Many people have asked me how much of an affect on our market the first time buyer tax credit has had over the past year.  It's a challenging question to answer --- some first time buyers who bought this year may have bought because of the tax credit, but some (or most?) may have bought even if the tax credit didn't exist.

One way that we should be able to tell if the tax credit had a big impact is to see if there are more first time buyers in the market now as compared to last year.  Thus, I decided to examine the breakdown of sales prices during May and June 2010 (it should be a lot of first time buyers) as compared to all of last year (2009).



As you can see, above, I assumed that I would probably find a pretty big increase in the proportional number of lower priced homes selling this May and June as compared to last year. 



Above, however, you'll note that there wasn't actually much of a change at all.  About 60% of the homes sold in the last two months were priced below $200k and the same percentage of the sales from last year were below $200k.

I welcome your suggestions for other ways to slice and dice the data to get at whether the tax credit had an impact on the market.  For now, we'll say the jury is still out...

For each of the past four years, fewer and fewer home buyers have purchased homes in Harrisonburg and Rockingham County.  The annual rate of home sales has declined from 1,669 in 2005 down to 816 in 2009 – a decline of more than 50%.   Even though the first five months of 2010 indicate that sales activity may finally be starting to increase again, it is still a buyer's market.  There are far more sellers needing, hoping or wanting to sell than there are buyers who need, hope or want to buy.

In many senses, this is great news for buyers – there are fewer buyers to compete with, and more houses to choose from.  Add to that the amazingly low interest rates and you'll see why today's home buyer is excited to be in the market to buy.  But despite this excitement, most buyers want to make sure they are making a wise investment.  In years past, just about any home would do – when the overall market was increasing by 15% to 20% per year, just about any home would see great appreciation.  Now, however, prices are holding relatively stable, so it becomes more important which house a buyer chooses.  As you look at which particular house you choose, one perspective to consider is how you'll do when you re-sell the house you are buying.

Some homes currently for sale need updating – hardwood floors to be refinished, a roof to be replaced, wallpaper to be removed, or a driveway to be re-surfaced.  These homes that are need of some updates can be a good opportunity for buyers – if the seller is pricing based on these imminent costs.  An even better opportunity, however, is a home where brand new value can be added through your improvements.  If you sand and stain the hardwood floors, you will have added value through improving the look and ambiance of the home – but you had hardwood floors before your work, and you still do.  If you replace the roof, you will have added value through lower roof maintenance for the next buyer – but you had a roof before your work, and you still do.  As you look at homes as a buyer you should not only look for updates that you might choose to or need to make, but also totally new areas where you can create space to add value.  Homes with unfinished bonus rooms or unfinished basements offer lots of potential for adding brand new value.  The layout of some homes invites the addition of a deck or screened porch – both of which add brand new value – or perhaps an existing porch can be converted into a sunroom.  When you're just refinishing the existing spaces, you usually aren't changing the functional space offered to the next buyer – but if there is an easy way to add more functional spaces, this can offer you many options during your time of homeownership, and when you re-sell.

A second perspective to consider when buying in a buyer's market is the "timeless value" or quality found in a home you are considering.  Look for appropriately sized rooms, the types of rooms that you use on a daily basis, and the quality of construction and craftsmanship that means your home will still look great in 5, 10 or 15 years.  In this case, it's not just about buying the biggest house, or the house with the biggest yard.  Some 2,000 square foot homes have layouts that won't fit most people's lifestyles, where an 1,800 square foot home down the street might be perfectly designed for comfortable daily use.  In her very well read book, The Not So Big House, Sarah Susanka encourages us to think differently about the layout of a house:

"It's time for a different kind of house.  A house that is more than square footage; a house that is Not So Big, where each room is used every day.  A house with a floorplan inspired by our informal lifestyle instead of the way our grandparents lived.  A house for the future that embraces a few well-work concepts from the past.  A house that expresses our values and our personalities.  It's time for the Not So Big House."

Saranka points out that it's not all about quantity in a house, but about quality – quality in design and materials.

