Welcome! This blog tracks the real estate market in the Central Shenandoah Valley, featuring market data and analysis, an exploration of common buying and selling questions, and candid commentary on all things real estate.
If you are interested in discussing any of the topics on this blog, or the details of your specific real estate situation, call or e-mail me!
After a huge spike in sales (408 lot sales in 2004) and in median prices ($99,900 in 2006), the sales of building lots cooled quite a bit between 2004 and 2009.
The last few years, have shown slow but steady growth in this segment of our market -- 60 . . . 61 . . . 79 . . . 83 sales over the past four years.
This has also resulted in stability in the median sales price, which has been right around $55,000 for the past five years.
The next question is -- where (and when) will we see the next new development of single family home residential lots....
Let's take a bit of a closer look at lot sale in Harrisonburg and Rockingham County - both at the number of sales in each subdivision, as well as the number of active listings, plus we'll examine the price range for each neighborhood....
A few observations....
Explore lots for sale....
I have several clients who are thinking about building a custom home. This is a helpful piece from Charles Hendricks [ Custom Home - how to get started ] that can get you started thinking about whether you are going to start by meeting with an architect, drafter or builder.
Read more here: Custom Home - how to get started
The bulk of Preston Lake subdivision (mostly undeveloped building lots) was foreclosed on in 2011, but last week was purchased by a neighboring land owner --- a developer from Maryland.
After some further research, here is what was conveyed:
Thus, if we ignore the fact that roads, water and sewer need to be installed on those 43.5 acres (outlined above in red), this was essentially the purchase of:
And here is a bit of context on the purchase price:
So, how much was paid for each lot? Well, let's assume that a single family home lots is worth twice as much as a rowhouse lot --- and that a finished lot (with infrastructure) is worth twice as much as a planned lot. If that were all the case, this new developer essentially paid:
If you refer back to the amount of debt that was foreclosed on ($20M) and compare that to the new purchase price ($2M) we can assume that the previous developer's lot basis was 10 times higher ($100K for single family home lots, etc).
UPDATE: After further review of the deed transferring the property from Wells Fargo, I am now noticing that the new developer has agreed to pay a "Subsequent Fee" to Wells Fargo of 2% of the gross sales price of any of their newly acquired properties (building lots or lots where they have built homes) when it closes. This only applies to transfers within the first five years.
These definitions do not describe all possible situations, but they will give you a general idea of the two ways to go about buying/building a new home....
CUSTOM HOME: A home designed jointly by builder and buyer, which is then built to the buyer's specifications.
SPEC HOME: A home designed by a builder, and built speculatively by the builder, who then works to find a buyer for the completed home.
Back in the height of the housing market (a.k.a. housing boom)....
Now, after the market has cooled off quite a bit (a.k.a. housing bust?)....
Thankfully, these desires actually coincide. There were lots of spec builds in the height of the market, and lots of buyers to buy them. There are very few spec builds now, and very few buyers to buy them.
Given the givens, here is some guidance for today's market....
Builders --- if you're going to build speculatively, put a good deal of thought into the floor plan and make sure it is going to be an attractive layout for a wide spectrum of buyers. Also, consider finishing the house through the drywall stage and then marketing it to find a buyer that can make their own selections for interior finishes.
Buyers --- talk to your lender early to know what will be possible for you. Buying a lot, obtaining construction financing, and building a custom home is quite a different financial transaction than buying a finished home with a traditional mortgage.
It's a tough time to sell a building lot in Harrisonburg or Rockingham County. Before the real estate boom of 2003-2007, roughly 200 lots sold per year. In recent years, only 60 lots have been selling per year. However.....
The graph above represents lot sales reflected in the HRAR MLS of less than one acre. See a clearer version of this graph on Page 18 of this PDF.
The abundance and low prices of re-sale homes can cause great frustration for custom home builders these days. Over the past few months I have had lengthy conversations with several clients who want to build a new home.....but then they get sidetracked by re-sale homes.
They start out, you see, quite focused on buying a lot, selecting and designing floor plans, hiring a builder, and building their dream home ---- but WAIT! Just before they tip the first domino, they take a look online at a few re-sale homes and they start to second guess themselves.
They're about to build a $400,000 home, and they think they see comparable re-sale homes (that are only a few years old) for only $350,000. Or they're about to build a $475,000 house, and there seem to be quite a few comparable $430,000 homes that are only a few years old.
