If you are making a low offer, you can increase the appeal of your offer by strengthening your other offering terms....

DEPOSITS
Make the largest deposit you are comfortable with so the seller knows you have money "on the line" and that you won't risk losing that money by attempting to walk away from the deal.

CLOSING COST ASSISTANCE
Sellers don't just look at the contract price --- they calculate their net proceeds based on the offer price and any credits or closing cost assistance. Only ask for assistance if you truly need it.

FINANCING
Provide as much detail as possible about your financing intentions, and always include a pre-approval letter. Sellers who believe you are capable of financing the purchase will be less hesitant as they consider other terms of your offer.  And yes -- offer cash, a large pile of it, if you are able.  :)

PERSONAL PROPERTY
Don't automatically ask for everything the seller intends to convey --- if you don't need them all, leave them out of the offer. Allowing the seller to keep their washer/dryer (for example) may make them more flexible in other areas.

INSPECTIONS
Having a professional inspect the property you are purchasing is usually a good idea; however if you only intend to do it for informational purposes, consider leaving it out of the contract negotiations and conducting it post-settlement.

SETTLEMENT & POSSESSION
If possible, cater your settlement date and the details of transferring possession of the property to the needs or wants of the seller. This can go a long way towards gaining seller flexibility on other contract terms.

Finally, research the seller's context for selling. That information can be invaluable in negotiating a successful contract.

Internet cools are great but they still can't replace an in-person walk through.

These days -- you can learn A LOT about a house online.  You can typically review:

It costs more now than it did a few years ago to buy a home in Harrisonburg and Rockingham County, which should come as no surprise since...

Over the next few years, it seems likely we will see a continuation of this trend, as sales prices and mortgage interest rates are both likely to continue to slowly increase.

 

If last year is any indication, get ready to see inventory levels falling over the next few months as the weather gets colder.

Inventory levels have fallen 18% over the past year -- and 39% over the past two years -- and we're about to head into the time of year (Fall to Winter) when inventory levels drop to their lowest levels.

As shown above, inventory levels fell 32% last year between the end of August and the end of January.  As such -- look at the meager supply of homes currently on the market -- and then eliminate 1 out of every 3 of those homes.  That's likely where we're headed over the next few months.

But here's the good news (sorta, kinda, with limitations) -- if you are thinking of selling your home in the next few months, you may have quite a few buyers angling to purchase it if it aligns well with what they are looking for in a home.  The sorta/kinda part is that you'll only be good shape if you don't have to buy as well.  After all, if we quickly sell your home (because of low inventory levels), but can't find something for you to buy (because of low inventory levels), then we still have problems.

Who is the indisputable winner in today's local housing market? 

The home seller who does not have to buy a home as well.  :-)

  

Mortgage interest rates keep on rising.  The question now seems to be whether the higher rates will take anyone out of the market to buy -- or will put a damper on rising home values / sales prices.

Thus far, buyer activity has continued to be quite strong in 2018 despite these modest increases in interest rates.

Interest rates have not quite risen a full percentage point over the past year....

3.85% back in October 2017

4.71% today

 

Home buying activity slowed for the fourth straight month in September 2018 -- but -- it was 15% higher than it was last September!

As shown above, 100 buyers signed contracts to buy homes in September 2018, a slight decline from 109 the previous month, but an increase over last September.

If last year is any indication, we may see an uptick in buying activity in October before things then cool down between November and February.

Generally speaking, folks don't use their outdoor hose spigots in the winter.  I suppose you might use it from time to time, but it's just not as fun to wash your car in the driveway on most December days -- and your lush garden is not lush, and does not need watering.  Oh, and if you did use your hose spigot, and left the hose attached, you'd potentially have serious problems when the water in the hose freezes, backs up into the spigot, maybe into the pipe, and something splits, cracks or bursts.

So, once we get through Fall, most folks are turning off their hose spigots for the last time until Spring.  But not so with the local housing marketing.

Between March and August (Spring and Summer, as we'll call it) an average of 130 buyers signed contracts to buy houses each month.  A pretty rapid pace of buyer activity.