Finally, it is very important to consider location and neighborhood, when buying a home in a buyer's market.  A home can be beautiful, well designed, and desirable to all – but if it is located on a busy road, or in the far corner of the county, or on a street where most homes are old and poorly maintained, the future value of the home suddenly changes.  Buying an older home, or one that needs work, can be a much better opportunity for you, as you have more control over the changes to the value of your home.  You'll likely never reduce the traffic count on the road in front of your house, you'll never make city and employment growth stretch all the way out to your corner of the county, and you won't spend your free time fixing up the other ten houses on your block.  

With many more homes for sale than buyers to buy them, and with amazingly low interest rates, and with fewer buyers to compete with when negotiating a deal with a seller, it can be a very exciting time to buy a home.  When you do so, it is important to consider how well the home will fit your needs, but it is also wise to consider how the home you are considering will fare when you need to sell in 5, 10 or 15 years down the road.

Data Sources: Harrisonburg/Rockingham Association of Realtors MLS, Rockingham County Circuit Court Clerk's Office (Thanks Chaz & April!)

Many have asked me how foreclosures are affecting our local real estate market.  Absent hard data on the number of foreclosures in Harrisonburg and Rockingham County, I have always mentioned that there aren't an overwhelming number of foreclosures --- and certainly not enough to make a huge difference in home values.

Now, I have the data, thanks Chaz & April at the Clerk's Office . . .

What can be seen here is that the percentage of the home sales that are foreclosures has certainly been on the rise over the past several years.  However, despite this being based on hard data, there is still a bit of fuzzy math....

The "Sales" includes all home sales as recorded in the HRAR MLS.  This includes most foreclosures, because most such properties end up being bank owned properties that are then listed (and sold) by Realtors via the MLS.  However, if only 127 of the 177 foreclosures ended up in the MLS as sales, then the true number of total sales for 2009 would have been 866 sales, making foreclosures 20.4% of the market as opposed to 21.7% of the market.

This year (2010) and next year will be important to watch as we see how many home sales we'll have, and how many foreclosures will exist in the market.  I predict that home sales will level off this year (and thus, stop declining), but that foreclosures will increase over last year.

Home sales have certainly started to bounce back in 2010...



Skeptics certainly won't believe we're making any progress until we pass June 30th and the end of the tax credit season.

Big picture thinkers will want to delve into why our market has outperformed so many others across the country..

But now let's examine what is actually selling this year:



Sales of homes priced under $300k have increased compared to last year.
Sales of homes priced above $300k, however, have declined this year.

Is it because of the tax credit?  Is it because buyers of sub-$300k homes often don't have a home to sell before buying?  Plenty of possibilities --- but so far the market is looking strong for the spring and summer!

Some reports indicate that Americans lost over $1,000,000,000,000 (one trillion dollars) in home values in the last three months of 2009.  When looking at the sum of the last several years, the figures are even more staggering – declining home values across the United States have resulted in trillions of dollars of losses for American homeowners.  Yet during this same time period, homes values in Harrisonburg and Rockingham County have only been marginally affected.  In fact, it wasn't until 2009 that this area saw any significant decline in median sales price, and then it was only a 5% decline.  So why and how, in this time of rapidly declining home values, have homes in the central Shenandoah Valley held their value?

First, while Harrisonburg and Rockingham County did see a sharp increase in home prices (51% increase in median home value between 2003 and 2006), our median sales price started out quite low ($127,700 in 2003) and only increased to $192,983 in 2006.  Median sales prices in many other metropolitan areas increased to much higher levels leading to borrowers stretching pursuing riskier mortgages for their purchases. 

In such areas with significant increases in home values, many homeowners took on risky mortgage programs such as variable rate mortgages, interest only mortgages, or mortgages with a teaser rate.  Those with 30-year fixed rate mortgages knew what to expect of their housing payment and likely were able to continue to pay their mortgages after buying several years ago, but those with these higher risk mortgages often had trouble keeping up with their mortgages and were foreclosed upon.  Variable rate mortgages have been somewhat problematic, but not to a great degree because interest rates have remained relatively low for the last several years.  Interest only mortgages have proven to be quite dangerous, because the homeowners has not been paying down any principal on their mortgage, and thus does not build up an equity in their home absent any appreciation in the market.  Mortgages with teaser rates provided for a very low rate (1%, 2%) for a short time period in order to qualify a home purchaser.   These teaser rate mortgages would then reset to a much higher rate after several years, then putting the homeowner in financial duress, unable to make their mortgage programs