My universal answer to this angst is to suggest that we spend some time viewing the re-sale homes. I suggest to them that looking at the re-sale homes will DEFINITELY give them their answer. They'll either confirm their decision to hire a custom builder --- or they'll fall in love with a re-sale home and move forward in that direction.
You'd think, with the price gaps we're discussing, that these clients would often end up buying a re-sale home --- but that's not usually what happens. While there are some compelling re-sale houses for sale, they almost always determine that they'd rather pay more to have a house exactly how they want it. Sometimes this is the floor plan, sometimes the neighborhood, or the lot size or topography, or the exterior materials of the home, or the interior finishes, or the level of maintenance needed into the future, or the views.......or a combination of many of these.
Sometimes this process will result in one of my clients deciding to buy a re-sale (instead of hiring a custom builder), but it almost always is a process that helps to confirm their decision to move forward with a custom build.
If you're in this situation --- ready to build, but full of self-doubt when examining the re-sale market --- please be in touch. I'd be happy to help you explore the re-sale market to either confirm or derail your current plans.
Let's take a bit of a closer look at lot sale in Harrisonburg and Rockingham County --- first, with a more visual look at the 2010 sales figures I reported a few days ago.
A few notes:
A few notes:
The pace of lot sales (of less than an acre) has declined significantly in Harrisonburg and Rockingham County over the past several years, from a high of 408 lot sales in 2004 down to only 58 lot sales in 2009. We did see a slight increase in 2010, up to 63 lot sales.
So where were these 63 lots that sold in Harrisonburg and Rockingham County during 2010?
BELMONT ESTATES: (4) lot sales between $74k and $90k
view active listings in Belmont Estates
BLUE STONE HILLS: (1) lot sale at $51k
view active listings in Blue Stone Hills
CROSSROADS FARM: (6) lot sales between $80k and $155k
view active listings in Crossroads Farm
GREAT OAKS: (1) lot sale at $65k
view active listings in Great Oaks
HARMONY HEIGHTS: (1) lot sale at $86k
view active listings in Harmony Heights
LAKE POINTE: (1) lot sale at $68k
view active listings in Lake Pointe
MAGNOLIA RIDGE: (12) lot sales between $55k and $84k
view active listings in Magnolia Ridge
MASSANUTTEN RESORT: (6) lot sales between $10k and $32k
view active listings in Massanutten Resort
MEADOWBROOK: (1) lot sale at $61k
view active listings in Meadowbrook
MONTE VISTA ESTATES: (1) lot sale at $80k
view active listings in Monte Vista Estates
OVERBROOK: (2) lot sales at $60k
view active listings in Overbrook
STONE SPRING MANOR: (4) lot sales between $29k and $39k
view active listings in Stone Spring Manor
THE CROSSINGS: (3) lot sales between $50k and $55k
view active listings in The Crossings
WOODBRIDGE: (2) lot sales between $37k and $50k
view active listings in Woodbridge
There were several other lot sales during 2010, that were not in subdivisions. Let me know if you have any questions about the building lot market in Harrisonburg and Rockingham County.
Rockingham County, Virginia (not including the City of Harrisonburg) is comprised of (approximately) 46,600 parcels of real estate. Some of these lots or tracts are very small, in towns such as Grottoes, Dayton or Elkton. Others are quite expansive and are in the far flung corners of the County. Below is a visual representation of the distribution of lot sizes of those 46,600 properties --- you might need to click on this link to view the full size document for easier reading.
Here's the summary:
As I expressed some time ago, my hope for the 2009 Harrisonburg and Rockingham County real estate market is that we would see the end of the ever-decreasing number of home sales in our market. We have seen (approximately) a 25% decrease in number of sales between 2006-2007, 2007-2008, and 2008-2009.
Lot sales, however are doing much worse!
In the first four months of this year (2009), In all of Harrisonburg and Rockingham County, there have only been 11 lot transfers of less than one acre.
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 . . .
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).
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.
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:
Over the past several years, prices of lots in eastern Rockingham County, particularly in the Peak View school district have increased dramatically. However, in 2007, the average sales price dropped below the 2006 average sales price.
2003: $47,546 (81 sales)
2004: $55,354 (112 sales)
2005: $89,112 (98 sales)
2006: $118,075 (51 sales)
2007: $110,875 (35 sales)
As you can above, during this same time, demand for lots decreased rather significantly. This was compounded by the fact that the inventory of available lots increased during the same time --- there are currently 109 lots available in the Peak View school district, as follows:
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