These helpful maps were created by the folks over at Design & Geography....

Virginia fared better than most states pre-bubble with a 80% to 120% increase in housing prices between 2000 and 2006.




Virginia homes lost value between 2006 and 2010 (0% - 20%) but not as much value as some states such as California, Florida, Nevada and Arizona.




Virginia is one among a handful of states that experienced a net gain in housing prices between 2000 and 2010.




Virginia's housing market continues to fare well, and hopefully we will see a further increase in the market both in Virginia as well as Harrisonburg and Rockingham County.
  

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It looks like this could be a fantastic spring/summer real estate market in Harrisonburg and Rockingham County.  The real estate market may finally be picking up some speed after several years of declining sales figures.

First -- I have been involved in four different multiple offer scenarios in the past week.  One contract even had an escalation clause!  It's been years since I have seen this much buyer activity in our market all at once.

Second -- If you compare the first 25 days of April this year versus last year, we're looking solid for this year! 

• Contracts signed Apr 1 - 25, 2010 = 76
• Contracts signed Apr 1 - 25, 2011 = 89

That is a 17% improvement in the market since last year when looking at the first 25 days of April.....wow!
 
Stay tuned!
 

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My article from this month's issue of the Shenandoah Valley Business Journal...

Change has been the only constant in the housing market over the past five years.  Between 2000 and 2005, our local housing market (and most markets across the country) witnessed unprecedented increases in the number of homes selling, and the prices for which these homes sold.  Then, however, the bubble (as some call it) popped.  Over the past five years, we have seen fewer and fewer homes sell, and the prices for which they are selling have also slowly declined.  Some observe that the local housing market might finally be steadying, with smoother sailing in the near future.  If this is indeed the case, what might we expect as some new norms in the local housing market?

More Renters.  During the real estate boom, home values were increasing by double digit percentages per year.  With such rapid appreciation, would-be renters decided to buy homes instead.  After all, even if you were only going to be in the area for a year or two, with home prices increasing so quickly and steadily, why wouldn't you buy?  These days, the new norm is that many would-be buyers (per recent logic) are now delaying a home purchase.  Unless you will be in the area for 4, 5, 6 or more years, it may make more sense to rent instead of buying.  After all, with home values currently falling a few percentage points per year, and with the cost of getting in and getting out of owning a home, buying for the short term just isn't as prudent.  Thus, as the local housing market moves forward, we'll see fewer first time buyers and thus more renters.

Slow Growth.   Between 2000 and 2005, many new subdivisions were created as the real estate market shot skyward.  Re-zoning after re-zoning created many new neighborhoods of single family homes and townhomes.  Some people even became concerned that new developments were too quickly overtaking farmland in some areas in the Valley.  Alas, these days of rampant and unfettered growth seem to be over.  With the drastic real estate slowdown over the past five years, builders are not building speculatively, nonetheless developing new subdivisions speculatively.  There will certainly be new neighborhoods and subdivisions over time, but they will develop much more slowly.

Slow Sales.   Depending on the price range, there are 12 to 24 months of housing inventory on the market in Harrisonburg and Rockingham County.  Even a stellar month or two of sales won't cut into this excess inventory that exists because of a now persistent imbalance between the number of sellers and buyers in the market.  Thus, with so many homes for sale, it will take a long time for the housing market to return to more normal inventory levels such as when there are six months of homes available for purchase at any given time.

Living Close to Work.  Gas prices spiked a several years ago which caused many people to reconsider how far they lived from their place of employment.  Afterwards, gas prices subsided, and the length of commute lost a bit of its focus, but the home buying public seemed to hold onto a part this new mentality.  Even if gas was cheap, buyers were now also thinking about how their quality of life was impacted by the length of their commute.  Now that higher gas prices are upon us once again, it is quite possible that this concept has been cemented into our home buying perspective – it is important to live close to where you work.

Larger Down Payments.  While there are still low and no down payment programs available (FHA, VA), there are certainly nowhere near as many such programs available to home buyers.  Gone are the days when anyone could obtain a mortgage so long as you had a pulse (as some joked).  Mortgages are still widely available to those with decent credit and some funds set aside for a home purchase, but there will no longer be enormous swaths of the public buying homes without putting any funds into the deal.

