In a few day I'll be releasing my full monthly market report.  Until then, you might find the following quick stats interesting.....

January 2012 home sales = 39
January 2011 home sales = 40

Thus, if last year was a typical year for home sales (up 4% from the prior year) then this January came in right in line with last year's sales.  Actually, one sale shy of last year's data.

January 2012 contracts = 60
January 2011 contracts = 49

As a good indicator for February and March, contract numbers were quite strong during January!
 

The Virginia Association of Realtors has released the 4th Quarter 2011 Virginia Home Sales Report, and for the second consecutive quarter there has been an increase in the annualized pace of home sales in Virginia.

Click the image below to download the full market report as a PDF.


  

More than they ever have!  Pre-boom, buyers (and thus sellers) were negotiating an average of 2.6% on price -- that is to say that homes were selling for 97.4% of the list price.  That went as low as an average of only 0.9% of negotiating room in 2004-2005, before rising quickly to current market conditions where the average negotiations are 5.3% of the list price.



If we look closer at the data pre-boom (c2000), mid-boom (c2005) and post-boom (c2011) we find some interesting facts:

• Last year (2011) 8% of buyers paid more than full price for their homes! 
  
• Only 13% of buyers negotiated more than 10% off the list price last year.
• In 2005, almost one out of four buyers (22%) paid more than full price for their homes.
• In 2005, only 9% of buyers negotiated more than 5% off of the list price of the home they purchased.
    
  

Detached home = single family home
Attached home = duplex, townhouse, condominium

So, which property type has shown a stronger performance over the past 11 years in Harrisonburg and Rockingham County?

• Attached homes maintained their value for longer before starting to decline.
  
• Attached homes have increased more in value over the past 11 years.
• Attached homes have seen a smaller decline since their peak.

But despite all of this, I believe the detached home market will be a stronger performer over the next five years, because:

• Demand for (sales of) detached homes increased 12% in 2011.
• Demand for (sales of) attached homes decreased 17% in 2011.

 

In 2000, there were 829 home sales.  That zoomed up to 1,669 in 2005.  This past year (2011) there were 791 home sales.  Certainly, 1,669 home sales a year is not a normal pace of home sales, but is 791 home sales per year a reasonable assumption for the pace of our local housing market going forward?

To explore this issue, I have created a model showing what home sales would have been if a constant percentage of our local population bought a home each year, and I have included population increases from the past decade.



Above you'll note that in 2000, a total of 0.77% of the population purchased a home (829).  Then, for each following year, I have shown how many people would have bought a home if it continued to be 0.77% of the total population.  Per these calculations, home sales in 2011 (though improved over 2010) are still well below where they (theoretically) should be.  If 0.77% of the population bought in 2011, home sales would have been 23% higher than they were last year.



Above is a second illustration, assuming that 2011 was a normal year -- and that each year we should expect 0.97% of the population to buy a home.  In this scenario, home sales should have been 56% higher last year to have 0.97% of the population buy a home.

Regardless of the actual numbers, my conclusion based on the data above is that 791 home sales per year (as in 2011) is not the new normal for our market.  I believe the market will improve further as to the annual pace of home sales -- at least to 1,000 sales per year.
  

As I commented in my monthly market report earlier this week, inventory has declined significantly (15%) over the past year!



Why is inventory dropping so much???

I have a theory....

First and foremost, I believe there are quite a few homeowners who are deciding to lease their properties instead of selling them, after having had little success in the sales arena.  I have seen this quite frequently over the past 6 months, and it makes sense --- leasing the property can provide a stream of income with which to pay the mortgage payment.  Leasing a property also gets the homeowner down the road a bit (perhaps a year or two) after which they can try to sell again in a market this has hopefully improved.

Second, I believe some sellers are either pulling their property off the market, or never putting them on the market, because they don't believe they can sell their home right now for a price that would either: a) make them happy, b) payoff their mortgage, or c) allow them to move into their next home.

Finally, after six years of steady increases in foreclosures in our local market, that trend finally reversed itself in 2011.  There were 17% fewer foreclosures in 2011 as compared to 2010 -- which means there are fewer bank owned homes coming on the market.