Since home values didn't go too drastically in this area, home buyers did not (in large number) feel pressured to obtain risky mortgages with variable or escalating future housing payments.  As a result, we have seen a very low number of foreclosures in the central Shenandoah Valley.  I have heard, anecdotally that earlier in 2009 over half of the homes on the market in the Winchester area were "bank owned" homes --- homes that had been foreclosed upon.  This high, high number of foreclosures lead to rapid decreases in home values, as banks quickly reduced the prices at which they would sell their inventory in order to get these homes off their books.  Thus while high foreclosure rates in other metropolitan areas lead to declining home values, the very low foreclosure rate in Harrisonburg and Rockingham County has lead to relatively stable home values.

The Harrisonburg and Rockingham County market has also been greatly protected by its diverse and stable local economy.  We have not seen significant losses of jobs over the past five years, which could have put large numbers of homeowners in a position where they had to sell their homes rapidly because they were unemployed, or because they were moving to another area to find work.  Our economy includes jobs from many sectors, and is largely supported by the colleges in universities in our midst.  It also helps that we have always had very low unemployment rates as compared to most every other metropolitan area in the country.

Since 2005, the pace of home sales has declined drastically, with only 813 home sales in 2009 compared to 1,669 home sales in 2005.  The law of supply and demand would suggest that such a large reduction in demand (a 51% decrease) would certainly lead to a drastic decrease in home values.  Yet, in the same time frame (2005-2009), the median home price has shown a net increase from $169,900 to $186,300 (a 10% increase).  While we have seen a 5% decrease in home values between 2008 and 2009, our local housing market continues to be amazingly resilient, without any significant shift in home values.

While we can't point one particular factor that has protected home values in the central Shenandoah Valley, it is highly related to the relatively slow and small increase in home values, the conservative mortgage programs used by home buyers, our low foreclosure rate, and our stable local economy.

Click here or on the image below to view the full March 2010 Harrisonburg & Rockingham County Real Estate Market Report (PDF).  Read on below for a few highlights.



Some high level February 2009 to February 2010 observations include:

• Inventory increased by 3%.
  
• Sales held steady (no change).
• Prices (median) declined by 3%.
• Days on market held steady (no change).

As can be seen below, we may be entering a new period of growth in our local real estate market.  Between 2004 and 2006, the pace of sales increased steadily.  Between 2006 and 2009, the pace of sales decreased drastically.  Over the past four months, we have seen the pace of sales stabilize and start to increase.



Don't delay -- get all of the exciting (and not as exciting) details and beautiful charts by downloading the full March 2010 Harrisonburg & Rockingham County Real Estate Market Report (PDF). 


If you find the information in this report to be helpful....

• Feel free to share it with your friends or colleagues.
• Let me know if you'd like to meet to discuss this report and/or the particulars of your real estate situation.
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• If you'd like to know even more about the housing market in Harrisonburg and Rockingham County, click here to subscribe to HarrisonburgHousingToday by e-mail or by RSS.
• Though I spend a considerable amount of time analyzing our local housing market,the majority of my time is spent helping people like you buy and sell real estate.  If you (or someone you know) will be buying or selling real estate sometime in the near future, I'd be delighted to have the opportunity to be of service.

Over at hburgnews I noticed a link to a new study from the Weldon Cooper Center indicating that the Harrisonburg / Rockingham County MSA has grown roughly 13% between 2000 and 2009.  [ read more at hburgnews ]

Knowing that home sales have decreased during the same time period, I thought I'd see how the two data sets lined up.  First, though, please note that:

• Home sales in 2009 (813 sales) are only barely below 2000 levels (829 sales).
• Of more interest is that home sales zoomed from 829 (in 2000) all the way up to 1,669 (in 2005) before significantly declining again.

This graph shows something (somewhat) similar --- a higher percentage (1.43%) of our population bought a home in 2005 than the percentage in 2000 (0.77%) and 2009 (0.66%). 

As I ponder this data, I wonder what will be "normal" over the next 20 years as to what percentage of our population will buy a home in any given year. Is 0.77% the magic number (shown in 2000 and 2008)?  If so, home sales were depressed in 2009 (how surprising).  Or perhaps we should expect about 1% of our population to buy a home each year. 