These are just a few of the new norms that are starting to emerge in the current housing market.  It seems that we may be through the most turbulent of times in the local housing market, but we are still adjusting as a whole to what buying and selling a home now means given the financial changes that our society has witnessed over the past five years.

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Inspired by a great article in yesterday's Daily News Record about foreclosure rates in the Harrisonburg and Rockingham County area, here is a comparison of foreclosure rates in Harrisonburg and Rockingham County as compared to Virginia.



A few other notable observations from the DNR article:

• "A diverse economy and relatively low unemployment rates have helped shelter Harrisonburg and Rockingham County from the national foreclosure crisis."

• "The Harrisonburg area posted the second-lowest foreclosure rates in Virginia..."

• "The number of local foreclosures based on trustee deeds filed at Rockingham County Circuit Court is trending downward this year. Through March, 52 filings were recorded, compared to 71 during the same period in 2010." 
    
  

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In the first 20 days April 2010..............58 contracts were written...

In the first 20 days of April 2011..............75 contracts were written!

Beyond this 29% increase in the pace of sales this April, it is interesting to note how many buyers are moving quickly once they see a house come on the market that works well for them, and is priced right. 



Note the large percentage of homes above that went under contract within the first two months that they were on the market.
 

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We have seen significant declines in home values in Harrisonburg and Rockingham County over the past several years --- though nowhere near the level of declines seen in many metro areas.  One common question, however, is what does the future look like.



Between 2003 and 2006, we might have thought that home values would increase forever (shown above).  This was obviously unrealistic and unsustainable.




I also don't think we'll see median prices fall in a straight line forever in the same trajectory as we've seen for the past several years.




Projecting based only on 2000 to 2001 data might get closer to reality, but we'd have to start seeing a rather dramatic uptick in values here in the next year or so to get back on track.




The graph above is perhaps my best guess for the future.  It presupposes that 2000 through 2003 showed normal increases in home values, and that things then escalated out of control from 2003 through 2006.  The market then stayed relatively level between 2006 and 2008 before finally starting to correct between 2008 and 2011.  The question remains, however -- will we have to dip below the trend line before coming back up to meet it?
 

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After staying relatively stable over the past few years, townhome values are dropping quite quickly in 2011 -- per the median home value of Harrisonburg and Rockingham County townhomes....



Townhome Sales between January and March 2010:

• 42 sales
• Average Sales Price = $171,260
• Median Sales Price = $155,000

Townhome Sales between January and March 2011:

• 32 sales
• Average Sales Price = $144,608
• Median Sales Price = $126,000

I believe what we're seeing here is that the median (and average) sales prices are coming down because of the composition of which (townhome) properties have actually sold in the first quarter of 2011.  If my theory is correct. the median (and average) sales prices might increase quickly as the year continues.  Alternatively, they could stay quite low if the smaller, older, more remote townhomes continue to sell -- at lower prices than most.


Properties selling in 2011 (1Q) under the $126,000 median sales price included:

• $49K  -  1346 Hunters Road (Hunters Ridge, student condo)
  
• $74K  -  423 Wirt Avenue (Elkton)
  
• $90K  -  3602 Killy Court (Massanutten)
  
• $90K  -  1171 Rosedale Drive (Rosedale)
  
• $100K  -  116 Granny Smith Drive (Timberville)
  
• $100K  -  118 Granny Smith Drive (Timberville)
  
• $100K  -  120 Granny Smith Drive (Timberville)
  
• $107K  -  1642 Buttonwood Court (Harmony Heights)
  
• $113K  -  964 Rosedale Drive (Rosedale)
  
• $116K  -  1017 Misty Court (Misty Meadows)
  
• $120K  -  136 Olivia Dawn Lane (Broadway)
  
• $120K  -  1151 Commercial Court (Park Crest)
  
• $123K  -  206 A Fourteenth Street (Grottoes)
  
• $125K  -  3004 Kidd Court (Massanutten condo)
  
• $125K  -  206 D Fourteenth Street (Grottoes)
  
• $125K  -  1211 Mountain View Drive (University Court)
    
  

The bottom line (if you made it down here) is that the data thus far from 2011 does not necessarily mean your townhome's value has taken a nose dive.  It may just mean that small, less expensive townhomes are the ones that are actually selling these days.