We'll have to wait a few months to see, but I think it's quite possible we'll continue to see much lower inventory levels than we saw last year.
    

The housing market as a whole in Harrisonburg and Rockingham County seems to be stabilizing.  As per my market report earlier this week, sales increased by 4% in 2011, even though prices declined by 3%.

Land sales, however, are looking even better!  There is quite a bit of information packed into the graph above, but here are the main things I think are important to note:

• Land sales soared in 2004 and 2005, and stayed at respectable levels in 2006 and 2007 -- for a total of 435 sales in 4 years.  Then, sales dropped steadily between 2008 and 2010, to a low of only 27 sales in 2011.  Let's look at that again --- in all of Harrisonburg and Rockingham County, there were only 27 sales of land of an acre or more.  Wow!
  
  
• Sales of land greater than an acre almost doubled in 2011, to 49 total sales.  That is quite an increase, and it beats 2009 sales figures as well.
  
  
• Prices also rebounded -- increasing to an average of $16,355 per acre -- it is encouraging to see this rebound in pricing in tandem with the rebound in sales pace.
  

Hopefully, a year from now, we'll have seen prices of residential properties stabilize in response to the increase in their sales pace --- similar to what we have seen in land sales.  Stay tuned!
  

A great question from a blog reader.  Any thoughts, other blog readers? 
 

Friends and Colleagues --- Our local housing market has finally done it -- after a five year slide (and a 55% drop) in the pace of home sales, the tide has finally turned in 2011.  Our local real estate market showed a 4% improvement in the pace of home sales last year, even though the median sales price declined another 3%.

Jump to the PDF of my monthly market report, or keep reading for an overview.

Speeding through the finish line....



The local housing market didn't slow down for the close of 2011 -- it poured on the gas to accelerate through the finish line with a strong month of 79 home sales in December.  This was the strongest December in at least four years.  October and November could have had us worried, with sales in the 50's, but apparently the market was holding back to create an exciting photo finish in December.

The Great Reversal....



After five years of seeing fewer and fewer home sales in our local area (from 1669 in 2005 down to 758 in 2010) we finally experienced an increase in buyer activity during 2011 -- with 791 home sales.  This marks a 4% improvement in the pace of home sales.  The not-quite-as-exciting news, of course, is that the median sales price declined another 2.83% over the past year.  But certainly, we needed to see this stability (and now growth) in sales pace before we could reasonably expect to see stability in sales prices.

Hello Buyers, Good Bye Sellers....



For the past few years, there have been too many sellers in the market, and too few buyers.  2011, however, has told a different story -- one of returning stability.  Not only did home sales increase 4% in 2011, but inventory levels declined 15%.  While we still have a ways to go, both of these trends are headed in the direction of increased stability in our local real estate market.

We Won't Miss You Mr. Foreclosure....



Foreclosures (and then bank owned homes) have dragged housing markets down across the country.  Thankfully, not only did home sales increase this year in our local market (blue bars above), but foreclosures also declined (red bars above).  This 17% decline in foreclosures during 2011 shows promise for fewer bank owned homes, and greater market stability in 2012.

What else would help?  Lower interest rates?  Lower unemployment rates?



The stage is set for further stability in our local housing market during 2012 -- mortgage interest rates are at historic lows (below 4%) and our local unemployment rate is at its lowest level in over two years.

Looking Forward

After a 2005 peak, and a 2010 valley, 2011 brought a long awaited step towards stability in our local housing market as sales began to increase again.  The pace of home sales is likely to increase even further in 2012, and we just might start to see some stability in median prices --- if not in 2012, then I would imagine we would certainly see that in 2013.

For a more detailed look at the Harrisonburg and Rockingham County real estate market, download my full market report as a PDF.

And -- if you have questions about the local housing market, or if I can be of assistance to you 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.
   

One of the best indicators in our local housing market is the pace of single family home sales.  Townhouses and duplexes are sometimes bought by investors, and thus if we include those sales, we aren't getting the best picture of the pace at which homeowners are purchasing homes. 

Given that single family (detached) homes are a good indicator for the market, I made a prediction in January 2011 as to what would happen in our local real estate market this past year.  Let's revisit those predictions for 2011....



