Brought to you by Scott P. Rogers, Funkhouser Real Estate Group, 540-578-0102, scott@HarrisonburgHousingToday.com
Brought to you by Scott P. Rogers, Funkhouser Real Estate Group, 540-578-0102, scott@HarrisonburgHousingToday.com
Wednesday, November 11, 2020
Happy Veterans Day and an enormous thanks to all who have served our country! Also, Happy November and Happy Thanksgiving!
Speaking of thankfulness, we have a lot to be thankful for when it comes to the residential real estate market in Harrisonburg and Rockingham County! Despite all of the twists and turns and ups and downs that 2020 has brought to our lives, the local housing market has remained stable and has even grown stronger over the past ten months.
Unfortunately, as with many things in life, this has meant that there have been winners and losers. Home owners and home sellers have done well and have appreciated this strength of and growth in our local housing market. Folks who do not own a home, or who have been unsuccessful in trying to buy a home, and even those who have been successful in buying a home this year are likely a bit less excited about how strong and vibrant our local housing market has been in 2020.
All that said, I believe this is the second best type of housing market trend to be seeing locally. Here's how I rank them as far as what is best for us locally...
- Steady, predictable, sustainable growth in home values - perhaps +3% per year.
- Faster than normal growth in home values.
- Stagnant home home values - which are really a net negative due to inflation.
- Declining home values.
So, as stated, we're in category two above, which I prefer to three and four if we can't be in category one. :-)
Now, after that rather long intro, let's get on to some data, but first, be sure to check out the home featured above, an upscale four bedroom Preston Lake townhouse on the Village Green by visiting 3297BatteryParkPlace.com.
OK, finally, unless you're skipping right to PDF of my full monthly report, let's dig into the data...
Quite a few things to note on the market snapshot above...
- October 2020 was crazy! There were 149 home sales in Harrisonburg and Rockingham County last month, which is 34% more than the prior October. This is likely much stronger than anyone was predicting.
- That strong month of October sales has pushed 2020 YTD home sales even further ahead of 2019. We have now seen 6.55% more home sales this year than last when looking at the first ten months of the year.
- The median sales price in our area has risen a staggering 10.27% over the past year -- from $220,000 to $242,600.
- Homes were selling fast last year, with a median of 17 days on the market, but 2020 wasn't going to be outdone as they are selling even faster this year, with a median of 10 days on the market!
Interestingly, things do branch out a bit when we look at the City vs. the County...
As shown above, there has been a decline in home sales in the City (-5.58%) while we have seen an increase in the County (+11.63%). Not shown is that the median sales price has increased in both areas -- up 11% in the City and up 9.76% in the County. The decline in City home sales is not for home buyers not trying -- there are plenty of folks who want to buy in the City but there seems to be a shortage of sellers willing to sell.
So - did I mention that September and October were a bit surprising?
Take a few seconds to take in what the graph above is showing us. September 2020 home sales (156) were 47% higher than the average of the past three months of September. October 2020 home sales (149) were 35% higher than the average of the past three months of October. So, if the local housing market was unusually slow this Spring due to COVID, this September and October have more than made up for that given these shockingly high months of home sales!
Which invites the question of how the year will finish out...
Earlier this year, I thought we were certainly going to see a decline in annual home sales after several years of increases. Not so much. We seem poised to easily surpass last year's pace of 1,324 home sales -- and it seems possible we could even make it to 1,400 home sales this year in Harrisonburg and Rockingham County. Who would have thought!?
Here's where I'm getting that "maybe 1400" number...
A few things going on above. First, the orange line, which is showing us the annual pace of home sales, evaluated on a monthly basis. After having risen from 1300-ish to 1350-ish, we fell back down to 1300-ish due to COVID, but the annual pace of home sales has rocketed back upward and is now approaching 1400 sales per year. The green line shows that home values didn't falter a bit despite a temporary slow down in home sales. We have seen steady increases in the annualized median sales price over the last year which has steadily (and quickly) risen from $217K to $240K.
That seems like quite a large increase in the median sales price, right?
It is a large increase. Over the past five years the median sales price has increased at an average of 4.6% per year. This year, thus far, we have seen the median sales price increase 8.8% -- almost twice as much as these other recent years. This has been almost entirely fueled by increasing demand for homes, declining inventory levels and declining mortgage interest rates.
These changes have made it more and more of a seller's market...
A few things to not and think about, above...
- The number of buyers buying in a given year (or in a given six month period in this graph) has remained relatively consistent over the past few years.
- The number of homes from which those buyers are choosing on a monthly basis has steadily fallen, from 400-ish homes for sale three years ago to 200-ish today. This makes it harder for buyers to find a house to buy and they are often competing with multiple other buyers.
- Sometimes folks think that lower inventory levels mean that fewer sellers are selling. It's not quite that. If 1400 buyers buy in a year, then 1400 sellers have sold. So, the steady pace of buyer activity means there is a steady pace of seller activity -- but buyers are contracting so quickly on (most but not all) homes that there are never very many homes on the market at any given point.
So, given this strong sellers market, are sellers negotiating much?
Nope. The median ratio between the list price and sales price for all homes sold in 2020 has been 100%. What!? Yes, that means that half of homes sold for the list price or more! This has been the least that sellers have negotiated in many, many years - maybe ever.
Circling back to those inventory levels one more time...
You'll see that we are seeing some amount of seasonable fluctuation in inventory levels as we did see a slight rise in homes for sale (and not under contract) during the spring months, but we have seen an overall 39% decline in inventory levels over the past year. Inventory levels ticked upward in October 2020, but I doubt that will be a lasting trend. We are likely to see relatively low inventory levels (under 200) even through the remainder of the fall and into and through the winter.
Oh, and did I mention that mortgage interest rates are relatively low?
Perhaps absurdly, ridiculously, unexpectedly, historically low would be a better way to describe it. We just finished the fourth month of average 30 year mortgage interest rates being below 3%! This has created some very favorable monthly payment scenarios for buyers this year -- and thus far I'm not getting any sense that we'll see these interest rates rise much in the near future.
OK, back to a few (real estate related) areas of thankfulness...
- I'm thankful that you read this entire synopsis of our local housing market. Who made it this far? Reply to say hello! ;-)
- I'm thankful that home owners and home sellers in this area have not seen home values fall amidst the many other unexpected changes that 2020 brought into our lives.
- I'm thankful to be able to do what I do - help buyers and sellers make thoughtful, informed and intentional decisions when buying and selling homes - because I love my work and the people (buyers and sellers) with whom I get to work.
I'll close out with a few key recommendations for buyers and sellers in this crazy-ish market...
BUYERS
- Get pre-qualified for a mortgage ASAP.
- Look at houses the day they are listed.
- Be prepared to make an offer on Day 1.
- Know that you might be competing with other buyers.
- Learn about escalation clauses and how to use them.
SELLERS
- Pricing your home appropriately, preparing it well for the market, and marketing it rapidly, thoroughly and professionally are still the secret sauce to securing a buyer.
- If your home has been on the market for 60+ days and still has not sold, you will likely have to start thinking about whether to make a price reduction in order to secure a buyer. If buyers are not responding (with an offer) at your current pricing, consider making an adjustment sooner rather than later.
OK. That's all folks. I hope you have plenty to be thankful for in your world. As always, if I can be of any help to you or your family, please let me know!
Reach out anytime by calling/texting me at 540-578-0102 or by dropping me an email at scott@hhtdy.com.
