Click the map above for a larger version of this map.
 

If you believe in the mantra of buying low and selling high, now is a great time to buy a property at Hunters Ridge.  A variety of factors have led to a significant decline in sales prices in Hunters Ridge over the past several years, including:

• Significant overbuilding of student housing decreased the rental demand for properties at Hunters Ridge.
• Condo financing guidelines became much more restrictive, making it more difficult to finance a purchase at Hunters Ridge.
• Other sources of capital for Hunters Ridge purchases have dried up including equity in a JMU parents' primary residence, money in the stock market, etc.
  

So, how do things look in Hunters Ridge these days?



Condo sales are still extraordinarily slow, with only 6 in the past 2.5 years, as compared to the high of 50 sales in 2005.   Median sales prices have declined from $101K down to $48K.




Townhome sales picked up quite a bit last year with 14 sales, though there have not been any thus far in the first five months of 2011.  Median sales prices dropped from $145K down to $65K.


Here is the full data set for your enjoyment:



Do you need more information about student housing or multi-family housing Harrisonburg?  Call me at 540-578-0102 or e-mail me at scott@HarrisonburgHousingToday.com.
 

Did you know Facebook is now estimated by some to be valued at $65,000,000,000?  Yes, that's $65 BILLION dollars.  How do analysts come to that number?  The valuation is based on the percentage stake that is given to a new investor as compared to the dollar value of the investment that they make in the company.  Just two months ago, a Goldman Sachs investment in Facebook put the value at $50 BILLION.

How does this relate to real estate in Harrisonburg, VA?  An investor just bought a significant stake in the student housing market in Harrisonburg, which provides another data point upon which other student housing owners can value their investment.

The big news --- 38 North has been sold for $32.8 million.

The specs of this recently built (2008) student housing complex include:

• 228 units (816 beds) built on 19 acres
• (96) 3-bedroom units
• (132) 4-bedroom units
  
• 94.6% occupied at the time of the sale
• sold for $143,640 per unit ($40,135 per bed)
  
• Amenities including a swimming pool, fitness room, tanning beds, spa, game room with billiards, computer lounge, basketball courts, barbecue grills, and a clubroom

With a 95% occupancy rate, it largely does not matter to 38 North, but I do wonder whether the buyers realize that there is a huge excess of student housing in Harrisonburg.

• Do Harrisonburg and JMU Need More Student Housing?
• Do You Think Harrisonburg's Student Housing Vacancy Rates Are High Now? You Haven't Seen Anything Yet!
• Everything Will Sell, At A Price (Hunters Ridge pricing)
• Harrisonburg Has A Tremendous Over-Supply of Student Housing for JMU Students

 

In my opinion, there is already more than enough college student in Harrisonburg.  That said, a developer will soon be starting a new student housing complex on South Main Street near Valley Lanes.

So....maybe Harrisonburg needs a student housing moratorium?

Joe Fitzgerald states (at the link above) "We can't flat out ban student housing, but we can stop rezoning more land for it."

I never considered that a moratorium on rezoning could be enacted.  Several questions then come to my mind....

Is local government overstepping its bounds to create such a moratorium (via *not* rezoning)? 

Perhaps not --- local government wouldn't be prohibiting development, just the rezoning for development.

So, local government is now making rezoning decisions based on market conditions?  Isn't a landowner entitled to make that part of the decision?

If a surplus of student housing creates a burden on the locality in some way (based on the new use or non-use of the old student housing??) then perhaps local government ought to factor in market conditions?

What does this sort of a moratorium look like?

Is this an unspoken stance of local government?  Or a drafted and approved policy?  Could this be challenged legally?

So, perhaps this all comes back to property owner rights?

Certainly, a property owner has the right to use or develop their property as the zoning ordinances allows them to do so.  But does a property owner have any rights when it comes to rezoning?  Are there reasonable, and unreasonable factors that can and cannot be used in a zoning decision?