So, how did I do?  I estimated that the sales pace of single family homes would stay within 2% of the 2010 pace of home sales.  Either a 2% increase in sales, a 2% decrease in sales, or somewhere in between.

Drum roll, please.....After 555 single family home sales in 2010, there were......618 single family home sales in 2011 -- an 11% increase!!!!  Wow, was I wrong! 


Please note that the 618 sales in 2011 might actually increase a bit further -- I'll publish my full market report in another week which will include final stats.

So, now for predictions for 2012.  It's actually a bit more difficult this year.  After an 11% increase in single family home sales during 2011 --- it's hard to be conservative in my estimates.  Before seeing these figures, I would have estimated we'd see a 2% to 5% increase in single family home sales in 2012.   But given that 2011 showed a whopping 11% increase in sales pace, I think I'll have to predict that we'll see a 5% to 10% increase in 2012.  That would put us somewhere between 649 and 680 sales in 2012 -- which is on pace with 2008.
  
As always, let me know if you agree or disagree.  I value your input as well.
  

The annual question for those planning (or hoping) to sell their home in the spring or summer is whether to put your house on the market the first week of the year (we'll say Jan 1) or to wait until we're approaching spring (we'll say Mar 1).

It's a double-edged sword --- while there will be more buyers several months from now.... there will also be more sellers, competing with you.

Looking at this year (2011), between January and March:

• There were 21% more buyers in March (75) than in January (62)
• There were 7% more sellers in March (832) than in January (778)

So, while there is more competition with other sellers in March, the increase in buyers is even more significant.  When comparing January to April, the change is even more extreme:

• There were 68% more buyers in April (104) than in January (62)
• There were 11% more sellers in April (865) than in January (778)

So, just when I (might) have you convinced to wait until April to put your house on the market, let me offer up this comparison:

• In January-March this year, an average of 69 buyers committed to buy properties each month.
• In April-June this year, an average of 99 buyers committed to buy properties each month.

Sure, 99 buyers per month makes your odds better than 69 buyers per month --- but it's not as if buyers are completely dormant over the next few months. 

Perhaps the best bet is to examine your house and your segment of the market more specifically.  If you don't have much competition from other sellers right now based on the size, location, price range of your house, let's get your house on the market ASAP.  If you have LOTS of competition right now with very comparable houses for sale, perhaps it makes more sense to wait for a few months.

Feel free to call me (540-578-0102) or e-mail me to discuss whether it makes sense to get your house on the market now, or to wait until March or April.
  

You don't need to tell me --- I know --- home prices are still on the decline.  But here is the basis for my cautious optimism about our local housing market....



This illustrates the trends in general housing market indicators two years ago, as compared to the trends in general housing market indicators today.  What do you think?  Do I have some basis in reality for my cautious optimism? 
 

The significant increase in online holiday shopping is certainly an indicator that are economy may be finally starting to return to some form of normalcy.



But did you see what happened in our local housing market?  There was a 100% increase in December contracts (Dec 1 - 25) in the Harrisonburg and Rockingham County housing market!  This continues the trend of increased activity in our local real estate market.  2011 looks like it will finish out to be a strong year -- or even if a weak year, a stronger weak year than last year!
 

As Business Insider puts it, the National Association of Realtors just made the mother of all data corrections. 

Basically, the National Association of Realtors (NAR) retroactively adjusted its accounting of the number of home sales that took place in 2007 (down 11%), 2008 (down 16%), 2009 (down 15%) and 2010 (down 15%).  Put simply, NAR had thought and had broadcasted quite widely that home sales were much stronger over the past four years than they really were -- and bear in mind, even the inaccurate, inflated numbers were quite depressing!

Why did it happen?

• FSBO Sales Declined:  NAR estimates the home sales based on a variety of data sources.  One reason for the inaccuracies is that the proportional number of FSBO sales declined significantly over the past four years.  Back in 2000, 16% of home sales were by owner, but in 2010 only 9% of home sales were by owner.  NAR didn't realize that this ratio had adjusted, and thus projected total home sales assuming that plenty (16% +/-) of sales were still by owner. 
• Builder Sales Declined:  Just as many more owners used Realtors over the past several years to sell their homes (instead of going FSBO), many more builders also used Realtors to sell their new homes.  This change in proportions also lead to over-reporting of home sales by NAR -- they were assuming the same number of sales were taking place directly from builders.
• Marketing Properties Through Multiple MLS's:  As housing markets worsened, more and more owners marketed their properties through multiple MLS's to broaden exposure.  This sometimes results in home sales being reported through more than one MLS, again over-inflating NAR home sales data.

