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Resale Home Might Be Harder To Find This Year Than Last |
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 We saw a 14% decline in existing home sales (sales of resale homes) in 2022... Existing Home Sales in 2021 = 1,347 Existing Home Sales in 2022 = 1,159 With many homeowners having bought with or refinanced to long term mortgage interest rates below 4%, it seems likely that plenty of homeowners will not want to sell in 2023 based on mortgage interest rates alone. After all... if you bought a home in 2015, refinanced in 2021 at 3.5%, and now have the possibility of selling, paying off that 3.5% mortgage and taking out a new mortgage at 6% or higher... would you? Plenty of homeowners will sell because they are moving out of the area, because they really need to move into a larger home or really need to downsize... but I think there will be an overall decline in resale home sales this year. How low will it go? Will we see as few as 1,100 existing home sales this year? As few as 1,000? If you are looking to buy a home in 2023 -- and you're not planning to buy in one of the area's new communities -- keep in mind that resale listings might be coming on the market a bit less frequently than last year. | |
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Home Buyers Happy To See Mortgage Interest Rates Continuing To Decline |
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 A year ago, the average 30-year fixed mortgage interest rate was 3.6%. Over the course of the past year that climbed... and climbed... and climbed... to a peak of 7.08% in October and November of 2022. As such, many buyers entered 2023 assuming we would likely see mortgage interest rates at or above 7% for much or most of 2023. Thankfully, that doesn't seem to be how 2023 is likely to unfold. After peaking at 7.08%, the average mortgage interest rate has been mostly declining... down to an average last week of 6.15%. I think it is extraordinarily unlikely that we would get back down to mortgage interest rates below 4% in 2023. It is also relatively unlikely that we'll see interest rates below 5%. But... I think it is now seeming unlikely that we'll see mortgage interest rates stick around above 7%. As such... we seem likely to see mortgage interest rates above 5% and below 7% in 2023... and if we give it a few more weeks we might conclude that rates might stay above 5% and below 6% for most of 2023. This is a trend that home buyers in 2023 are quite happy to see! | |
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The First Three Questions We Will Try To Answer When Meeting To Discuss Selling Your Home |
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 So, you're planning to sell your home this spring? Perhaps we should meet to discuss! Here are the first three questions we will try to answer, together, when we meet... [1] TIMING We may talk this through forwards -- how soon are you ready to put your house on the market -- or maybe backwards -- how long do you want to be able to stay in your house. We'll talk about how long it will take you to prepare your house for the market... how long it is likely to be on the market before going under contract... and how long it will likely take to then get to closing. We'll map out a few different timeframes to make sure they work with everything else that you have planned -- which could be a simultaneous purchase, or a move out of town, etc. [2] PREPARING We'll walk through your home together to identify any small or large improvements or preparations you will make prior to putting your house on the market for sale. Plenty of this may end up being in the category of "straightening up -- or simplifying -- or decluttering" but we'll also talk about any small fixes or cosmetic improvements that might help your home show better or reduce the number of potential buyer hesitations. [3] PRICING We'll review the main selling attributes of your house (size, age, condition, features, neighborhood) that will both set it apart -- and will determine it's value in the current market. We'll then (during our meeting or as a follow up) build a list of comparable sales of the most similar properties to help guide us towards a pricing strategy. If you're ready to sell this spring, let's start the conversation sooner rather than later so that we can answer these first three questions of timing, preparing and pricing. Oh, and yes, you are welcome to have PLENTY of other questions all along the way... about the process, the market, and more! | |
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Foreclosured Started To Increase Again In 2022, Sort Of... |
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 Foreclosures in Harrisonburg and Rockingham County increased 71% in 2022. Gasp! ;-) Well, yes, technically they did... after only 14 foreclosures in 2021 there were 24 in 2022. That's a 71% increase. But... that dip down to only 14 foreclosures in 2021 was due in large part to the moratorium on foreclosures during Covid. So, really, we need to skip that year of data. Looking back a bit further we'll note that the 24 foreclosures in 2022 was the lowest of anytime since 2008. Somewhat surprisingly, between 2008 and 2017 there were over 100 foreclosures a year. As such, the 24 foreclosures seen in 2022 is quite low - and a sign of general health in our local housing market - or a sign that home values are increasing, making foreclosures less likely to be a necessity. Looking ahead, will we see more foreclosures in 2023 and/or 2024? I suspect we'll only see a significant increase if home values were to flatten out or decline and/or if buyer demand were to significantly decline. Both of those seem relatively unlikely at this point, so we seem poised to see another year of fewer than 50 foreclosures in 2023. | |