Weight in if you have an opinion -- this raises more questions than answers for me.

(The Short Answer:  No!)  As reported by hburgnews a developer from Glen Allen is moving forward with a developing a community for 1,500 college students.  Paul Riner astutely points out (WHSV) that it might be five to ten years before enough students exist at JMU for the community to be fully utilized.

Is there really too much student housing already built?

• In Fall 2007, there were approximately 17,428 students at JMU.  
  
• In a few months (Fall 2010), there are projected to be 18,484 students at JMU. 
  
• This three year increase of 1,056 students has been paired with an the construction of 3,473 off campus beds.

Where are these 3,473 new campus living options?

• 422 in a new JMU residence hall
• 332 at Charleston Townes
• 96 at Sunchase
• 816 at North 38
• 188 at Campus View Condos
• 274 at 865 East
• 1,220 at Copper Beech
• 125 at Urban Exchange

Why was this enormous number of student housing properties built over the past three years? 

A few years ago, Harrisonburg created an incentive (with good intentions) for student housing developers to build now, now, now.  Much of the land in the City that was annexed several decades ago was zoned R-3, which allowed (until recently) a property owner to build student housing (in the form of three-story apartment buildings) without asking for permission.  Much of this R-3 land was adjacent to single family home neighborhoods, and thus Harrisonburg took this "use by right" out of the R-3 zoning classification.  R-3 property owners were left with a three year window of time in which they could build this higher density housing (student housing) without asking for permission -- and thus the construction began!


Finally, here are some fun quotes out of the Daily News Record article of July 25, 2007:

"... James Madison University recently announced plans to increase enrollment by 4,100 students by 2013." 

Total growth will probably end up being around 1,900 students.

"With the influx, we are going to need housing. We are going to need housing quickly." 

Well, we have that new housing now -- but it turns out we don't need much of it!

As reported in detail at hburgnews, a new student housing complex is one step closer to being built on South Main Street.  The 60 acre tract is proposed to feature 466 apartments for college students --- but wait, certainly the developer would first be examining the state of the current student housing market --- right??

Let's take a quick look at what has happened over the past several years in Harrisonburg's student housing market:

In Fall 2007, there was a relatively even balance between JMU students living off campus, and housing available for said students.  There were 11,654 students, and approximately the same number of "beds" (bedrooms in apartments, etc) available for those students.

Between Fall 2007 and Fall 2009 the the number of off campus students increased by 382 students.  But.... there were 3,313 new beds for these students!  This huge increase in housing included new complexes (Charleston Townes, North 38, Campus View Condos, 865 East, Copper Beach, Urban Exchange) and additions to current complexes (Sunchase, new JMU residence hall).  This left an off campus vacancy of roughly 20% --- with 12,036 off campus students compared to 14,967 off campus beds for students. 

While growth is still occurring at JMU, it is quite slow because of state budget cuts for higher education.  Thus, the vacancy rate for Fall 2010 will likely only decline to 18.5%, and per my projections, by the time we get to Fall 2013, there will still be an off campus vacancy rate of 15% --- with 13,090 off campus students compared to 15,387 off campus beds for students.

But it seems that a company out of Glen Allen, VA is ready to jump into this exciting student housing market, add help pump that vacancy rate up even higher.  This new community will bring 466 apartments, described as 1, 2 and 4 bedroom apartments, laid out per the site plan below.



Let's assume 1/3 of the apartments are 1 bedroom, 1/3 are 2 bedrooms, and 1/3 have 4 bedrooms.  This equates to roughly 1,087 new beds for students.  They'd like to have them finished for Fall 2011, which means we'll have 12,588 off campus students available to fill 16,286 off campus beds, shooting us up to 23% off campus vacancy.

But the best part yet --- where will this student housing be located?  Next to JMU campus?  In the midst of other student housing? No and No.  This complex is quite a distance from JMU.



Again, read more at hburgnews, as there are a few detailed comments on that site that explain some of the history of the property.

