and 2005, lots sales greater than an acre increased 57% during the same time period.

Thus, buyers of smaller lots (likely in a subdivision) began pulling back in 2005, but it wasn't until 2006 that buyers of larger lots started pulling back.