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Many buyers (and sellers) have a misunderstanding of how the home inspection process works.  For example:

• Buyer: I can inspect the house, and if there's anything wrong, I can get out of the contract, right?
• Seller:  They can inspect the house, but I'm not fixing anything. (and they'll have to buy anyhow)

Here's how a home inspection really works, per the standard Home Inspection Addendum in Virginia.

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It's been an interesting week showing houses over $400,000 in Harrisonburg and Rockingham County.  Both of the following seem to be true:

• There are way too many homes for sale over $400K.
• There are way too few homes for sale over $400K.

OK --- so, why are there TOO MANY homes for sale over $400K?  If you compare the average number of $400K sales/month over the past year with the number of active listings, you'll find that it would take 25 months to sell all of the homes listed for sale over $400K.  Way TOO MANY homes, right?

But wait --- if there are soooooo many homes for sale, how are there also TOO FEW homes for sale over $400K?  Well, as I drove my clients through neighborhood after neighborhood, there were so many areas where there was not a single home for sale.  In fact, looking back two years, there were 125 homes for sale over $400K, but now there are only 81 homes for sale over $400K.  This 35% reduction in inventory significantly limits the homes from which a buyer can choose.

So, what happened?  I think many (many) sellers who wanted to sell their homes, and tried over the past year or two, have become discouraged and have taken their homes off the market.  They look at the oversupply (25 months) and figure they'll be better off just taking their home off the market.  Many sellers are out of the game!

And what is happening now?  Given limited inventory levels, (some) buyers aren't finding what they are looking for.  Frustrated by not finding a home that works well for them, buyers are also out of the game!
 
What a conundrum!

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One of the questions we asked hundreds of visitors to our booth at the 2011 Shenandoah Valley Builders Association Home & Garden Show was..... "How do you think our local real estate market is doing?"  Here are the responses....



So, what do you think?  Do you agree with those in attendance at the Home & Garden Show? 
 

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March 2011 home sales show plenty of positive indicators, though the local market is still a ways off from a full recovery.



After mediocre performance in January and February, the Harrisonburg and Rockingham County housing market finally witnessed some growth in March 2011.  March's 61 home sales exceeded March 2010 (49 sales) and March 2009 (57 sales), and contributed to an overall decline in home sales of only 6% between 2010 (YTD) and 2011 (YTD).



Not only did buyers close on properties in March, they also contracted on properties --- though probably not the same buyers.  March 2011 showed another strong month of contracts (75), exceeding March 2009 figures (68).  Last March's contract figures (95) were significantly affected by the home buyer tax credit.



Despite increases in inventory over the past two months, it appears that 2010's peak of over 1,000 properties for sale will not be met this year.  We have seen an overall decline of 13.5% over the past year in the number of residential properties for sale, which can help restore balance to the market.



Despite the strong indicators noted above, we do see that the median sales price of single family homes has started to decline again more sharply after a relatively steady year last year.  We may not be totally out of the woods yet.



There's plenty more news in my monthly housing market report -- click on the image above (or here) to download and view the full PDF. 

As always, if you have questions about this report, or if I can be of assistance with real estate that you own, or that you'd like to own, please be in touch.  You can reach me most easily at 540-578-0102 or scott@HarrisonburgHousingToday.com.

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I have been cautiously optimistic about the real estate market improving for almost four years now.  Each year, instead of improving, the market declined. 

So -- would you like to know what I am predicting for the upcoming year in the Harrisonburg and Rockingham County real estate market?  I am cautiously optimistic that things will start to improve.

Hmmmm........

Now, of course hindsight is always 20/20, but check out my comments back in January 2008 (a bit over 3 years ago):


Was a healthy balance in the market restored in 2008?  No.  Things became worse.  And then worse yet in 2009.  And then worse yet in 2010.

So where IS the real estate market headed in 2011?
I believe the market will start to incrementally improve this year --- but again, I have thought that for years now, without my beliefs being born out in market realities.  And yet as I look to the future and provide projections and predictions to my clients I try to strike a balance between totally unrealistic optimism and totally depressing pessimism.

