Inventory
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Why Are Housing Inventory Levels So Low In Harrisonburg And Rockingham County? |
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 First, Harrisonburg is a popular place to live. Beyond everyone who is living here now, we continue to see new folks planning to make Harrisonburg their home, including but not limited to...
So, lots of people want to make Harrisonburg their home. Second, I think that more people are moving to Harrisonburg than new housing units are being built. If over a five year period, 5000 new people decided to make Harrisonburg their home, we wouldn't see a change in availability of housing if we also saw 5000 new housing units built. I think that the amount of new moving to (or attempting to move to) Harriosnburg over the past 5 to 10 years has exceeded the number of new housing units built during that same timeframe. Third, I think there is an imperfect match between what home buyers want to buy and new housing units that are being built. First of all, plenty of the new housing units that have been built over the past ten years have been rentals - apartments or otherwise - which hasn't helped provide housing for would be home buyers at all. Furthermore, the "for sale" housing that is being built in this area certainly meets the needs of some buyers, but probably not most or all buyers. If you're hoping to buy a home that is within the location, size parameters and price parameters of one of our area's new home communities -- great, you'll be in good shape! If what you are hoping to buy is not the type / size / price of new homes being built in our area, then the new housing units being built don't help you out at all. As such... the popularity of Harrisonburg and the rate at which new housing units are being built, and the type of housing units being built all contribute to a shortage of housing inventory for many price ranges and property types. | |
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Yes, More Houses Will Come On The Market For Sale In The Spring. Yes, More Buyers Will Be Competing For Them. |
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 It's a common question at this time of year... Will more houses come on the market in the spring? There don't seem to be many options at all right now. Great news... There will be more homes coming on the market in the spring. The spring season is one of the most active times of the year for new listings of homes for sale to be coming on the market. But... Bad news... There will also likely be more buyers competing for each of those new listings, as the number of buyers shopping for homes also typically increases significantly in the spring. So... Yes, more houses will come on the market for sale in the spring AND yes, more buyers will be competing for them. :-) :-( I suppose though, that as a buyer, it's still nice to have more listings from which to choose from, even if you have more competition as well? Even with higher mortgage interest rates (relative to the past few years) and even with prices edging higher and higher -- it still seems that the coming spring season will be quite an active one in the Harrisonburg and Rockingham County real estate market. | |
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Sometimes Housing Inventory Levels Are Not A Good Indication Of Housing Availability |
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 Reflect with me for a moment on the definition of a paradox... paradox - a seemingly absurd or self-contradictory statement or proposition that when investigated or explained may prove to be well founded or true. Here's the paradox of the day... Sometimes Housing Inventory Levels Are Not A Good Indication Of Housing Availability Let's think it through together... Let's say you want to live in the infamous (and completely fictitious) "Riverside" neighborhood in Rockingham County. If you wanted to get a sense of whether it is possible to find housing in the Riverside neighborhood which method would you use? Method #1 for understanding housing availability... Look at how many homes are for sale in Riverside right at this very moment. There are currently zero homes for sale in Riverside, thus it is seemingly *impossible* to buy a home in Riverside, right? Method #2 for understanding housing availability... Look at how many homes have sold in Riverside during a particular timeframe, such as the past year. Oh, wait. There have been 15 home sales in Riverside over the past year. Thus, you likely will be able to buy a home in Riverside if you can wait for some new listings beyond what happens to be on the market at this very moment in time. As can be seen above, housing inventory levels were not a good indicator of housing availability in Riverside. -- Shifting gears a bit, let's consider whether housing inventory levels are a good indicator of housing availability in a real place, the City of Harrisonburg, but only examining homes priced under $300,000. Method #1 for understanding housing availability... Houses Currently For Sale in the City of Harrisonburg Under $300K = 5 houses Hmmm. Method #1 would lead us to believe that houses are not generally available in the City of Harrisonburg for less than $300,000. Method #2 for understanding housing availability... Houses Sold In The Past Year in the City of Harrisonburg Under $300K = 275 houses Wait a minute. There were 275 home sales under $300K in the City of Harrisonburg over the past year? That seems to point to a rather different conclusion about housing availability. -- And one more real example... Houses in Harrisonburg and Rockingham County combined priced under $200K: Currently Available Homes = 5 Sold Over The Past Year = 211 -- So... again... Sometimes Housing Inventory Levels Are Not A Good Indication Of Housing Availability Now, this does, of course, create the possibility that a would-be home buyer will simultaneously feel... 2. Encouraged... to know that there may very well be 270 more options in over the coming year. -- And one last point... If LOTS of homes sell each year in a particular location and/or price range but VERY FEW are available at any particular moment in time then two things would seem to be true... 1. Houses are generally available for purchase in this location and price range. 2. Demand for said houses likely exceeds supply, and if more such homes existed that could help bring more balance to that segment of the market. -- OK, fine, one more last point... If you are looking to buy a home in the coming year, yes, let's look at what's available now... but much more importantly, let's look at what has sold in the past year. The number of homes that have sold in the past year will likely be the best indicator of what to expect in the year to come. | |
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Inventory Levels Largely Unchanged From Two Years Ago |
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 How have inventory levels changed over the past two years in Harrisonburg and Rockingham County? Some might assume there have been fewer (and fewer and fewer) homes on the market as we have progressed through the past 24 months. As it turns out, inventory levels are largely unchanged over the past two years.