SUMMARY:  Student housing vacancy in Harrisonburg currently hovers around 20%.  A developer is planning to build, likely increasing the vacancy rate to 23%.  If I were the developer, I would not develop it as a student housing complex in this community at this time.

What are your thoughts?  Questions?

This is a story of quickly rising, and quickly falling real estate values.  In Harrisonburg.  Despite a relatively stable overall housing market.



Some parents of JMU students buy an investment property for their son or daughter to use a a residence while at JMU, and many of these parents have historically bought condos and townhomes at Hunters Ridge.

Let's take a look at sales trends for each over the past several years:



As you can see here, prices of Hunters Ridge condos and townhomes had steadily (sometimes rapidly) increased for many years before arriving  in 2009.  Last year, Hunters Ridge sales slowed down to a snails pace --- with only one condo sale in the entire year, and only 3 townhome sales. 

Good news --- townhomes and condos are starting to go under contract again.  Bad news --- it's because the prices have dropped very low!

At the moment there are 5 condos on the market at the $60,000 price point, which is well below any recent sales price.  There are also townhomes on the market for only $70,000. 

Some conclusions:

• If you're looking for a rental property, you might want to consider Hunters Ridge.
• It will take some time (years) for Hunters Ridge prices to increase anywhere near where they had been in recent past.
• Some owners that bought at Hunters Ridge in the last several years will likely have difficulty selling without taking a big loss.
  

Harrisonburg has a tremendous over-supply of student housing, but it's not the first time!  I've been engaged in some fascinating reading (thanks JGFitzgerald!) over the past day or so --- a Citywide Housing Analysis for Harrisonburg, Virginia compiled by S. Patz & Associates, Inc in 2005.  Yes, it's becoming dated, but it provides some valuable insights into the history of our local real estate market. 

Here are a few statements that are quite interesting within the current JMU enrollment and student housing context:


Wow --- and to think that in the past two years, new student housing units have been built to accommodate an additional 3,292 students!?!


This is interesting --- in the early 2000's there was an oversupply, then things were back to being balanced by 2005 (date of report), and we again have a significant oversupply in 2009.  This report identifies immigrants as a population that filled the vacant student housing in the early 2000's.  Will we see that again?  And if not, who will fill the vacancies?


Again --- this begs the question of who will fill the anticipated 2,470 empty "beds" this coming fall that are/were intended for college students.

If you're interested, there is a lot more very interesting data in this 129-page Citywide Housing Analysis report published in 2005.  I'll be taking a look at some additional sections in the days to come.

Two years ago there was a relatively even balance between students and housing.  Now, as we approach Fall 2009, there will be 822 additional students, and 3,292 additional bedrooms for students.  Woah --- did you catch that?  An extra 2,470 bedrooms!?!

I've written about it before....

• The real reasons why so much student housing is being built for JMU students...  Jun 09
• Understanding the Over-Supply of JMU Student Housing  Mar 09
• JMU Student Housing Supply & Demand Analysis  Feb 09

.... but let me try to clarify a bit more, since the numbers changed just last week.

The Students
Enrollment Projections Data Source: http://www.jmu.edu/instresrch/project.shtml

• The total on-campus enrollment for Fall 2007 was 17,428.
• The total on-campus enrollment for Fall 2009 is projected to be 18,250.
• Of note, prior JMU enrollment projections showed that there were to be 885 new students between 2007 and 2008.  In the end, there were only 536.
• Of SIGNIFICANT note, prior JMU enrollment projections showed that there were to be 1,500 new students between 2007 and 2009.  But approximately a week ago, these enrollment projections were amended by JMU, with current projections now showing an increase of 822 instead of 1,500.  Enrollment projections have been significantly scaled back over the next five years because JMU is not receiving enough funding from the state to be able to grow their faculty, staff, campus and degree programs to meet their prior enrollment projections.