So, this winter, what should we expect?  Will that supply of buyers be turned off like a hose spigot, and will the buyers slowly drip out at a rate of 13 buyers per month?  Thus, 10% of the pace of buyer activity in the Spring and Summer?  Nope!

Looking at last Winter (December, January, February) there were an average of 81 buyers signing contracts per month!  You read that correctly, only a 38% decline in buyer activity during the Winter months -- as compared to the Spring and Summer months.

So, unlike your hose spigot, which will likely be barely used during the Winter -- the local housing market doesn't slow down, or cool down, or shut down, nearly as much.

 

How much should you be willing to pay for the smallest house in a neighborhood?  Especially if it is a good bit smaller than all the other houses in the neighborhood?

Let's imagine a neighborhood in Harrisonburg or Rockingham County where homes typically sell for $350K - $400K, with an occasional sale above $400K. All of these homes, however, are 3000 SF homes.  There might be a 2800 SF homes that sells from time to time, but almost all are at, above, or well above 3000 SF.

So -- when a 2300 SF home comes on the market in the neighborhood, how much should you be willing to pay?

A seller might say $340K.  After all, you have to pay $350K+ to buy any house in this amazing neighborhood, so even if my house is smaller than most, you'll need to pay pretty close to that floor of $350K.

A buyer might say $300K.  After all, the 2300 SF home is markedly smaller than just about every other home in the neighborhood, so the sales price should be quite a bit lower as well.  If a 3000 SF home sells for $350K, I don't want to pay more than $300K for a 2300 SF home.

I might say $320K. I think there is merit in both of the perspectives above, and a blending of those two concepts gets us close to what a buyer should be willing to pay. 

Keep in mind -- it is also possible that a buyer will come along who just LOVES the neighborhood and doesn't need much space at all.  This buyer might just be willing to pay closer to that $340K - $350K price, especially if they are a cash buyer, or moving from a more expensive market, etc.

 

If you're looking for a resale, four bedroom home with two full bathrooms, a two-car garage, brick exterior, with a flat lot, walk out basement, privacy, views, character, charm, an open layout, defined spaces, nine foot ceilings, hardwood floors, passive solar design, a screened porch, covered porch, deck, patio and rooftop terrace -- then you'd better be ready to relocate anywhere in the US to find such a combination.  :-)

If you're like the other 99.9% of the home buying population, then you're going to have to make some compromises when you buy your next home -- it won't be perfect in all ways.

But, the question is, which imperfections are you willing to accept?

In showing a house yesterday, I had an insightful conversation with some current home buyers where we concluded it would certainly be more reasonable to buy a home that is imperfect in the size of a few rooms or the finishes of some interior features -- much more so than it would be reasonable to buy a home that is imperfect in the drainage of the lot or the condition or nature of the roof and heating system.

So, when you are buying your next home, and buying an imperfect home -- give some thought to which imperfections you will accept.  Imperfections that you can change later -- or that you will never be able to affect?  Imperfections that are inexpensive to adjust -- or that will require a major investment?  Imperfections that you can easily overlook -- or that will bug you each and every day.

  

It's time for your annual (semi-annual?) physical with your doc -- and as you review your recent health concerns with your doctor you share that you have been having some severe pain in one of your toes and one of your toenails doesn't look so great.  You're not sure -- and it turns out your doctor is not sure -- if it is a drastically in-grown toenail, a fungus, an infection, or something more. 

Your doctor refers you to a specialist (a podiatrist) for further evaluation to see if everything is OK and what recommendations (if any) they might have.

At this point, do you...

 

If beauty is in the eye of the beholder, perhaps home value is in the eye of the buyer.

While viewing a unique property yesterday, I was discussing the value with my clients.  The value of that property (and perhaps any property) can seem to vary quite a bit.

Let's pretend the unique property is listed for $400K.  (it's not)

The value to YOU -- how much a property is worth to you likely relates to how well it fulfill your needs, what your budget is for a purchase, what it would cost to make changes to the house to allow it to work well for you, etc.  In this case, the house might only be worth $300K to you because it is larger than you actually need it to be, and you'd need to add a bathroom, and renovate the attic. 