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Home Sales Slowed Considerably In Late 2022 But Home Prices Kept On Rising |
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 Happy Thursday afternoon, friends! And... Happy New Year! It's hard to believe the New Year is upon us. Actually.. we're already more than halfway through January at this point. What a whirlwind. I hope you had a delightful finish to 2022. I capped off the year with a slightly warmer than anticipated New Years Eve Glow Run, another fantastic community running event put on by VA Momentum. Below is a photo just prior to the start of the race... after which it became progressively darker and our glow bracelets and necklaces were lighting up the hilly course at Heritage Oaks Golf Course...  Two other items of business before we get into the real estate data... First, take a few minutes to check out my featured home of the month... 3078 Preston Lake Blvd...  This beautiful cottage home with a finished basement is located in the Preston Lake community with a clubhouse, pool, walking paths and playground, all just minutes from Sentara RMH, JMU, Merck and Coors! You can check out the house here or walk through it here. Finally, each month I offer a giveaway, of sorts, for readers of this market report, highlighting some of my favorite places, things or events in Harrisonburg. Recent highlights have included Grilled Cheese Mania, Walkabout Outfitter and Bella Gelato. And this month...  This month it's back to music... I'm giving away a pair of tickets to see The Steel Wheels and Sierra Hull at JMU's Wilson Hall on February 11th! Read all about the event, and the artists, here - and if you're interested in a pair of free tickets, enter to win them here. :-) Now, onward to the latest data on our local housing market! First, how many homes have been selling lately...  There's a lot to note in the graph above, and some of these numbers informed the headline for this article... [1] There were only 83 home sales in December 2022... compared to 144 in December 2021. That's a rather surprising 42% decline in home sales for the month of December. [2] When we pile in a few more months (October and November) we see that there were 28% fewer home sales in the fourth quarter of 2022 than in the fourth quarter of 2021. [3] Finally, when looking at the full year of 2022... there were 7% fewer home sales than in 2021. After several years of rapidly increasing numbers of home sales, it seems that higher mortgage interest rates finally slowed down buyer activity... though not very significantly until the very end of 2022. But yet, despite slowing sales, home prices did what!?  Home prices... kept on rising! [1] Starting from the bottom of the chart (above) this time we see that there was an 11% increase in the median sales price when comparing all of 2021 to all of 2022. That's a rather significant increase in the median sales price and it follows on after two preceding years of 10% increases in the median sales price. Needless to say, homes have become quite a bit more expensive over the past several years. [2] The median sales price in December 2022 was 3% higher than in December 2021. This could be an indication that we'll start to see a slow down in the rate at which home prices are increasing... or, as is more likely, it may be lower than the longer term trend (+11%) because it is a smaller data set of only the homes that sold in a single month. So... was it just December when we were seeing slowing home sales?  The decline in home sales was certainly significant in December... but if you track that red line (2022) back to November and compare it to the blue line (2021) you'll see that the slow down started before December rolled around. The graph above (and many of the graphs in this month's report) are in a slightly different format than in past months. I spent some time going through to revamp my monthly market analysis process to hopefully make the resulting graphs and analysis even more helpful and pertinent for all of us as we see how 2023 unfolds. As such, the graph above is showing the current (just finished) year of 2022 with a red line -- and the previous year of 2021 with a blue line -- and the grey line is showing a longer term trend calculated by averaging 2018 through 2021. Next up, let's look at monthly cumulative home sales...  The graph above provides another illustration of the fact that 2022 was keeping pace with 2021 all the way through the end of October... and then November and December fell short. This resulted in the second strongest recent year of home sales in Harrisonburg and Rockingham County. Indeed... there were 7% fewer home sales in 2022 than in 2021... but there were well more than in 2019 and 2020! Next, let's look at general long term trends over the past few years...  