Certainly, there have been some changes in between...
But in the end, current inventory levels are in just about the same spot they were two years ago. | |
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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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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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Comparison Shopping (For Homes) Is Difficult In A Low Inventory Market |
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 If you were going to buy a ____, it would probably be nice to look at multiple options, compare them, and then decide which one to buy, right? That is often possible with buying a home, whenever we have a balanced market (or a buyer's market) when buyers can find multiple houses on the market at any given time that might work for them. A buyer would then go view multiple houses, compare them, and decide if they want to make an offer on one of the available homes. These days (and for the past few years) we have been in a strong sellers market, with very low inventory levels. The same number of houses have typically been available for a buyer to consider... but they are often evaluating them one at a time, every few weeks... instead of all at once. Sorta like this...
Basically, home buyers have had to make a decision about whether to buy a house... one house a time... without the ability to compare multiple options that are available at the same time. That may eventually change, in some or most price ranges, if we start to see inventory levels increase over time. Until then, it can be a challenge to be a thoughtful and intentional comparison shopper when trying to buy a home! | |
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So You Think Home Prices Will Decline? We Would Likely Need To See Much Higher Inventory Levels First! |
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 It's all about supply and demand. Over the past few years there have been plenty of home sellers... but WAY more home buyers. This resulted in buyers fighting over each new listing, competing to offer the most compelling terms, often being willing to pay a higher and higher price. Basically... [ Plenty Of Sellers ] + [ Way More Buyers ] = [ Rising Prices ] Some think that given higher mortgage interest rates and seemingly fewer buyers in the market, that we are certainly going to see home prices start to decline in this area. I suspect that will only happen if we see significantly higher inventory levels (of homes available for sale) such that sellers find themselves fighting over each new buyer, competing to be willing to offer buyers the most compelling terms, often being willing to accept a lower and lower price. (I'm exaggerating a bit here, but I just flipped the language above to show you what I mean.) That type of a market would look like this... [ Lots Of Sellers ] + [ Not Many Buyers ] = [ Falling Prices ] Until and unless we actually see measurable, significant increases in inventory levels, what I think we'll actually see is... [ Plenty Of Sellers ] + [ Fewer But Plenty Of Buyers ] = [ Stable Or Rising Prices ] Feel free to offer up your counterpoints or contrary perspectives. I'd love to hear them! | |
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Inventory Levels Creeping Slowly Upward, To Higher Low Levels |
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 Inventory levels - the number of homes for sale at any given time - have been creeping upward for the past 6+ months. With 163 homes for sale, we are now seeing more homes for sale than we have seen at any time since late 2020. The gray bars above show the number of homes on the market at the end of each month. The red line above shows a moving three month average to show the overall trend more clearly. To put this in a bit of context though, these new highs are actually still pretty low... Homes for Sale In...