The value to MOST PEOPLE -- how much a property would be worth to most buyers who might look at it is an important perspective for a seller to seek to understand.  If ten possible buyers walked through this home and all concluded that they'd pay $350K, perhaps the house is overpriced.

The value to the THEORETICAL BUYER -- in theory, if a buyer existed (now or in the future) for whom this was the absolute perfect amount of space, layout, condition, location, etc., maybe they would be head over heels in love with the house and ready to pay $375K.

As a seller, you need to decide if you want to wait for that theoretical buyer -- who might not really exist -- or if you want to price your home to make its value seem reasonable to most people -- or if you want to be willing to negotiate down to a price that could work for nearly anyone.

 

Sometimes you'll see a house that doesn't really work for you -- BUT -- it COULD -- with some major renovations.  Maybe that's building an addition, adding a garage, tearing out some interior walls to make larger rooms, etc.

Often, you'll determine that these renovations are possible -- but it is my opinion that they are not always advisable.

A HOUSE JUST FOR YOU -- You should enjoy the home you live in, and make it your own, however a buyer can go overboard here.  If you make major renovations to a home that makes it work ONLY for you -- then later when you try to sell, you may find it to be a challenge if your renovations made it work ideally for you -- and extraordinarily less than ideally for every other possible future owner of the home.

OVER-BUILDING FOR THE NEIGHBORHOOD --  If you're buying a home in a neighborhood where homes usually sell for $250K, and you are likely to spend $230K because the house you are purchasing needs work, and then you spend $130K on fixing it up and making it work well for you -- all of a sudden you have a $360K home to try to sell in the future, surrounded by $250K homes.

So -- by all means, consider making changes or improvements to the house that you purchase -- but keep in mind the big picture related to eventually selling the house as well.

 

If you have three non-negotiable home search criteria, it is important to reflect on (or at least be aware of) how much overlap exists between these criteria. 

Above are two examples of this way of thinking about your home search....

The first set of buyers will likely have lots of options (large yellow overlap area) because many homes in the City have three bedrooms and are under $300K.

The second set of buyers will likely have very few options (small yellow overlap area) because there are very few homes that somehow offer privacy AND amazing views and happen to have a formal dining room.

These are fictitious illustrations -- they don't represent the actual amount of overlap that does or does not exist based on the criteria noted above -- but you should give some thought to how small of an overlap area you are creating for yourself based on what you are defining as non-negotiable in your home search.

If that area is too small, you'll have very few options to consider, and eventually you may decide to flex a bit on a non-negotiable point.

 

First, learn more about this new listing in Lakewood Estates by visiting 1285CumberlandDrive.com.

Now, on to our local real estate market -- I just published my most recent monthly market report, and as usual, you can read on for an overview, download the full report as a PDF or tune in to my monthly video overview of our local housing market...

After an extraordinarily robust month of sales in June (174 -- third highest month ever) home sales slowed a bit in July, but remained (at 130) higher than in any recent July.  It should be no surprise then that home sales cooled (even if temperatures did not) in August.  Perhaps many summer buyers bought earlier in the summer this year than last. 

In the chart above, orange = 2015, green = 2016, blue = 2017 and red = 2018.  So...

Jun + Jul + Aug in 2016 = 425 summer buyers

Jun + Jul + Aug in 2017 = 374 summer buyers

Jun + Jul + Aug in 2018 = 418 summer buyers

We have seen 897 home sales in the first eight months of the year -- this is more home sales than we've seen in any recent first eight months of the year.  At this point, we seem poised to see another 1300+ year of home sales -- which we have only seen one other time in the past decade.

Looking at a rolling 12 month data window -- we see that there has been a net 1% increase in the pace of home sales per year (up to 1303/year) and a 7% increase in the median sales price (up to $210K) over the past year.  The median sales price escalated quickly from $200K to $210K this Spring but now has stayed put at $210K for the past few months.