The top green line is showing the median sales price of all homes selling in Harrisonburg and Rockingham County... measured monthly by looking at the median of the previous 12 months. In tiny letters underneath someone (ok, me) wrote "can't stop, won't stop, can't stop, won't stop" -- but, I should definitely, definitely clarify that -- yes -- the median sales price could stop increasing. It didn't do so anytime in the past three (plus) years as illustrated above, but as they say, past performance is not a guarantee of future results. The bottom blue line (above) is a monthly check-in on the annual pace of home sales. During Covid the annual rate of home sales in our area shot up from around 1,300 sales per year all the way up to 1,700 sales per year... but as mortgage interest rates rose during 2022, eventually the annual pace of home sales started to decline again. Where did we finish out 2022, you might ask, within the context of the past few years?  We ended up seeing 7% fewer home sales in 2022 than in 2021 -- though there were 5% more home sales in 2022 than in 2020. So, again, this past year was the second best year of home sales in recent times. You can see again here (in the graph above) that the median sales price has been aggressively climbing for multiple years. Five years ago (in 2017) the median sales price was $198,250... and it closed out 2022 just shy of $300K with a median of $299,912. This marks an 11% increase in the median sales price in 2022 after a 10% increase in both 2020 and 2021. Wow! This next one might surprise you. It surprised me, at least for a moment...  The 7% decline in home sales in 2021 was actually a much larger decline if we focus in on resale homes. There was actually a 14% decline in resale homes during 2022! We only ended up seeing a 7% decline in overall market activity because of the sale of new homes. We saw a 24% increase in new home sales in 2022. As a result (and as circled above) the balance between new home sales and existing home sales continues to shift with over a quarter of all home sales (26%) being new homes in 2022. I think there is a decent chance this ratio will be similar in 2023, or that we might see even more new home sales as plenty of homeowners will sit tight and enjoy their super low mortgage interest rate rather than selling their home. What comes next, I wonder...  The graph above tracks how many contracts are signed (by buyers and sellers) each month... and here you can see that the slow down actually started halfway through 2022. Each month of contract activity in the second half of 2022 (red line above) was lower than the corresponding month in the second half of 2021 (blue line above) though the gap became much more pronounced in the last three months of the year. Interestingly, if we look at the typical November to December trend in contract activity per the grey line (four year average) we see that it is typical to see about 74 contracts in December... and December 2022 was only slightly below that with 67 contracts. Here's a new graph that provides a bit more insight into how many contracts are out there waiting to get to closing...  The graph above shows the number of properties that are pending (under contract) at the end of any given month. If you look at the second half of 2021 (blue line) you can see there were anywhere from 260 to 321 contracts pending from month to month. As we moved our way through 2022 the number of pending sales sank lower and lower... below that previous low of 260 all the way down to 189 pending sales at the end of the year. This graph (and the prior graph) would indicate that we will likely see a relatively slow month of closed sales in January and February. But again, looking a bit further back for context... the 189 pending sales at the end of 2022 is... just a smidgen below where we might have otherwise expected to be in a month of December. The anomaly here, it would seem, was the end of 2021 when things were still bonkers in the local real estate market due to super low mortgage interest rates among other factors. And how about those inventory levels -- they must be moving up given slower sales, right?  Well... maybe not. We closed out the year with 127 homes on the market in Harrisonburg and Rockingham County. Yes... this is a higher inventory level than one year prior when there were only 119 homes on the market... but it's not that much higher. Furthermore, even though the inventory levels in 2022 (red line above) were higher than in 2021 (blue line) they were still well below (!!!) the average of 2018 through 2021. These are still times over very low inventory... much to any home buyer's dismay. Oh, and how quickly are homes selling now? Slower, probably, right?  Not so much. The graph above shows the median days on market -- how quickly properties go under contract after being listed for sale -- within a six month timeframe. For over a year this metric stayed right at five days... so as to say that half of homes were under contract within five days and half took longer than five days. That has risen to... six days now. Clearly, not a significant shift, but perhaps we will see it shift further as we move forward. Of note, the median days on market two years ago was seven days... but that was after dropping steadily from double digits the summer prior. Interest rates, interest rates, all you talk about is interest rates...  