Does it matter nationally?
It sort of matters retroactively -- everybody needs to go back and think that the housing market was worse than they thought before, and make their past decisions differently.  Oh wait, that's somewhat difficult to do -- so the national impact is simply that we need to readjust our historical understanding of the pace of home sales from 2007-2010 and be a bit less dependent on NAR home sales estimates, as they are ultimately, just estimates.

Does it matter locally?
Since the national housing market (if one could be said to exist) doesn't impact us too much at all, these adjustments to national housing sales figures don't impact us that much either.  Of much more importance is the pace of sales (and median price of those sales) on a local level.

Could it happen locally?
NAR and yours truly make different attempts as far as reporting home sales.  NAR attempts to report on total home sales (MLS, by owner, by builder, etc) -- and thus there can be inaccuracies in their data.  My home sales reporting is based solely on data reported through the HRAR MLS.  Thus, I'm not making any guesses -- I'm just performing analysis and providing commentary on home sales reported through our local MLS.

NAR's adjustments are rather significant, so let me know if you any questions or concerns beyond those addressed above.
 

What a wild ride it has been for the townhouses market in Harrisonburg and Rockingham County.  How about a brief history before looking at today's great opportunities....

Early 2000's:  moderate sales (200/y) and low prices ($100K)
In 2000 and 2001 there were around 200 townhouse sales per year, and the median sales price for townhouses was right around $100K.  At the time, interest rates were around 7.5%, so a monthly payment on a 96.5% (FHA) loan would have been right around $745/month.

Mid 2000's:  escalating sales (650/y) and escalating prices ($170K)
As real estate markets across the country heated up between 2003 and 2006, there were more townhouse buyers than ever in Harrisonburg and Rockingham County.  The pace of sales peaked in 2005 with an amazing 644 townhouse sales, and prices peaked in 2008 with a median sales price of $167K.  At the time, interest rates were around 6%, so a monthly payment on a 96.5% (FHA) loan would have been $1,085/month.

Early 2010's:  slow sales (150/y) and softer prices ($140K)
Since the high of 644 townhouse sales in 2005, the pace has drastically dropped, down to only about 160 sales in 2011.  This reduced demand for townhouses has brought prices down, and median prices are now at $143K.  Interest rates are currently just under 4%, so a monthly payment on a 96.5% (FHA) loan would be right around $760/month.

So, now on to some specific examples of the great opportunities in today's market:

• Some of my clients sold a townhouse this week to a young professional who was paying close to $1000/month in rent for an apartment before she purchased her townhouse.  Her new townhouse -- an end unit with two master suites and a full unfinished walkout basement now costs her a grand total of around $790/month.  Wow!  If she ends up moving out of the area at some point, she could easily rent the townhouse (likely for around $900/month) and have positive cash flow from day one!
   
  
• Another of my clients is buying a three bedroom bank owned townhouse with a full unfinished basement for just under $130K.  Bank owned properties certainly offer some good opportunities, and this investor has already lined up tenants who will be paying him over $1,000/month in rent.  With a 20% down payment (it's an investment property) the mortgage payment will only be taking about $600/month out of this $1,000 of rental income per month.

As you can see, there are some great opportunities in the current townhouse market --- both for first time buyers, and for investors.  Please let me know if you'd like some assistance in finding a property!  I'd be excited to help you find a great opportunity.
 

Are houses worth more in the summer and less in the winter?  I have always mostly ignored that question because median home values bounce all over the place front month to month in Harrisonburg and Rockingham County.



It's certainly hard to draw any conclusions about seasonal (summer vs. winter) changes in home values based on the data above. 