The most pressing question in my mind is when we will start to see an increase again in home sales --- both as a raw number, and as a percentage of the population.  I thought we'd see in 2008 (we did not).  I thought we'd see it in 2009 (we did not).  I think the third time might be the charm, and we'll see home sales (quantity, not sales prices) increase in 2010.  What do you think?

Also, another interesting way to look at the data above is as follows:

• In 2000, one in every 130 residents bought a home.
  
• In 2001, one in every 103 residents bought a home.
  
• In 2002, one in every 97 residents bought a home.
  
• In 2003, one in every 85 residents bought a home.
  
• In 2004, one in every 76 residents bought a home.
  
• In 2005, one in every 70 residents bought a home.
  
• In 2006, one in every 82 residents bought a home.
  
• In 2007, one in every 96 residents bought a home.
  
• In 2008, one in every 130 residents bought a home.
  
• In 2009, one in every 151 residents bought a home.

In conversation today about our local housing market, I was asked how in the world Harrisonburg and Rockingham County home values have stayed relatively level over the past few years when many parts of the state and country are not. 

One key reason for the relative stability in our housing market is continued LOW UNEMPLOYMENT.  Thanks to Jim over at RealCentralVA, for pointing out the Washington Post's interactive unemployment map. 

As unemployment has increased in other parts of Virginia, and the United States, there have been many ripple effects that directly impact those local housing markets:

• people who lose their jobs can't buy houses
• people who lose their jobs often can't continue to pay for their houses
• people who think they might lose their jobs won't buy houses
• people who can't find jobs won't move into the area and buy houses

To focus in on Harrisonburg and Rockingham County, here are a few snapshots from the Washington Post's interactive unemployment map.


 
As seen above, all areas in Virginia and most in neighboring states experienced sub 7% unemployment rates in July 2007.
 

 
As shown above, quite a few areas in neighboring states, and a few in Virginia started to see unemployment creep up to the 7% - 10% range in July 2008.
 

 
OUCH!  The vast majority of states surrounding Virginia were above 7% or above 10% or even above 13% in 2009.  Most areas of Virginia outperformed these neighboring states --- and Haririsonburg and Rockingham County STILL experienced an unemployment rate below 7%.

Somehow, the $8,000 tax credit for first-time buyers is getting all of the attention, meaning that most people don't even know about the $6,500 tax credit available to you if you've lived in your home for five years.

If you have owned your home for five or more years, you will (almost certainly) receive a $6,500 tax credit if you buy your next home by April 30th, 2010.  To clarify -- you must have a contract on the house by April 30th and close by June 30th.

Many people that I talk to who would be eligible for this $6,500 tax credit don't even know that it exists.  If you're in this situation and planning to buy a new house in 2010, you really ought to consider making a move in the first four to six months of the year. 

Click here for more information (from the IRS) about both tax credits.

Again, to try to really drive this point home:  If you've owned your house (and lived in it) for more than five years, you are very likely eligible for a $6,500 tax credit if you buy a new home by the spring/summer.

Thankfully, the value of homes in Harrisonburg and Rockingham County hasn't taken a nose dive like has happened in many other markets.  As you can see below, modest (normal?) growth in values occurred between 2000 and 2003, unbelievable (and unsustainable) growth in values occurred between 2003 and 2006, and prices became stagnant between 2006 and 2009.



That being said, since we haven't seen consistent growth in home values since 2006, there are some homeowners who are unable to sell their house (after costs) for as much as they bought it. 

Conventional wisdom pre-2003 said that you should only buy a house if you knew you'd be living in it for 5 or more years.  You see, with the principal balance of the mortgage declining SO SLOWLY at the start of a 30-year mortgage, it would take a full five years to have paid down the mortgage enough to cover the costs of selling.

As you might imagine from the graph above (or from talking to your friends), some people bought in 2003, 2004 or 2005, and then sold a year later at a tidy profit.  The market was going up so quickly that they could sell one year later with no financial detriment because of the high rate of appreciation.

Let's take a look at how our market has performed over the past decade by imagining that someone has to sell three years after they buy.



As per the chart above, a homeowner buying 2000 or 2001 would have been experienced a good sized gain.