The Housing
The following new housing projects (with the corresponding number of "beds") all make up the 3,292 new "beds" that will exist as of August 2009.

• JMU Residence Hall (422)
• Charleston Townes (172) --- with 356 more to come
• Sunchase (96)
• North 38 (816)
• Campus View (192) --- with 476 more to come
• 865 East (274)
• Copper Beach (1,220)
• Urban Exchange (100)

The Impact
Only time will tell what the impact will be of this over supply of student housing.  So far, it has translated into many lease incentives for students, and higher than expected vacancy rates for many apartment complexes. Many student housing developers say that the newest complexes in the closest proximity to a college campus will be the most successful -- so far this seems to be playing itself out here in Harrisonburg, as many new complexes are doing quite well, and some older complexes are having difficulties leasing.

This past week the Daily News Record published an article about the new housing complexes being built to house JMU students.  I believe the uninformed reader of the article would assume that there is a relatively good balance between students and housing --- but according to my calculations there is a significant oversupply of student housing for JMU students!

Here are the numbers...

• On-Campus Headcount has increased (or is projected to increase) by 1,500 students between Fall 2007 and Fall 2009.
• In this same two year time period new housing developments have accounted for 3,340 new "beds".

Why will this oversupply exist?

• The Daily News Record consistently uses enrollment figures creatively to exaggerate JMU growth, though I won't speculate as to whether it is innocent or intentional.  If you compare the figures in the DNR article with JMU enrollment projections, you'll see that they use a lower enrollment metric (students taking classes at the JMU campus) when referring to past enrollment figures, and they use a higher enrollment metric (students taking classes at the JMU campus, or anywhere else) when referring to current or future enrollment figures.  The result is that JMU growth seems more significant than it actually is.  Take a few minutes to see where on the JMU enrollment projections page they pulled the figures in paragraph 3 and 4 of the DNR article, and you'll start to see the errors in their comparisons.  Their "8 percent increase from last fall" is actually a 5.5 percent increase if you use the same metric for the two data points.  Is this simply an error, or does 8 percent sound better than only 5.5 percent?
• Harrisonburg created an incentive (with good intentions) for student housing developers to build now, now, now.  Much of the land in the City that was annexed several decades ago was zoned R-3, which allowed (until recently) a property owner to build student housing (in the form of three-story apartment buildings) without asking for permission.  Much of this R-3 land was adjacent to single family home neighborhoods, and thus Harrisonburg took this "use by right" out of the R-3 zoning classification.  R-3 property owners were left with a three year window of time in which they could build this higher density housing (student housing) without asking for permission -- and thus the construction began!

Don't Build Anymore!  My concern when I read an article such as the one that ran last week in the DNR is that a local (or out of town) developer will read the article and will decide to build more student housing because of the (exaggerated) enrollment growth and the (fictional) even balance between students and housing.  If you're a student housing developer feel free to contact me (540-578-0102, scott@HarrisonburgHousingToday.com) to discuss this further --- but please don't start building more student housing before completing a thorough market study beyond the figures reported in the Daily News Record.

Tell Your Friends!  Last week I was told of a (usually) well informed local business leader who was convinced that JMU will be growing to 30,000 and then 40,000 students within the next 5 - 10 years.  This type of casual conversation will lead to an even wider sentiment that we need more student housing in Harrisonburg --- and this individual is often in conversation with student housing developers.

I'm stepping down from my soap box now, but I hope that student housing developers, and those that advise them, will carefully study our market before continuing on a rampage of building college student housing!

As I explained yesterday, there will be a rather significant over-supply of housing for JMU students in the fall, with an estimated 1,740 empty "beds" across all student housing options.  As a reference point, my calculations show a current over-supply (during this 08/09 academic year) of approximately 1,075 beds.

Why does this over-supply of housing for JMU students exist?

