Here's an interesting report from NPR telling the story of an employee of Freddie Mac who manages an online calculator that has (intentionally or unintentionally) been telling web users that home values will only go up!

Read more from NPR:  Housing Guy Apologizes For Housing Bubble

It is interesting --- I do wish home values would only go up --- and during most years values do increase.  The last few years, however, have not held that promised increase.

That said, it depends on the time horizon that you consider.  First, the year to year bad news -- home values decreased for 4 out of the past 10 years.  That is to say that the first six years of the decade showed an increase ('01, '02, '03, '04, '05, '06) but the most recent four years have shown a decrease ('07, '08, '09, '10).

But here's an interesting cumulative look at the value of a $200,000 home purchased in 2000:

• 2001: 9% increase to $218,000 (9% cumulative increase)
• 2002: 2% increase to $222,360 (11% cumulative increase)
• 2003: 8% increase to $240,149 (20% cumulative increase)
• 2004: 16% increase to $278,573 (39% cumulative increase)
• 2005: 24% increase to $345,430 (73% cumulative increase)
• 2006: 8% increase to $373,064 (87% cumulative increase)
• 2007: 1% decrease to $369,333 (85% cumulative increase)
• 2008: 4% decrease to $354,560 (77% cumulative increase)
• 2009: 5% decrease to $336,832 (68% cumulative increase)
  
• 2010: 3% decrease to $326,727 (63% cumulative increase)

So....the premise of the title of this blog post was certainly wrong.  Home values can certainly decline over the short term, and perhaps over the long term?  Thus far, home prices are still quite solid over the 10 year horizon --- showing a 63% increase.  That said, 2006 through 2016 home values might tell a different story.
 

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We've had a turbulent real estate market over the past several years, and one of my clients was wondering if all property types had weathered the storm similarly.  More specifically, the question was raised of whether split foyers or ranches typically held their value better.  Let's take a look....



As you'll see above, both split foyers and ranches have seen a decline in sales over the past (almost) five years. 

• split foyer sales (quantity) have dropped 62% since 2006
• ranch sales (quantity) have dropped 54% since 2006

Here we see that ranch sales have not declined as far as split foyers in popularity.



The median sales price of both home styles have declined since 2006.

• split foyers have declined in median sales price by 16.9% since 2006
• ranches have declined in median sales price by 11.7% since 2006

Again, ranches fared better than split foyers in value adjustments.



Finally, examining the time it takes to sell each type of home (average days on market) we find that there used to be a difference in how long it took to see each type of home, but there is not any longer.

• split Foyers now take 20% longer to sell as compared to 2006
• ranches now take 61% longer to sell as compared to 2006

Again, it's very interesting that the days on market for each type of home have tracked with each other for the past few years.

Finally, let's examine the supply of each type of home.

• There are 46 split foyers currently on the market.  Given that 26 split foyers sold in the first 9.5 months of this year, it would take 17 months to sell all split foyers currently on the market.
• There are 278 ranches currently on the market.  Given that 197 ranches sold in the first 9.5 months of this year, it would take 13 months to sell all ranches currently on the market.

Given almost all of the comparisons above, it seems that ranches have fared better in the Harrisonburg and Rockingham County real estate market over the past (almost) five years.  Yet split foyers have their redeeming qualities -- they are a house layout that allow you to have lots of above ground square footage (including the "practically above ground" square footage of the lower level, at a better price than can be achieved with most other house types.

Buyers, please remember.... This information can be wisely understood to mean both that you should and that you should not buy a split foyer (or a ranch). 

• You might wisely choose to buy a ranch, because they seem to perform better in value and saleability than split foyers.
• You might also wisely choose to buy a split foyer, because the past five years have made them more affordable than their one-level counterparts.  Also, if you buy a house in a down market that doesn't do well in a down market (split foyer) --- and then you sell in a neutral market --- you'll likely have done better than to have bought the strong performer in the down market (ranch).
  

Please Note:  The 2010 figures above are based on sales from 1/1/2010 - 10/20/2010.  Additionally, the "split foyer" data includes split foyers, split 3-level homes and split 4-level homes.

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It really depends on how you measure housing supply.  Here's the graph I include in my monthly market report....



This graph (above) shows the number of months of supply in four price ranges.  This value is calculated by comparing the number of homes for sale in a particular price range with average number of home sales in that price range over the past 12 months.  Thus, if over the past year there were 120 home sales in one of these price ranges, that would be 10 sales per month; if 130 homes are for sale, that would be 13 months of supply.  This means it would take 13 months to sell all of the active listings if buyers kept buying at the same pace as had occurred over the past 12 months.

But let's examine the market overall using this same calculation....