The gain is starting to be more and more unbelievable at this point.  Buying in 2003 and selling in 2006 would have resulted in a whopping $53,000 gain, or roughly $18,000 per year.



While things are starting to slow down, we see here that someone could have bought as late as 2005 and been just fine, given that there was such a big jump in median home values between 2005 and 2006.



OOPS!  Wait a minute!  A $16,000 loss??  It's true --- if you bought in 2006 or anytime thereafter, and you want to sell your house, you'll need to prepare to do so at a loss, given the costs of selling.

The big question:  When will the median sales price start to stabilize?  When the supply of homes for sale starts decreasing more rapidly than it has, I believe we'll start to see the median price inch upwards again --- though not at the pace it did between 2003 and 2006!

Over the last few days I have had quite a few discussions with developers, builders, buyers, sellers, and other Realtors regarding the exciting change of pace our local real estate market experienced in November 2009.  To remind you of this astonishing news:

• November 2009 sales were 95% higher than November 2008.
  
  
• Home sales increased 30% between October 2009 and November 2009 -- a time period when we typically see a decline.
  
  
• November 2009 outperformed every other month of home sales in 2009 other than June and July.
  
  
• It looks as if 2009-Q4 will be the first quarter in four years with an increase in home sales as compared to the same quarter the prior year.

Read more here and here.

All of these are wonderful indicators, and we find yet another one at the top of this post, showing that while online property views (defined below) have been declining over the past few months, they are much higher than could be expected.  In fact, there were more properties viewed online in November 2009 than in March 2009. 

Wow!  We would typically expect that most buyers would be looking at properties online (and in person) at the start of the spring "buying season" -- but the graph above shows that there are still LOTS of buyers looking (at least online) at properties for sale.

Online property views is the sum of all property views on the Coldwell Banker Funkhouser Realtors network of web sites, including our company web site, and all agent web sites.

My hypothesis was that smaller homes were performing better in Harrisonburg and Rockingham County than the market at large.  After all, there is a significantly greater supply of homes for sale in the higher price ranges --- which would suggest that the real winners are the lower priced and smaller homes.  Plus, the $7500 followed by $8000 tax credits were certain to bring lots of new buyers into this segment of the market....

The data, however, shows otherwise....



As shown above, the overall market experienced a 44% drop in home sales between 2005 and 2008.  However....



As shown above, the market defined as homes with less than 1,500 square feet experienced a 47% drop in home sales during the same time period.  Now, let's look at prices....



As shown above, median sales prices of all residential properties have decreased by 1.5% between 2006 and 2009.  However....



As shown above, the market defined as homes with less than 1,500 square feet experienced a 4.5% drop in median sales price during the same time period. 

How could this be??  The best explanations for this (slightly) lower performing segment of the market (1,500 SF or less) that I can offer are....

• Lending guidelines have become increasingly stringent over the past few years, allowing fewer and fewer buyers to qualify for these homes.
• Investors have been largely absent from our market for the past few years since home prices increased so much faster than rental rates.  The smaller number of investors has likely decreased the number of sales of homes in this size range.
• Between 2002 and 2005, many buyers were those who only planned to stay in the area for a year or two.  They were comfortable buying because of the huge increase in home values each year that would allow them to sell again shortly after buying without taking a hit.  Now, however, buyers need to plan to wait 3, 5 or 7 years before being able to sell without a loss.

So, what do you think?  Is it surprising that these smaller, more affordable homes are performing (slightly) worse than the overall market?

Sort of....but maybe not effectively??

The chart below shows the number of price changes per year of homes that have sold for each of the past nine years.  Some houses that sold may have had multiple price changes --- these figures show the total number of price changes, counting each change on each property.



There was a sharp increase (+29%) in price changes in 2006 (compared to 2005), which would be expected because it was the first year of a reduced number of home sales.  However, there was also a sharp increase (+22%) in 2005 (compared to 2005) when the market was still peaking.

Perhaps of even more interest is that the number of price reductions per year has slowly decreased over the past several years (-4% in 2007, -7% in 2008).  This may be explained by the declining number of home sales, as the number of price changes shown above only accounts for price changes of listings that have sold. 

This year there have been approximately 600 home sales, and roughly 200 price changes of those homes that have sold . . . but nearly 700 price changes when we include the many houses that are still on the market.