Well, yes, that's true. I have talked a lot about mortgage interest rates this month (and over the past year) because they have been rising, quickly. A year ago (as shown above) the average mortgage interest rate (on a 30 year fixed rate mortgage) was only 3.11%. We closed out 2022 with an average of 6.42%. Thankfully, these rates have continued to decline a bit further in the first few weeks of 2023... but the cost of financing a home purchase is still MUCH higher now than it was a year ago. And yes... these higher mortgage interest rates directly contributed to the slow down in home sales in the second half of 2022. Well folks, that's all for today. I hope the analysis above provides you with a bit more insight into all that has transpired in our local housing market in 2022... and a few thoughts as to where things might be headed in 2023. If you are thinking about selling or buying a home in 2023, I would be happy to assist you with that process. Yes, I spend a good bit of time analyzing our local housing market to educate our local community -- but the majority of my time is spent helping individual home sellers and home buyers. Feel free to reach out to start that conversation by emailing me or texting or calling me at 540-578-0102. I'll provide another update in about a month -- looking back at the first full month of 2023. Until then, I hope you and your family stay healthy and enjoy (???) the constant fluctuations between winter and spring temperatures we seem to be experiencing this year. ;-) Happy New Year! P.S. You can review a few more charts and graphs with further analysis of our local housing market through the close of December 2022 here. | |
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Harrisonburg Planning Commission To Consider 897 Unit Bluestone Town Center Proposal To Include 415 Apartments, 349 Townhomes, 133 Detached Homes |
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 The City of Harrisonburg Planning Commission will hold a public hearing tomorrow, Tuesday, January 17th as they consider a proposal called Bluestone Town Center which would include 897 residences on 90 acres.  In addition to 415 apartments, 349 townhomes and 133 detached homes, the master plan also proposes a community center, playground and retail shops. You can explore the proposed development further on the website put together by those seeking the rezoning... You can download the Planning Commission agenda here which includes links to all of the supporting documents for this rezoning application. It is likely to be a lively public hearing as there seem to be plenty of folks both supporting and opposing this proposal. Change.org Petition #1... Change.org Petition #2... Here are some other my thoughts and observations...
As details of this proposal have become increasingly available over the past few months... [1] I have had many conversations with people who are strongly in support of BTC because they want more affordable housing options to exist in the City. [2] I have had many conversations with people who are strong opposed to BTC because they are concerned about (among other things) what they see as a likely increase in City taxes to pay for the impact of this development. From here, the Planning Commission will review the proposal and make a recommendation to City Council... and then City Council will decide whether to approve this development in the City. The final decision by City Council (to approve or deny) will be a big decision that (regardless of the decision) will affect the future of the City for decades to come. | |
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A New And Improved But In 2023 (Keep Reading, Really) |
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 OK, OK, I'm not talking about workout goals. I'm not suggesting you get a better BUTT in 2023... I'm just pointing out that some would be home sellers have a better BUT this year... A Would Be Home Seller's But In 2022... I would sell my home BUT it's so hard to buy a home right now because soooo many buyers are competing over each new listing. A Would Be Home Seller's BUT in 2023... I would sell my home BUT I have a super low interest rate on my current mortgage and I don't really want to get a new mortgage on the new home with a much higher interest rate. Low inventory issues have been an issue (for buyers) in the Harrisonburg and Rockingham County for the past few years. There have been fewer and fewer options of houses on the market to for a buyer to purchase. It doesn't look like the inventory situation is going to improve anytime soon. Last year plenty of would be home sellers decided not to sell because they weren't confident they'd be able to secure a contract to buy a new home after they sold. This year plenty of would be home sellers likely won't sell because they don't want to let go of their super low interest rate on their current mortgage and exchange it for a higher rate on a new mortgage. So, while we can in some ways blame would be home sellers for the shortage of inventory... we can't really blame them for the reasons why many are choosing not to sell. | |
