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
Tuesday, January 5, 2021
As shown above, I was terribly (!!!) inaccurate in predicting how many home sales would take place in Harrisonburg and Rockingham County in 2020. We saw a 1% increase in home sales between 2018 and 2019 and so I made the rather unexciting prediction that we'd see another 1% increase in 2020 to a total of 1,340 home sales.
Wow, was I wrong!
Home sales actually increased almost 12% to 1,481 home sales in 2020. This double digit increase in the pace of home sales is surprising because we were in the middle of a global pandemic for much of 2020 - but perhaps this is a part of why the increase happened.
Here are some ways that the global pandemic (Covid) could have contributed to a significant increase in local home sales in 2020...
- CHEAP MONEY -- Interest rates (including mortgage interest rates) steadily declined throughout the year, in part to help prop up a potentially faltering economy. This resulted in mortgage money to be less and less expensive, which made it a compelling time to consider a home purchase.
- MORE TIME AT HOME -- People were spending more and more time at home, and many were working from home or had kids learning from home. Your home might have worked for you and your family when you were only spending half of your waking hours in it -- but all of a sudden a lot of us were spending 90% of our waking hours at home. I think this caused plenty of homeowners to decide it was time to upgrade to a new space given the new demands they were putting on their homes.
- FINANCIAL SHAKE UP -- First, it's important to note that many (though certainly not all) of the folks locally who saw their jobs or income interrupted in 2020 were folks who were renting and not looking to buy a home. Thus, economic disruptions did not impact the pipeline of home buyer activity as much as might have been expected. Secondly, a lot of people saw their discretionary spending decline (less travel, fewer vacations, not eating out as much, lower gas costs without a daily commute) and this likely freed up further funds to use for a downpayment or on monthly housing costs.
These (above) are some but certainly not all of the reasons why we saw an increase in home buying activity in 2020. In March and April of this past year as many aspects of our lives slowed to a stop, I certainly would not have predicted we see such a large increase in home sales locally -- but once we hit July, there seemed to be no stopping this quickly moving local housing market.
So, given that I was wildly wrong on the number of home sales we would see in 2020, is it safe to assume I also erred on predicting the change in median sales price? Let's see...
...and, yes, I was also quite off the mark when it came to predicting the median sales price for 2020!
After a 5% increase in the median sales price in 2019, I predicted that we would see another 5% increase to a median sales price of $235,000.
When the year closed out, we actually saw a 10% increase in the median sales price -- from $223,000 in 2019 up to $244,900 in 2020.
Wow! So, what could have caused this significant increase in the median sales price?
- LOTS OF BUYER INTEREST -- See above. Many more buyers wanted to buy in 2020 as compared to 2019. Whenever you see an increase in demand you almost always see a corresponding increase in prices.
- LOW INVENTORY -- Throughout the year, buyers were struggling to find homes to buy amidst lots of competition from other buyers. This dynamic resulted in quite a few bidding wars, and buyers being willing to pay prices they likely would not have had to pay a year prior.
- LOW INTEREST RATES -- The ever declining mortgage interest rates came into play here as well. As mortgage interest rates fall, buyers can afford to buy a more expensive home and have the same mortgage payment. Thus, even though home buyers paid 10% higher prices in 2020, they saw no change (or nearly no change) in their monthly payments because of lower interest rates.
So -- given how inaccurate my 2020 predictions were you must, certainly, be looking forward to my predictions for 2021, right? :-)
Stay tuned for my best guesses on what we'll see in our local market in the year ahead!