Stay tuned for more analysis of how price changes affect the sale of your house.

I discovered today that the Harrisonburg and Rockingham County economy is in recovery! 



According to the data above, Harrisonburg is in "Recovery" --- though that includes a drop in employment, a drop in housing starts, and a drop in industrial production.  Data apparently wasn't available for housing prices, so I'll fill in the blank: median sales prices have decreased by 4% over the past year in Harrisonburg and Rockingham County.

So.....does this sound like recovery to you?  Dr. Rosser sheds some light on a property perspective in his comment at hburgnews....


I have to agree -- we're in a lot better spot than most other areas of Virginia and the U.S., though we still have progress to make before we see those metrics increasing again.

There are some who are predicting that the coming months will be QUITE slow in terms of home sales.  After all, the first time buyer tax credit is ending, and we're entering into winter -- a season that always brings slower sales.  But looking at the trajectory of sales between the most recent two quarters (2009-Q2, 2009-Q3), I'm left starting to wonder whether things might be picking up in pace....



As you can see in the graph above, there were a roughly equivalent number of Q2 and Q3 homes sales last year.  This year, however, despite both data points lying below the 2008 figures --- we saw a 15% increase in sales between Q2 and Q3.  With last year's astonishingly slow fourth quarter, I think there is a good chance our local real estate market will finish out the year strong with lots of home sales in October, November and December.

Why are home sales picking up in pace?  One plausible reason is that lots of first time buyers are getting in the market who might not have otherwise, or might not have last year.  Check out the graph below, showing the change in pace of home sales under $175k.



As you can see above, home sales in Q3 of this year surpassed (barely) last year's Q3 sales figure.  It seems quite plausible that this trend will continue in Q4, and that it may be largely a result of the tax credit for first time buyers.

Stay tuned as we move into and through October, November and December, but I don't believe real estate sales will be as slow as some predict.

I was chatting with a client today who asked me this question --- "So....what do we do....just wait?"  I am marketing this person's property for sale, but their segment of the market is particularly slow right now, and we haven't had much solid interest in their property in quite a few months.

So....what DO we do?

Many homeowners today likely feel this frustration --- that there is only so much that can be done in trying to sell their property --- and that at the end, they are just left waiting.  Some homeowners, in fact, go months without a single showing of their home.  It's easy to be discouraged in times when it seems like all you can do is wait, and while I won't try to cheer you up or encourage you that "it will all be ok", I will offer a few suggestions of things you CAN do if you find yourself just waiting:

1. Stay connected to the market so that you know how the value of your property is being affected by competing listings and properties that have recently sold.
2. Consider touring some of the competing listings to see how they compare to your home -- and even if you don't visit the properties, at least come to understand them on paper to best prepare your property be competitive.
3. Is there a small subset of Realtors who typically represent buyers of your property type or properties in the area where you live?  Perhaps a targeted e-mail or direct mail campaign to these Realtors could be effective.
4. Keep your pricing competitive, but know that if you lower your price below all other competing properties, many of them will likely follow suit and you'll all be dropping and dropping to try to be the lowest price on the block.
5. Consider alternatives to selling, such as a house swap, renting your house, or other creative ways to address your transition needs.

These are but a few things to consider if you find yourself in waiting mode as a hopeful property seller.  There are certainly many other marketing activities and strategies that could (and should) be explored, but many of them will vary depending on the nature of your particular property.

And to circle back around to answer the original question more simply, no, we don't "just wait."  It is vital to be constantly re-evaluating the pricing and marketing of a property to most aggressively and proactively expose it to potentially interested buyers.

Don't get depressed waiting --- get busy brainstorming ways to actively market your property!

Despite continued turbulence in many real estate markets across the country, the Harrisonburg and Rockingham County housing market continues to perform well, with stable values, despite a continued decline in sales pace.  Many housing markets across the country have experienced net losses of 30% - 50% in housing values over the past three years.  Harrisonburg and Rockingham have seen only a 2% downward shift in housing values over the past three years, as measured by the median price of sold residential properties per the Harrisonburg/Rockingham MLS.