1. JMU was projected to grow, and a lot of developers started student housing projects to take advantage of this growth.  Of note, in December 2007 I pointed out that the the way the media has been counting JMU students might lead student housing developers astray.
2. Harrisonburg put a time table (deadline = July 2010) on building student housing development without having to ask for permission.  This encouraged (along with the growth projections) many student housing developers to get started immediately.
   

What effects will we see of this over-supply of housing for JMU students?

1. Some housing complexes will likely have high vacancy rates next year.  Student housing trends from around the country would suggest it will either be the oldest complexes, or those farthest from campus.
2. Rental rates may decrease, as landlords compete to find tenants.
   

Who needs to know about this over-supply, and what should they do?

1. Student housing developers should carefully consider their planned development timeline to account for an over-supply in the market.
2. Owners of student housing properties should position their property carefully in respect to price, included amenities, lease terms, etc.
3. Potential purchasers of college student housing should carefully consider the implications of such a purchase in our current market.  Those purchasing solely as an investment need to be aware of possible declines in rental rates, and increases in vacancy rates.  Those purchasing to have a place for their son or daughter to live should likely still consider a purchase, but should be aware of market conditions.
4. Owners of "possible" student housing properties (i.e. townhouses somewhat near JMU, but not in student housing complexes) should consider targeting the non-student market.
   

The JMU student housing market is entering a new cycle where supply will well exceed demand.  Our market has not seen this type of an imbalance in many years, so many of the implications remain to be seen.

As we approach the 2009/2010 academic year at JMU, I believe we will be facing a significant surplus in student housing for JMU students.  However, do bear in mind that there are many factors that make it difficult to track the actual supply and demand for student housing, including:

• There are many metrics by which JMU measures their enrollment, some of which include part-time students, those studying abroad, faculty and staff enrolled in courses, etc., each of whom may not actually need student housing.
• Aside from student housing available in well-defined areas (on campus residence halls, apartment complexes), there are also many housing units that may or may not be leased to JMU students in any given year (single family homes, individual townhomes in communities near campus, etc).

To analyze the current student housing supply and demand, I used Fall 2007 enrollment data as a baseline (17,428 students), and I made the assumption that there was a balance between supply and demand for the 2007/2008 academic year.  In other words, I assumed that there were approximately 17,428 "beds" available for students (on campus, off campus complexes, off campus houses, off campus townhouses, etc).  I believe there was some small amount of vacancy at that time, but it was negligible.
   
On the demand side of the student housing equation, enrollment for Fall 2009 is projected to be 18,928 students.  This is an increase of 1,500 students as compared to our Fall 2007 baseline.

On the supply side, I estimate that 3,240 additional beds will be available for Fall 2009 as compared to Fall 2007.  These new beds are located in the following communities:

• JMU Residence Hall
• 865 East
• Campus View Condos
• Charleston Townes
• Copper Beach
• North 38
• Sunchase
• Urban Exchange
  

Thus, per my analysis, there will be a surplus of 1,740 beds for Fall 2009.  This equates to an overall vacancy rate of 9.2%.  Accounting for anticipated enrollment growth, the continuation of current student housing projects, and the onset of new student housing projects, I anticipate the following surplus housing supply in the coming years:

• Fall 2009    1,740 bed surplus    9.2% vacancy
  
• Fall 2010    1,351 bed surplus    6.9% vacancy
  
• Fall 2011    1,066 bed surplus    5.3% vacancy

The above projections do not consider additional projects that may come online that are unknown at the current time.

Are builders gearing up?  (Daily News Record)

Yes, and no!  Read on...

Building Permits Issued Per Year:

Year	Harrisonburg	Rockingham County
2007	748	558
2006	219	673
2005	388	785
2004	287	745

So....the number of building permits has definitely increased, BUT a large portion of the City of Harrisonburg building permits are for multi-family student housing projects.

Though not having conducted a wide survey, I would guess:

• local subcontractors might be doing o.k., if some of the out-of-town student housing developers are using them for their projects, but,
  
• local builders aren't doing as well, with much higher inventory levels (which varies by price range).