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We Are Starting 2023 With Fewer Homes On The Market For Sale Than Anytime In The Past Decade |
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 Yet another reason why it seems relatively unlikely that we will see home prices start to decline in this area... One main factor that could cause downward pressure on home prices would be if inventory levels were starting to meaningfully rise. If more sellers wanted to sell homes than there were buyers to buy them... then we might see prices level out or decline. But... as shown above... we're starting 2023 with fewer homes on the market for sale than anytime in the past decade. So... there's that. Will we see meaningful increases in the number of homes available for sale at any given time during 2023? Buyers sure hope so... but it is not yet clear whether that will actually happen this year! | |
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Maybe, Just Maybe, Buyers Might Be Able To Look At More Than One House At A Time In 2023?? |
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 The actual process of home buying has been a bit bananas for the past two years. Buyer: I want to buy a house. Me: Cool. Buyer: Let's go see a bunch later this week, K? Me: Every house for sale you might like is already under contract. Buyer: Ugh. Me: Wait, a new listing just came on the market, let's go see it, ASAP. Me, Two Weeks Later: Now there's another new listing! Me, Three Weeks Later: Ooooh, another new listing! Basically, many (most?) home buyers have only been able to consider one house at a time for the past two years. Homes were going under contract so quickly after they were listed for sale that it was rare for there to be two or more houses of interest on the market, not under contract, all at the same time. Which... lead to some less than ideal decision making for buyers. A buyer would have to decide whether to make an offer on each house, individually, without yet knowing what the other options would be (or might be) in the coming days or weeks. So, if the market starts to transition a bit in 2023 -- and if (a big IF) inventory starts to creep up a bit -- then maybe, just maybe, buyers will finally be able to look at more than one house at a time this year?? And compare and contrast them? What a novel concept! ;-) | |
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Seasonality Might Be Back In Our Local Housing Market |
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 Pre-COVID there were better times of year and worse times of year to list your house for sale in Harrisonburg and Rockingham County. The busiest buying seasons were spring and summer with fall close behind that... but winter was not always the best time to put your house on the market because there weren't as many buyers in the market to buy. For the past few years, however, it really didn't matter when you put your house on the market. The levels of home buyer interest were so high during late 2020, all of 2021 and early 2022 that you could literally list your home at any given time (holiday, not holiday, weekday, weekend, spring, summer, fall, winter) and it would still sell very quickly with very favorable terms. But now, perhaps seasonality is back in our local housing market. It seems that buying activity is a bit lower and slower right now which seems relatively likely to be at least partly due to the fact that we're in the middle of that stereotypically slower winter season. So... if there aren't as many home sales this winter as we saw during the winters of 2020 and 2021... perhaps we shouldn't be surprised. The real indicator of where this market is headed, therefore, might not show up until we can see what market activity looks like in the spring. | |
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What Would It Take For Home Prices To Decline In Harrisonburg And Rockingham County? |
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 I've chatted with several homeowners in the past few weeks who have wondered whether home prices will start to decline in Harrisonburg and Rockingham County in 2023 as a result of slower home sales and higher interest rates. It is certainly possible that home prices will decline in 2023, but here's what I think we would have to see first... [1] Sustained "high" mortgage interest rates. We would likely need to see mortgage interest rates stay above 6% or above 7%. I put "high" in quotes because current mortgage interest rates are simultaneously the highest we've seen in about 15 years, and also are lower than the rates for the 30 years before that. Regardless of the context one chooses, I believe we would need mortgage interest rates to stay above 6% in order to see prices decline in this area. [2] We would need to see buying activity continue to decline. There were fewer home sales in 2022 than in 2021, but only by 7%.... and 2021 will perhaps be seen as an anomaly after we get a few more years down the road. I think we'd need to see about a 20% decline (or more) in buying activity (home sales) in order to see prices