So, yes, July 2022 inventory levels are higher than a year ago... but are also much lower than any other recent July... | |
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Do Inventory Levels Rise (and fall) With Mortgage Interest Rates? |
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 Q: Do Inventory Levels Rise (and fall) With Mortgage Interest Rates? A: Sometimes Interest rates are on the rise right now... and inventory levels are rising as well. Interest rates were falling for quite a few years just prior to 2021... and inventory levels also fell during that timeframe. So... do inventory levels just track right along with mortgage interest rates? Sometimes, but not always, it seems. Of note... The graph above shows a 12 month average of the number of homes for sale (blue line) and a 12 month average of a 30 year fixed rate mortgage interest rate (orange line). So, the last data point (June 2022) is showing the average number of homes for sale in the 12 months prior to and including June 2022... and the average mortgage interest rate in the 12 months prior to and including June 22. Looking back, then, to the beginning of 2015, we can see four general trends taking place, three of which I have labeled. [0] The unlabeled portion of the graph (2015-2016) showed very little upward or downward movement in inventory levels or interest rates. [1] Between 2016 and 2018 we saw interest rates rising, but inventory levels falling. This runs counter to the premise proposed above, that inventory levels rise and fall as interest rates do the same. [2] Between 2019 and 2021, indeed, interest rates declined, and inventory levels did as well. [3] Since late 2021 we have seen interest rates start to climb (and even faster and further in 2022) and inventory levels have started to climb as well. So... yes, there seems to be some connection between interest rates and inventory levels... at some times... but not always. The unspoken here, is the main connection between these two factors... which is home buyers. As interest rates decline, in theory there are more buyers, which would in theory, cause inventory levels to decline. As interest rates rise, in theory there are fewer buyers, which would in theory, cause inventory levels to rise. Beyond all of these theoretical connections and consequences, what does this mean for 2022 and 2023 in our local housing market? So long as interest rates are rising, there is a decent chance that inventory levels will rise somewhat as well, as some buyers won't be able to afford some houses any longer... or will choose to limit their home buying budget. The big question, of course, is whether it will be a four part chain reaction... [1] Interest Rates Rise [2] Fewer Buyers Buy Homes [3] Inventory Levels Rise [4] Prices Flatten Out or Fall Thus far in our local market, we are seeing... [1] Interest Rates Rising [2] More Buyers Buying (not fewer as predicted above) [3] Inventory Levels Rising (slightly, not significantly) [4] Prices Are Still Rising (not flattening out or falling as predicted above) Do keep in mind that every housing market trend you see in the national news may or may not actually be representative of what is happening in our local market. | |
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Housing Inventory Levels Seem To Be Slowly Rising, With One Third Of Them Being New Homes |
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 There are almost 150 homes for sale now in Harrisonburg and Rockingham County... we're at 147 at the moment... and this would be the first time since late 2020 that there were 150 options for home buyers. But... do note that more than a third of them (53 of 147) are new homes. This isn't a bad thing... it's just that new homes in new home communities are only going to work for some buyers... they are particular property types, at particular price points in particular locations. Higher inventory levels means more choices for buyers which could mean -- if inventory levels were to keep climbing -- that there wouldn't be quite as fierce of competition for some new listings. That said, I have been a part of several "multiple offer" scenarios over the past two weeks, so the overall market isn't necessarily calming down or cooling off yet. | |
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Inventory Levels Have Been Dropping For Almost An Entire Decade |
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 At the end of last month there were only 127 homes for sale in Harrisonburg and Rockingham County. Five years ago, at the end of April 2017, there were 411 homes for sale. Five years before that, at the end of April 2012, there were 733 homes for sale. Home buyers over the past year have had fewer options of what to buy at any given point in time than ever before in the past decade, and possibly ever before, ever. The low inventory levels don't mean fewer buyers are buying -- in fact, more buyers are buying on an annual basis than ever before. The low inventory levels are an indication that there is much more buyer demand than seller supply, so new listings get scooped up (go under contract) within a matter of days -- thus, not contributing to the inventory levels at the end of the month. | |
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Many Would Be Buyers Are Finding Zero Homes For Sale Right Now |
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 It's a strange time right now -- there are quite a few segments of the market with absolutely no options for buyers. For example, let's say you wanted to buy a resale home just east of Harrisonburg, in the Spotswood High School district, with at least 2,000 square feet, and four bedrooms... ...and you could spend up to $700,000... ...you should have plenty of options, right? Nope. There are currently... zero homes for sale (that aren't under contract) in the Spotswood High School district, under $700K, with 2000+ SF and 4+ bedrooms. So, buyers, as much as you might want to buy -- you will be at the mercy of waiting for sellers to be ready to sell. And sellers, these extraordinarily low inventory levels in many segments of the market may very well mean that you will have lots of early interest in your home... and you may very well secure a contract with very favorable terms! | |