I have never been happier to see such a modest increase in prices as I am to see the 2.4% increase in the median sales price of single family home as shown above.  The 7% increase in median sales prices shown on the prior graph reflects not just increases in home values but perhaps a shift in which homes are selling.  By looking at only single family homes (excluding duplexes, townhouses and condos) we can (sometimes) get a better sense of actual changes in home values.  Here we see that single family home sales prices have increased only 2.4% over the past year.

The balance (or imbalance) between buyers and sellers doesn't show any signs of shifting any time soon.  After multiple years of increasing buyer activity we are now seeing a relatively stable number of buyers in the market -- around 650 every six months.  But at the same time, inventory levels continue to decline -- making it an even stronger seller's market -- with the usual disclaimers of "in most areas, in most price ranges, for most property types, etc."

The huge month of sales in June 2018 was foretold by the enormous month of contracts in May 2018.  Since that time, we've seen relatively normal months of contract activity.  The 109 contracts signed in August 2018 is pretty much in line with the 111 contracts we saw last year.  Looking forward, we're likely to see a dip in contract activity in September, possibly a spike in October, before much lower contract numbers between November and February.

If you thought inventory levels have been low recently, you haven't seen anything yet.  After a 16% year over year decline, we're about to head into the Fall and Winter where we inevitably see fewer homes on the market.  It seems likely we'll dip below the 300 homes for sale mark again as we did last December and January.  An increase in new construction is likely the only thing that can break this drought of listing inventory.

This is absolutely no consolation at all to any home seller who has had their home on the market for 2, 3, 4, 6 or 10 months -- but for sellers about to put their homes on the market, you have a decent chance of selling your home quickly -- again, depending on price point, location, features, finishes, condition, marketing, etc.  But, as shown above, slightly more than half of the homes that sold in the past year were under contract within 30 days of being listed for sale.

Yes -- interest rates have risen over the past year -- by about 0.75%, which we shouldn't minimize.  That said, at 4.5% -- which seems to be where we are hovering for the moment -- this doesn't seem to be drastically changing buyer behavior or housing affordability.

OK -- I'll stop there for now.  Again, you can download the full report as a PDF, or tune in to my monthly video overview of our local housing market

And a few tips for anyone thinking of buying or selling soon --

SELLERS -- even though it is a seller's market in many price ranges right now, you must still focus on price, condition and marketing.

BUYERS -- it can be difficult and frustrating to buy right now -- make it a bit easier for yourself by knowing the market, knowing the process, knowing your buying power, and closely monitoring new listings!

For further reading on buying or selling in this area, check out....

• BuyingAHomeInHarrisonburg.com


• SellingAHomeInHarrisonburg.com

And if YOU are ready to get the process started, simply contact me at 540-578-0102 or scott@HarrisonburgHousingToday.com.

 

Some buyers find themselves in a "repeating stalemate" situation -- where they have made offers on multiple offers and they keep coming up short, and not being able to find common ground with the home sellers.  In the situation I am describing, it is not a result of the buyer being outbid by another buyer -- but rather, because they repeatedly are not willing to pay a price that the seller is willing to accept.

In such a situation, a buyer can start to wonder whose thinking is askew.  Are they being unreasonable as buyers, thinking that they should be able to buy one of these homes for $X?  Or are the sellers being unreasonable as sellers, thinking that they should be able to sell their home for $Y?

In the end, I suppose that if the seller is willing to continue to own their home (and not sell it) then it is OK for them to continue to try to sell their home for $Y if multiple buyers keep walking way from negotiations not willing to pay $Y.

And likewise, if a buyer is willing to continue to not buy a home then it is OK for them to continue to walk away from negotiations when sellers won't accept $X for the house.

The only way that this type of a stalemate ever ends is when one party finally decides that their long-held and previously non-negotiable position can be compromised. 

 

It remains difficult to buy a single family home in the City of Harrisonburg for less than $100K.  While the 2018 data point (above) is based only on the first eight months of the year, it is clear that fewer and fewer detached homes are selling in Harrisonburg for less than $100K.

This is the only home that has sold for less than $100K thus far in 2018...