meaningfully decline. [3] This one is the most important... we would likely need to see a meaningful increase in supply (inventory levels) in order to see home prices start to decline. So long as there are about the same number of buyers and sellers in the market (or more buyers than sellers in some price ranges) then there won't be much downward pressure on prices. If we get to the point where inventory levels are increasing and there are more sellers than buyers in the market then some sellers will likely start competing on price to attract buyers, which could cause prices to decline. So... will home prices decline in Harrisonburg and Rockingham County? It is certainly possible, but I don't think we can say that it is likely at this point. By April 1st, if we're still seeing high interest rates, if we see a much lower number of home sales compared to last year, and if we see inventory levels starting to climb, then maybe we will see prices flatten out or decline... but we're not seeing it yet. | |
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Fewer Resale Home Sales Likely Was And Will Continue To Be A Supply Side Issue |
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 Existing home sales declined 15% in 2022 in Harrisonburg and Rockingham County... 2021 Existing Home Sales = 1,364 2022 Existing Home Sales = 1,165 That said, overall home sales only declined 7% because new home sales increased 28% in 2022... 2021 New Home Sales = 309 2022 New Home Sales = 397 Why did existing home sales decline 15% in 2022? I don't think it was a shortage of demand. If there was a limited amount of demand for existing homes then we would see inventory levels of existing homes for sale increase. We did not see that increase in an inventory in 2022. As such, it seems reasonable to conclude that the decline in existing home sales in 2022 was a supply side issue... there were (perhaps, approximately) 15% fewer sellers willing to sell their existing homes in 2022 as compared to in 2021. Looking ahead, it seems relatively likely that this trend and supply side issue will continue. I think it is likely that we will see another decline in 2023 in the number of existing homes selling in Harrisonburg and Rockingham County... and I think it will still be a supply side issue... there are likely to be somewhat fewer home sellers willing to sell their existing homes in 2023. | |
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Was Contract Activity Slower Than Expected In November And December 2022? |
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 Were this past November and December (2022) a bit slower than expected when it came to contract activity? Did fewer buyers (and sellers) sign contracts to buy (and sell) homes during the last two months of 2022? I suppose whether contract activity was "slower than expected" depends on what you expected. If you were expecting the same amount of contract activity as we saw in those same months in 2021 then yes, contract activity was definitely slower than expected. As shown above, 222 contracts were signed in November and December of 2021... but only 138 were signed in those same two months in 2022. Quite a bit slower! And they went under contract... slightly (+/-) slower as well. The median "days on market" in the last two months of 2021 was seven days... and that figure rose to a median of 10 days when looking at the last two months of 2022. The super, really important, disclaimer here is that after having risen throughout all of 2022 from about 3% up to about 6%, mortgage interest rates peaked just above 7% in... November. Stay tuned to see how things unfold in January and February of 2023! | |
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Existing Home Sales Declined 15% Last Year In Harrisonburg and Rockingham County |
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 Above you can see the breakdown of sales of existing homes (blue bars) and the sales of new homes (green bars) over the past few years. While home sales declined 7% between 2021 and 2022... Existing Home Sales declined 15% in 2022... and... New Home Sales increased 28% in 2022! So, if you were hoping to buy a home last year... but you weren't interested in the particular sizes, styles or locations of the new home communities being developed in our area... and you felt like you had fewer options than you would have hoped... ...you were right... 15% fewer homeowners sold their (existing) homes in 2022 as compared to in 2021. | |
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My Predictions for the 2023 Real Estate Market in Harrisonburg and Rockingham County |