Removing the price ranges from the equation, you can see that the number of months it would take for all listings to sell has shifted upwards from 11 months to 15 months.  It is interesting to see (in the graph above) how supply trended down approaching November 30, 2009 (anticipated deadline for home buyer tax break) and then again approaching June 30, 2010 (actual deadline for home buyer tax break).  This would suggest that the tax credits helped our market, even if for a short while.

You'll note (especially compared the graph below) that the graph above shows a relatively smooth trend line -- without significant increases or decreases.  This is a result of comparing each month's inventory of homes for sale to the average number of homes sold per month over a 12 month period.  If we compared active listings each month to the number of homes sold in that one particular month, we'd get different results....



This graph (above) compares active inventory to one month of home sales.  Thus, the number of months of supply can change dramatically from month to month and season to season.  Spikes in home sales will result in low months-of-supply figures --- this phenomenon can be seen in November 2009 and June 2010.

So, help me determine which graph I'll use going forward.  Leave a comment below, or e-mail me at scott@HarrisonburgHousingToday.com and let me know which graph(s) above are the most helpful for you.

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Yesterday I discussed that when the real estate market improves all homes will increase in value.  Thus, holding out to sell your current home for a higher price won't do you any good -- as you'll then also have to pay more for the house you are buying.

But let's flip that on it's head....when the market is getting worse, do all ships sink at the same rate?  I'd suggest that some sink faster than others, and that they sink deeper than others, for example:

• Houses on busy roads
• Houses with steep driveways
• Houses with disadvantaged yards (small, steep, etc)
• Houses with unconventional floor plans

In the heat of the market a few years ago, a house on a busy road might have sold for $250k compared to the same house located inside a neighborhood selling for $255k.  Now, the house within the neighborhood might sell for $240k, but the house on the busy road won't sell for $235k.  It might sell for $230k, but it's likely to be $220k or $225k.

This is primarily the result of the high inventory levels that almost always exist in times of slower market activity.  A few years ago, being located on a busy road might have only equated as a $5k price difference because buyers didn't have many houses from which to choose.  Now, however, when buyers have LOTS of houses from which to choose, most buyers will look past the house on the busy road, instead choosing a house within a neighborhood. 

More choices for buyers means that houses with significant "issue" (see bullet points above) will sit longer and longer on the market, and sell for less than you would expect them to sell for, given their other characteristics.

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It is said that a rising tide lifts all boats.  Apparently, there are some larger political or economic meanings to the concept, but for today we'll just consider it within the context of the local real estate market.

• Consider a house that is listed at a GREAT VALUE -- perhaps it should be priced at $330k, but it's listed at only $290k. 
  
• Some buyers come along and are quite EXCITED to buy this house that is priced so well -- but they have to sell their house.
• The buyers are then DISAPPOINTED to find out that their own home won't sell for what they thought it might.  Instead of it being able to sell at $225k, it will only be able to sell for $215k.

These buyers / sellers were advised quite well by their wise Realtor (not me -- one of my colleagues here at Coldwell Banker Funkhouser Realtors)....

"You see -- if we wait until later to sell your house, you'll be able to sell it at a higher price -- but the owners of the house that you want to buy will also be able to demand a higher price for their home!" 

The rising tide lifts all boats!

Put another way, it's o.k. to sell low in a tough market, as long as you are also buying low in that same tough market.  This is especially important to remember given today's low interest rates.  Let's compare buying now versus buying later....

• If you buy today, for $250k and finance at 4.25%, and you'll pay $1,162 / month.
• If you buy later, for $280k (after the market has "recovered") and finance at 5.5%, and you'll pay $1,471 / month.  (for the same house!)
  

If you're both buying and selling, this can be a very compelling time to make a housing transition!

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If you haven't stopped by Founders Way yet to see these newly finished condominiums, you might want to considering doing so this coming weekend during the SVBA Parade of Homes.  Founders Way won several awards including Realtors Choice, Best Interior, Best Exterior and Best Overall.

But let's give Founders Way some context.... There are lots of townhouses for sale in Harrisonburg priced around $160k, with 1300-1400 square feet.  The condos at Founders Way are similar ($160k, 1300-1400 SF) but they have some significant differences.

• The 1,301 sf in a Founders Way condo are all on one level, so you don't have stairs eating into the square footage, and you have much larger open spaces.
• The master suite in condos at Founders Way is fantastic --- with two walk-in closets, and a large bathroom!
• You'll also enjoy features such as 9' ceilings, an extremely open floor plan with columns, a covered patio or deck, an actual laundry room, hardwood laminate flooring, and more.

Now to pricing ---

• Second level condos at Founders Way (hint -- no steps -- easy access for those with limited mobility) are priced from $163k to $169k. 
  