 

Each year, right around twice as many home buyers purchase homes in Rockingham County as compared to in the City of Harrisonburg.  Clearly, the home buyers in the City are much more densely situated -- since the City is comprised of only 17.42 square miles -- while the County spans 849.09 square miles!

As a random aside, Rockingham County is the third largest county in Virginia!

So -- twice as many buyers in the County -- do sellers in the County have it easier than in the City?  Not necessarily, as there are slightly MORE than twice as many homes for sale in the County as compared to the City.

Where will you purchase your next home?  In the City or the County?  Why?  Based on the lot size, privacy, school district, age, property type?

  

If you are getting ready to sell your home AND buy your home, it can sometimes be difficult to determine where to start...

Do you start by finding a house you want to purchase? 

Or do you start by listing your home for sale?

I would suggest that you start with whichever you anticipate will be the most difficult part of the two step process.

If it will be difficult to sell your home (because of price, location, layout, features, age, etc.) and it will be at least slight easier to buy the next one (plenty of viable options are listed for sale) then you are likely best off starting with listing your home for sale.  Work to get the more difficult half of the transition underway by getting your current home under contract, and then work on the easier side of the transition.

If it will be more difficult to buy the next house (because of the specificity of your housing goals, or because of low inventory levels, etc.) and it will be at least slightly easier to sell your current home (because the property type, location or price are in high demand) then you are likely best off focusing first on finding the home to buy -- and then listing your home for sale.

There are plenty of nuances we can discuss further to formulate a plan for attempting to simultaneously sell and buy -- but as a general rule of thumb, you'll be best off to start with the harder half of the transaction.

 

Here is a break down of a year's single family home sales by price range:

A reader asked the following in response to my analysis earlier this week of all home sales in Harrisonburg and Rockingham County...

This is an excellent point.  When we look at a large amount of data (all sales in Harrisonburg and Rockingham County) the large number of home sales in a particular price range can obscure some market realities that are hiding just below the surface.

In the case of the buyer commenting above, the reason that she found very few options in the $200K - $300K price range relates to property type, location, size, age and features.

Property Type - Indeed, the original analysis includes all property types, including townhouses and condos.  Under $100K, this includes many student rentals.  Between $100K and $200K, this includes many townhouses, some of which are rental properties.  Between $200K and $300K this also includes quite a few townhouses.  In the new analysis (above) I have only included single family detached homes.

Location - Rockingham County is a large county.  It's actually the third largest county in Virginia, behind Pittsylvania and Augusta.  Many buyers looking to be close-ish to Harrisonburg aren't going to be looking at homes in Broadway, Elkton or Massanutten, based simply on location.  In the new analysis (above) I have only included areas close-ish to Harrisonburg, as shown below.

Size - It's easy to look at the data above and wonder how there could really be 182 homes that sold between $200K and $300K, in the geographic area bounded above, and to not (as a buyer) have thought any or many were good options.  A whole lot of this has to do with the size of the home -- many buyers need more than X bedrooms, or more than X square feet.  When we start putting some lower bounds on the space needed in a house, we quickly narrow down the number of viable homes.

Age - The age of a home doesn't narrow things down quite as quickly as the size of a home, but it makes an impact.  Many buyers are going to be significantly less excited about buying a 60 or 80 or 100 year old home as compared to buying a home that has been built in the past 10 to 20 years.

Features - Then, when we start adding on needs (garage, basement) or wants (open floor plan, level lot), we narrow it all the way down to a relatively small number of homes that often match exactly what a buyer is hoping to buy.

So -- when you look at the large number of homes selling in a given price range, don't think that all of those homes will be homes that will be viable options for you and your family.  Once we add some of your additional (reasonable) criteria, the options will start constricting, often rather quickly.

The number of options that you have today, as a buyer, may be the most options you'll have at any given point between now and the end of the year.  As shown above, inventory levels (the number of active listings in the MLS at the end-ish of each month) climbed through the first six months of the year, but seemed to peak in May/June and now would appear to be starting to decline again.

Now, certainly, there will be new listings over the next five months of this year -- so there will be some new inventory options -- but the total inventory available at any given point is not likely to increase again until next Spring.