The Central Shenandoah's diverse economy has remained very stable in most sectors over the last several years, and our area's continued low unemployment rates have allowed our housing market to continue to perform well.  While there are still those in our local community that are seeking employment, our local unemployment rate has been below the state and national rate for many years.  This employment stability gives local home buyers confidence in moving forward with their housing purchases.

While it hasn't created an enormous, market-altering boost in sales, the $8,000 credit to first time buyers has allowed many hopeful homeowners to buy over the past few months in Harrisonburg and Rockingham County.  The $8,000 is returned to the home buyer when they file their 2009 taxes, but can also be used as a down payment or closing costs in some cases.  Of note, time is now running short for those hoping to take advantage of this $8,000 first time buyer tax credit.  The deadline for closing on a home under this government program is November 30, 2009, and the financing process generally takes 45 to 60 days to complete. 

In addition to low unemployment, and the $8,000 first time buyer tax credit, very low foreclosure rates in our local market have also contributed to stability in home values.  Home values increased quite rapidly between 2003 and 2005 in Harrisonburg and Rockingham County, but did not increase fast enough and far enough to push large numbers of buyers into risky loan programs.  In many other high priced areas of the country, buyers purchased homes using extremely risky loan programs during the market boom, which led to high foreclosure rates in those areas during 2007, 2008 and 2009.  These foreclosed homes then re-entered the market and sold by the new owners (the banks) at values much lower than pre-existing market values.  Since Harrisonburg and Rockingham County have such a low foreclosure rate, these few home sales have not significantly affected local housing values.

Thus, it seems that our local housing market has experienced the lesser of two evils.  Most local homeowners are glad that they have not seen 30% - 50% declines in the value of their home, yet the drastic decline in the number of homes that sell per year makes it difficult to sell a home in a timely fashion.  Interestingly, many of the market that experienced huge drops in home values have now seen the pace of home sales increasing yet again. 

Prospective buyers in today's market ought to research home values carefully in the neighborhood(s) where they may buy, and shouldn't buy if they will need to sell again within a one to two year time period.   Hopeful sellers in today's market should price and market their home aggressively to maximize the chances that it will sell amidst very high inventory levels.

Yes and no.

I am participating in an economic survey group striving to create a true picture of the impact of the national economy on our region.  In our first meeting yesterday, we discussed our local economy as it pertains to retail sales, manufacturing, farming, construction, and many other sectors.  The participants included chambers of commerce, representatives from employment commissions up and down the valley, and many other perspectives on our Valley economy.

After hearing some not-so-great news followed by some so-so news, followed by some plain-old-depressing news, one participant commented that it sounded like our local economy wasn't really as sheltered as some consider it to be.

I quickly jumped in to clarify that (as it pertains to real estate) we are definitely affected by the national economy, but also significantly insulated from the effects that it has had in other areas.  Take these two facts, for example:

• The number of homes selling in Harrisonburg & Rockingham County have slipped 25% (+/-) each of the last 3 years.  That is clear evidence that national economic conditions and events are affecting our local real estate market.
• Median home values have increased or decreased 1% - 3% each of the last three years.  That is clear evidence that our local real estate market is also somewhat insulated from national economic conditions and events, as most other markets have seen 15%, 25%, 35% or higher losses in median home values.

So --- are things bad?  Yes, but they are nowhere near as bad as things are in most other areas of the country, even as close as communities such as Winchester. 

All kinds of news over the last few days related to our local real estate market and our local economy...

Bridgewater annexes 45 acres for new housing development

Office Depot closes 112 stores including Harrisonburg's

Site on Port Republic Road approves residential to commercial rezoning

Public hearing to determine outcome of age-targeted development in Elkton

The Virginia Resources Authority sold an unprecedented $215 million in infrastructure revenue bonds to raise funds for projects around Virginia.  This was, in fact, the largest transaction in the pooled financing program in VRA history --- in what is otherwise a challenging economic time.

"Bricks and mortar projects mean jobs and income in Virginia communities," said Sheryl Bailey, Executive Director of the Virginia Resources Authority. "We can't over-emphasize the importance of such projects in stimulating the local and state economy. Infrastructure is a key to America's economic recovery. "

According to the Daily Press, the projects to be financed will include "upgrades to bridges and wastewater treatment plants, replacement of water and sewer lines, and construction of a firehouse, a library, and a public safety academy."