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Will Inventory Levels (of resale homes) Increase At All This Spring? |
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 Many homeowners thinking about selling their homes this spring are considering selling sooner rather than later... because of the super low inventory levels right now. There are certainly houses on the market for sale, but many are new builds, and thus if a buyer wants to go ahead and buy and be able to move into their home, they are likely trying to do so with very few houses from which to choose. The logic of listing your home sooner rather than later is something along the lines of.... List Now = zero (or very little) competition from other sellers List Later = likely more competition from other sellers I totally agree with this logic, and listing sooner rather than later makes a lot of sense, though I also am not 100% sure we'll ever get to the point this spring or summer where you will be listing your home for sale amongst much competition from other sellers. After all, if eager buyers keep snapping up each new listing as it hits the market, the collective inventory of competing listings will never grow. So, yes, my first recommendation is to list your home sooner rather than later -- though it will probably work out just fine to list a bit later as well. P.S. Buyers -- sorry there are so few options for you!!! :-/ | |
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City of Harrisonburg Housing Inventory Levels Fall Below 20 Homes For Sale... For First Time Ever!? |
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 There are now fewer than 20 homes for sale in the entire City of Harrisonburg! As you can see, above, the number of homes for sale at any given time has been falling rather consistently over most of the past five years. The several times when you see inventory levels rising are typically in the spring season. These extremely low inventory levels do not mean that fewer houses have sold in the City over the past five years. Here are the annual City home sales during that timeframe...
So -- plenty of homes are selling in the City this year -- more, in fact, than any of the past five years. These extremely low inventory levels thus mainly mean that as soon as City homes are coming on the market they are almost always quickly going under contract -- keeping inventory levels at any given moment QUITE low! | |
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This Housing Inventory Crisis Is Likely YEARS In The Making |
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 Is this inventory issue a new one? Nope! It's been sneaking up on us for YEARS now! We haven't had PLENTY of homes on the market for years and we're JUST NOW all of a sudden seeing that drop off. The number of homes on the market at any given time has been declining for years. Thus, the only way to have not been in the situation we are in now (very, very few homes for sale) would have been if many new homes had been built over the past four to five years. Some homes were built, but not enough. Now, It will, unfortunately, take a long time (likely years) for our market to dig its way back out of this housing inventory crisis. The many new home communities in the planning or building stages will help -- but hundreds or thousands of new homes don't pop up over night. | |
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Are Inventory Levels Slowly Starting To Increase? |
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 We may (finally?) be seeing inventory levels creep up a bit in Harrisonburg and Rockingham County. As shown above, after having dropped all the way down below 100 homes for sale -- inventory levels have increased over the past two months. We're still at basically all time lows other than what we've seen in the past six months -- so don't get to excited about the inventory levels rising -- but it's nice for the inventory levels not to be heading down even lower. Stay tuned as we see how inventory levels continue to adjust as we make our way through the rest of the summer and into the fall. | |
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The Housing Inventory Shortage Is Not Likely To Quickly Work Itself Out |
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 Did you hear that...
It's not happening on every house in every price range in every location -- but it (lots of showings, multiple offers) is happening very frequently these days. Clearly, there are waaaaaay more buyers in the market than there are sellers. And, sadly, it doesn't seem that this housing inventory shortage is not likely to work itself out anytime soon. After all...
So, alas, for the foreseeable future...
I wish I saw an easy or fast or near-term way out of this situation, but I'm not currently seeing it on the horizon. In theory, the answer is new construction of "for sale" homes at scale, but we're not there yet... | |
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Nearly 500 Buyers Secured Contracts On Homes In First Four Months of 2021 |
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 As shown above, for three of the past five years, around 430 - 440 buyers signed contracts to buy homes between January and April. Two years ago, in 2019, there was a bit more contract activity than normal with 466 buyers signing contracts to buy homes. But this year -- in 20201 -- we set new records! Nearly 500 (499) buyers (and sellers) signed contracts to buy (and sell) homes between January and April 2021. You might ask -- how is this possible -- I heard inventory levels are super low!? It actually works the other way around. It is not remarkable or mysterious that this many buyers secured contracts to buy homes despite low inventory levels... The inventory levels are so low because so many buyers secured contracts to buy homes! Buckle up - this seems bound to be a fast paced year in the local real estate market! | |
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Scott Rogers
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scott@funkhousergroup.com
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