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 After several years of an ever increasing number of homes selling in Harrisonburg and Rockingham County, we saw a slowdown in 2022. There were 7% fewer home sales last year (2022) than the previous year (2021). One of the main reasons for this decline in the number of home selling is the increase in mortgage interest rates during 2022. The average 30-year mortgage interest rate was just above 3% at the start of 2022... and just above 6% at the end of 2022. Understandably, some would be home buyers were a bit less interested in or a bit less capable of buying with that magnitude of a change in mortgage interest rates. Looking ahead to 2023, I believe we'll see yet another decline in the number of homes selling in Harrisonburg and Rockingham County... for a few reasons... [1] I don't think we are going to see significant declines in mortgage interest rates in 2023. Perhaps they get back down to 5.5% or maybe 5.25% but I don't think we'll see them get down to (or below) 5% in 2023. With continued high(er) mortgage interest rates, I don't think we're going to see a big influx of buyers back in the market to buy who stopped looking in the second half of 2022 when rates rose. [2] I think there will be far fewer "elective" home sales and purchases. Over the past few years it was so easy to sell one's home quickly (with multiple offers, at an amazing price) and this lead to plenty of homeowners electing to upgrade to a new house. Sell easily, quickly, at a great price and buy with a super low interest rate... easy... let's do it! Now, homes won't necessarily quite as quickly and the mortgage interest rate on a purchase would be much higher... so I don't think as many buyers will sell and then buy unless they really want or really need to sell and buy. [3] Fewer home buyers upgrading (selling and buying) means fewer existing homeowners selling... which will also limit the number of homes that buyers could buy... because of the limited number of sellers selling. All that to say... I think we're going to see even fewer home sales in 2023 than we did in 2022. As per the graph above, I'm predicting another 7% decline in the number of homes selling in Harrisonburg and Rockingham County in 2023... which would take us back to a bit less active of a market than in 2019... though quite a bit more active than in 2018. And how about those sales prices... of the number of homes selling declines, will we see home prices start to decline?  After three years in a row (2020, 2021, 2022) of double digit growth in the median sales price... I am predicting that we will see a smaller increase in that median sales price in 2023... but yes, still an increase. Here are a few of the reasons why I think we will see an increase in home prices in 2023... [1] To the extent that the price of everything keeps going up (inflation) it seems likely that home prices will continue to rise. Inflation doesn't seem to be cooling off anytime soon (yikes, no fun, not a fan) which would make it even more surprising if we saw home prices start to decline. [2] The decline in home sales in 2022 -- and the predicted decline in 2023 -- have been a result in lower levels of buyer interest, but despite that, inventory levels have not meaningfully increased. Slightly fewer buyers are buying, but because slightly fewer sellers are selling, inventory levels have remained consistently low, which does not provide any downward pressure on home prices. [3] The Harrisonburg area continues to be a popular place to live, work, relocate, retire... and this continued interest in this growing area seems likely to keep home prices rising. All that is to say, I think we'll see an increase in home prices over the next year... but not as large as we have seen for the past three years. I am predicting a 5% increase in the median sales price over then next year. So... I'm predicting fewer home sales and a continued increase in sales prices... how could I be wrong? How could I be wrong? Plenty of ways. ;-) 1. We could see an even sharper drop in the number of homes selling if mortgage interest rates go even higher or if inflation gets even more out of control or if we enter into a full blown recession or if there are other major economic and job market changes in 2023. 2. We could end up seeing an increase in home sales if mortgage interest rates start to decline significantly, or if there is major employment growth in the area resulting in ever more would be residents seeking to buy a home. 3. We could end up seeing another 10% (or higher) increase in the median sales price if buyer demand continues to outpace seller supply. We're still in that territory now... but I think that price growth is going to soften a bit in 2023. But yes, prices really could rise another 10% or more in 2023. 4. We could see a decline in the median sales price if mortgage interest rates keep rising and if home buyer activity falls significantly and if inventory levels start rising. There you have it folks... my predictions for local housing market in 2023. What are your predictions? Where is our local market headed next? | |
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Looking Back At My Predictions For The 2022 Harrisonburg Real Estate Market |
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 Within the first week of 2022 I made two predictions for the 2022 Harrisonburg and Rockingham County real estate market related to how many home sales we would see, and what changes we would see in the median sales price in our market. As shown above, I was predicting a 2% increase in the number of home sales in our market... from 1,668 sales up to 1,695 sales. But... higher mortgage interest rates intervened, cooling buyer demand, leading to a 7% decline in home sales... from 1,668 sales down to 1,555 sales. And how about those prices...  As you can see above, I was predicting that after two years (!!) of 10% increase in the median sales price that we would only see a 5% increase in the median sales price last year... which would have been an increase from $270,000 to $284,000. But, in actuality, high levels of buyer demand throughout most of the year lead to an increase in the median sales price that was much larger than I had predicted. The median sales price in our local market increased 11% in 2022, from $270,000 up to $299,900! Stay tuned later this week for my predictions for the local housing market in 2023. | |