The related question here is whether home values really jump around as much as shown above -- no, they don't -- with only 50-100 home sales per month the sample size of the data set is small enough to allow for the variation shown above.  Basically, the median home value might end up adjusting quite a bit in one direction or the other in any given month because of the composition of how many smaller homes versus larger homes sold in any given month.

But then when I examine the entire state of Virginia, values do seem to adjust seasonally....



So -- does anyone have any theories here?  Why do Virginia home values seem to adjust so seasonally (as per median prices) but Harrisonburg and Rockingham County do not?
 

Would you advise your Aussie friends as to whether they're getting a good deal on the house they're buying in Sydney?  Would you want to make sure they were gobsmacked about the price you were paying for a house here in Harrisonburg?

What about New York City?  If your friend was buying a condo in Queens, would you weigh in on what she should pay?  And would you wait anxiously to hear back from her about how how you should price your duplex in Dayton?

How about Richmond?  If your mom lives in Glen Allen, will she get the final call on the price you pay for your new single family home in Harrisonburg? 

I'm sure you have intelligent Australian friends, well-read pals in Queens, and astute parents in other areas of Virginia -- but I challenge you to:

• Remember that this local real estate market (Harrisonburg and Rockingham County) is quite different than all of the aforementioned housing markets.  The glut of foreclosures in Richmond that is driving down prices doesn't drive them down in Harrisonburg.  The deals that home builders are giving away in Northern Virginia doesn't mean that a builder in Harrisonburg will be giving away those same deals.
     
  
• Become familiar enough with the local market to be comfortable making decisions in consultation with your Realtor.  I have seen far too many buyers lead astray by well intentioned parents who live out of town and think they are doing well by their kids to advise them about what they should do and how they should proceed in a real estate deal.

Again, I am sure you have very well intentioned, well informed friends and relatives all around Virginia, the United States, and perhaps the world.  But at some point, we'll need to focus in on the nuances of the Harrisonburg and Rockingham County housing market and make the best decision in a local context.

I am ready to spend as much time as needed with you to help you understand our local housing market and how such an understanding could and should guide your real estate decisions.  Are you ready?

Click here to download my full market report (27 pages, 7 MB, PDF) or read on for highlights....



November was a relatively positive month for the local housing market:

1. Home sales (barely) decreased in November (by one home sale) as compared to last November.
2. Year-to-date home sales have increased 2% over 2010 sales levels.
3. Year-to-date median sales prices have declined 4% as compared to one year ago.
4. Average days on market increased by 7%.
   

Despite several negative trends (#1, #3, #4 above) the positive trends (#2 above) is a long-term leading indicator that we are likely in the early stages of recovery for our local housing market.  After sustained increases in the long-term pace of home sales we should then start to see an eventual leveling off and increase in sales prices.



A strong surge of buyers in 2011 is leading the charge towards more stability in the local housing market.  As shown above, November 2011 was yet another strong month of contracts (76) showing a 27% increase over last November and a startling 77% increase over three Novembers ago.



Inventory levels continue to significantly decline, down 12% from a year ago.  Lower inventory levels (fewer sellers) combined with an increase in contracts (more buyers) will eventually lead to greater balance in the local housing market.



Despite the fact that our local housing market's median price has not yet stabilized, it is interesting to note that we have seen a steady improvement in median price per square foot for single family homes over the past year.  This is in sharp contrast to the steady decline seen in the four prior years.



The icing on the cake is that mortgage interest rates remain at historically low levels creating amazing opportunities for buyers.  At the end of November, the average 30-Year fixed mortgage interest rate was 3.98%. 



For an even more in-depth look at the Harrisonburg and Rockingham County real estate market, click the image above to download my full market report (27 pages, 7MB, PDF).

If you have questions about the report, or if I can be of assistance to you 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. 
  

This is good news for the local housing market!

Remember, when you list your home, you are picking your competitors....

In the above scenario....

• Option 1 leaves you with some chance of selling, but you are on a very level playing field compared to your competitors.  Your house and all others like it are all priced at $170K (+/-).  You shouldn't necessarily expect to win that competition.
• Option 2 leaves you with a great chance of selling.  Your competition (other $160K homes) aren't quite as large of homes, and won't show nearly as well as your home.  You can easily beat your competition here, and sell your house!