Let me know sometime whether you think I'm striking an appropriate balance:  scott@HarrisonburgHousingToday.com
 

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Have you ever wondered how Virginians heat their homes? 

The Market Leaders Over Time:  Coal......Oil......Electric



 
And for the graphically inclined....


  
Source:  U.S. Census
 

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I recently listed a home in Barrington that, in the first month, had multiple showings and two offers.  One of the offers was accepted, and the property will be under contract later this week.

Oh wait, think for a minute about the price range that this home was in -- over $400,000.  Does that price range strike you as particularly hot right now? 

There were 57 home sales in Harrisonburg and Rockingham County during March 2011 (as reported thus far), and only one of them was a house over $400,000.  So no, the housing market over $400,000 isn't tremendously active right now --- but there seem to be buyers waiting in the wings, waiting for good opportunities to present themselves.

It was somewhat humorous when the property first came on the market, as I relatively quickly had showings scheduled by Realtors who had shown my other similar listings in Barrington and Lakewood during the recent months.  It was clear that these buyers were just waiting for the right property  to come along.

What does this mean to you?  While there are no guarantees, if you price your house well, and it is marketed well, you might just have a chance to sell your property, even in a not-quite-so-good-yet real estate market.
 

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As of today, you can obtain an amazing 3.625% interest rate on a 5/1 adjustable rate mortgage through FHA.  Until recently, I had thought that 30 year fixed rate mortgages were the only product offered through FHA, but Oguz Sengul  pointed out that FHA also offers a 5/1 ARM.

A "5/1 ARM" is a mortgage that has a fixed rate (3.625%) for five years, and then can adjust once every year.

If you anticipate only being in your home for 3, 4, 5 or 6 years, this can be a fantastic loan program to consider!
 

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Fortune Magazine makes some bold predictions after LOTS of detailed analysis....



Click on the image above (or here) for a PDF of the entire article, which deserves a careful read. 

To entice you to read the entire article, consider the following excerpts....

• "The talking heads who are down on real estate will hate to hear this, but America needs to build a lot more houses. And in most markets the price of new homes is fixin' to rise, not fall."
   
  
• "The lack of new home building is a huge help that a lot of people are ignoring," says Case. "People think I'm crazy to be optimistic, but housing is looking like the little engine that could."
    
  
• Zandi of Moody's Analytics expects that prices will rise three to four points faster than inflation for the next few years in virtually all of the nondistressed markets. His view is that prices will increase in line with rents, which are now growing briskly because apartments are in short supply. Those higher rents will encourage buyers to cross the street from an apartment to a home of their own.

Click here to read the entire article
  

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Bill Meadows, a new resident of Dayton, Virginia, holds a distinct honor -- he was the only person to buy a home anywhere in Harrisonburg or Rockingham County during March 2011.



As shown above, January and February sales were quite low, but most people were expecting that we would see a rebound in Harrisonburg and Rockingham County home sales during March 2011.  Alas, we did not, as only one person (Bill Meadows) bought a home during the entire month of March.  Most analysts are hoping for stronger sales in April, to at least hit the double digits.

"I was quite surprised to find out that I was the only one to buy a house this month," Bill commented, "I was pretty sure I had heard several co-workers and friends also talking about buying a home this month." 

Home sellers are trying hard to keep this in perspective but some sellers, such as Sally Peters, are having difficulty staying calm about this new development.  "With only 1 home sale last month, and 821 active listings, that shows a 68 year supply of homes on the market," Sally explained, "Since I'm already 52 years old myself, I am obviously a bit concerned that it might take 68 years to sell all of the houses on the market.  I might be over 100 before my home sells!?!"

Stay tuned for a full report on the housing market in roughly a week, until then, watch for additional details on these breaking stories:

• JMU to purchase portion of Interstate 81 passing through campus, plans to paint the road purple, and use gold lines for all lane markings.
• Rockingham County Planning Commission members, bored due to a lack of re-zoning requests for new residential subdivisions, form a development company, and send themselves re-zoning applcations for their own land.

Happy April 1st!

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