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Median Sales Price In A Larger (Longer) Context |
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 We have seen three distinct periods of changes in the median sales price in the Harrisonburg and Rockingham real estate market... 2000 - 2006 = Growth 2007 - 2014 = Minor, Slow, Correction 2015 - 2022 = Growth What's on everyone's mind now is... what comes next! Will we see prices continue to rise in 2023? Will they level out? Will they decline a bit? I have no answers. ;-) I'll make some guesses next week. | |
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Annual Home Sales In A Larger (Longer) Context |
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 Even after the last few home sales of 2022 are tabulated, we'll see a net decline in the number of homes selling in 2022 as compared to 2021. In the graph above I have each year color coded as follows... GREEN = 4% or greater increase in # home sales RED = 4% or greater decrease in # home sales GREY = less than a 4% change in # home sales Thus, as you can see, we've seen an increase in the pace of home sales in the local market, or less than a 4% change in the pace of home sales, every year since 2000 except for in 2006, 2007, 2008, 2009 and 2010... and now, 2022. It's hard to say at this point what 2023 will look like, but it seems reasonable to think we may see another (+4%) decline in the numbers of homes selling in Harrisonburg and Rockingham County. | |
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Even With A Slower Second Half Of 2022, It Will Have Been The Third Strongest Year Of Sales, Ever |
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 Mortgage interest rates rose considerably in the second half of 2022 -- actually, even as early as mid-April they had already surpassed 5%. These higher rates eventually (months later) lead to a slowdown in the number of homes selling in 2022. Yet, despite this slowdown, 2022 will close out as the second strongest year of home sales in Harrisonburg and Rockingham County, ever. Thus far in 2022 we have seen 1,548 home sales in Harrisonburg and Rockingham County as reported in the HRAR MLS. Last year, in all of 2021, there were 1,668 home sales. As such, yes, we aren't breaking any records this year. But, prior to 2021, there was never a year with more than 1,500 home sales in a single year. The closest (which was quite close) was 2020 with 1,495 home sales. So, was 2022 a much slower, much weaker year of home sales in this area? Not really. It was slightly slower than last year... but stronger than every other year before that, ever. NOTE: After having awarded 2022 with the beautiful second place ribbon above I then looked back even further beyond the past decade and found that there WAS one other year with more home sales than 2022... way back in 2005. So, 2022 will really end up being the third strongest year of home sales, ever. | |
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Trading Up For A New House Will Likely Also Mean Trading Up Your Interest Rate |
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 For about three years (2019-2021) the average mortgage interest rate for a 30 year fixed rate mortgage was less than 4%. It even dropped below 3% at times. As such, anyone who bought a home during that timeframe likely has a mortgage interest rate below 4%... and many (many) other homeowners refinanced during that timeframe to lower their rate and their mortgage payment. So now we find ourselves in a situation where many mortgage holders have a mortgage interest rate below 4% or even below 3%. Thus, when any such holder of a low mortgage interest rates considers selling their home to trade up for a new house... they will also be trading up their mortgage interest rate. It was often an easy decision to sell a $300K home and buy a $400K home when you were paying off a 5% mortgage and taking out a new 3.5% mortgage. Now, if you're selling a $300K home with a 3.5% mortgage and are considering the purchase of a $400K home with a 6.5% mortgage... the math is going to work out a BIT differently. I suspect there will still be plenty of people selling and buying homes in 2023, even with these higher mortgage interest rates, but I think there will be fewer people swapping one house for another unless it is a significant upgrade in the house... because it will more than likely be a significant upgrade in the mortgage interest rate. :-/ | |
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Scott Rogers
Funkhouser Real
Estate Group
540-578-0102
scott@funkhousergroup.com
Licensed in the
Commonwealth of Virginia
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