• First level condos at Founders Way are priced at only $143k-$149k! 
  
• The loft units (3rd floor) feature a total of 1,703 SF, three bedrooms and three bathrooms, for $193k - $199k.

Below is a brief video taking you through the condos.  (here's the video link)



For more information, visit FoundersWay.com or call me at 540-578-0102 to schedule a time to look at this very new and very exciting product in our market.

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



As you'll note above, there were very few home sales in September 2010.  In fact, there were very few home sales in in July, August and September!  That was, however, after very high home sales in April and June.  Thus, it would seem that the home buyer tax credit certainly rearranged the timing of 2010 home sales, regardless of whether it brought new buyers into the market nor not.  The question now, of course, is how many of the October, November and December closings were borrowed by the first half of 2010.



After multiple years of a declining sales pace, the graph above shows that we were finally seeing a reversal for the first six months of this year.  However, the past three months of slow sales has turned us back around into a declining market again.  The fourth quarter of 2010 will be quite indicative as to a reasonable 2011 forecast.



Please note, above, the silver lining.  Despite a lower than normal number of closings in September 2010 -- the buyers were out yet again, contracting to buy real estate.  In fact, with 74 properties going under contract, buyers in our market outpaced the past two Septembers.  This should be a good indicator for the coming months.



Above you'll see a decade-long comparison of two imprecise measures.  The blue bars show the number of home sales recorded in the HRAR MLS -- this does not include private sales (sans Realtor), and some new home sales. The yellow bars show the number of Trustee Deeds recorded during each of the past 10+ years. Some of these foreclosed properties (203 in 2010) then show up in the blue bar when they are listed and then sold as bank owned properties. It would seem that foreclosures have increased nearly four-fold over the past ten years, and now make up somewhere between 15% and 26% of all home sales.



My full market report (click above -- or here -- for a 20 page PDF) includes LOTS more analysis to help you make informed real estate decisions.  Read through it and let me know if you have any questions, or if any additional information would be helpful to you.

You can contact me (nearly) anytime at 540-578-0102 or scott@HarrisonburgHousingToday.com.

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In Virginia, each newly constructed home must convey to the purchaser with a warranty from the builder, as outlined in the Virginia statute (55-70.1) entitled Implied warranties on new homes.  In brief, the builder must warrant the construction of the house for one year, and the foundation for five years.

One important thing to note, however, is that this required warranty on new homes does not apply if you first buy a lot and then hire a builder.  Here's the first section of the statute that speaks to this:


The issue, you'll note above, is that if you hire a contractor to build a house on your own lot, you are not in a contract for the sale of a new dwelling.  There will not be a conveyance of real estate -- title will not transfer -- you already own the real estate and are hiring someone to improve it.

From talking to a local real estate attorney, there are likely still construction quality expectations of builders of new homes when you have contracted with them to build on your own lot --- but those are are not neatly summed up in a statute. They are, instead, a part of the "common law" --- the aggregation of laws as defined by judges making rulings about such matters over the years.

Click here to learn more about the Virginia one year new home warranty.

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An Associate Press story printed in the Daily News Record a few days ago....



The beginning of the article references an increase in prices in July as shown by the Case Schiller index.  So, will home values fall here in Harrisonburg and Rockingham County as is suggested in the article might happen in many markets?  Let's take a look at the support for their theory that values will fall.....

• "...the peak home-buying season is now ending after a dismal summer." Our summer wasn't necessarily dismal. Year to date we've seen as many home sales as we had in the same time period last year.  Sales are slow compared to four or five years ago, but we're no longer seeing a free fall in the number of homes selling.
• "...bracing for a bigger wave of homes sold at foreclosure or through short sales."  Thankfully, our market hasn't seen a tremendous number of foreclosures or short sales, which has kept our market relatively stable as compared to many other metro areas.
• "Add high unemployment and reluctant buyers, and the outlook in many areas is bleak."  Harrisonburg and Rockingham County continue to have low unemployment rates compared to most other metropolitan statistical areas.  We do, however, have lots of reluctant buyers!

The final conclusion in the article is that home values might fall 8% within a year.  It's important to note at this point that our market has had a much smaller decline in home values over the past several years as compared to the Case Schiller index. 

• The Case Schiller index (which, in theory, measures home values nationally) has declined approximately 28% over the past four years. 
  
• Harrisonburg and Rockingham County home values have only fallen 6% in the same time period.

So....even if the Case Schiller index falls another 8% over the next year, we're unlikely to see the same drop in the Central Shenandoah Valley.  It is more likely that we'll see a 3% to 5% adjustment.

Stay tuned!

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