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Nationwide Median Sales Price Declines For First Time In More Than 10 Years... But, What About Locally? |
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 I saw the headline over at CNN yesterday... home prices are falling (nationwide, barely) for the first time in over a decade. The median sales price of a home in the United States was $363,000 in February 2023... ...marking a (tiny) 0.2% decline from a year ago. How do those numbers compare to Harrisonburg and Rockingham County? February 2022 - February 2023
February 2023
So, as usual, we're just doing our own thing over here in Harrisonburg and Rockingham County. Will we see home prices decline in Harrisonburg and Rockingham County? Before that happen, we'd need to see them level out (stop going up) which isn't happening at this point. So, read the national news (if you must) but as usual, it's much more important to keep tabs on the local trends. | |
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Buyer Demand Exceeds Supply In Varying Degrees By Price Range |
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 As one might expect, there are more buyers able to and interested in buying a home for $200K than for $300K... and more buyers able to and interested in buying a home for $300K than for $400K. You get the picture. As such, we currently find buyer demand exceeding supply in varying degrees by price range. These numbers are completely made up, but are likely not too far off base given recent listings or transactions I have been a party to or have heard about in our local market... SHOWINGS IN WEEK ONE, BY PRICE RANGE:
If you're seeing more showings than outlined above, your house may be slightly more popular than the average house based on its location and condition - or you might have priced it "just right" for the current market. If you're seeing fewer showings than outlined above, your house maybe slightly less popular than the average house based on it's location and condition - or you might have priced it "a bit too high" for the current market. Again, the data above is completely fictional (not based on actual showing data) but is included to paint a general picture of the differing amounts of buyer demand in different price ranges in the current market. | |
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Pending Home Sales Data Points To Slower Months Of Home Sales Ahead |
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 Pending home sales is the most timely indicator of what we should expect in the very near future for closed home sales. A pending home sale is a house that is under contract. Two springs ago (2021) the number of pending sales peaked at 373. Last spring (2022) the number of pending sales peaked at 416. There are currently only 261 pending home sales. As such, it seems likely that we'll see fewer closed home sales over the next few months. But, interestingly, this lower level of pending home sales does not necessarily seem to be a result of an insufficient number of buyers wanting to buy -- but rather, an insufficient number of sellers willing to sell. This seems to be a supply side issue inventory levels (the number of homes on the market for sale) remain stubbornly low. If we were seeing fewer pending home sales, and inventory levels climbing, this would be an indication that buyer demand is declining. That is not what we're seeing. So long as fewer sellers are willing to sell, we are likely going to continue to see lower numbers of pending home sales, and lower numbers of closed home sales unless new construction options increase to provide additional housing options for home buyers. | |
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Detached Resale Home Sales Decline 39% In Two Years, Down To... Pre Covid Norm |
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 First, a definition... Detached Resale Home Sales = not townhouses, not duplexes, not condos, not new homes Now, then, an observation... Detached Resale Home Sales have declined 39% over the past two years when looking at first 2.5 (ish) months of the year. Oops, wait, another observation... Detached Resale Home Sales have dropped all the way down to... pre covid norms. In the three years leading up to Covid (2017, 2018, 2019) we saw home sales between January 1 and March 13 totaling 99, 101 and 103 home sales for each of the above referenced years. But then, the three most recent years showed a very different pace of sales... Jan 1 - Mar 13 of 2020 = 136 sales! Jan 1 - Mar 13 of 2021 = 164 sales! Jan 1 - Mar 13 of 2022 = 136 sales! But, then, back to what seems to have been the pre-Covid norm... Jan 1 - Mar 13 of 2023 = wait for it... 100 sales So, two things seem to be true right now... There are significantly (!!!) fewer detached, resale homes selling right now compared to how many we saw during the same timeframe over the past three years. But, yet, the number of detached, resale homes selling right now is quite normal per the historical trends before Covid started messing with the housing market. Prospective home buyers in 2023 should thus realize that... [1] There will likely be a historically normal number of homes that you could buy this year... if we ignore the three most recent years. [2] There will be far fewer options of homes to buy this year compared to last year and the year before. [3] There may very well be more competition from other buyers for that smaller number of homes that will be available for purchase. As you can see through all of this -- the decline in home sales is very much due to a restrained supply (only so many sellers willing to sell) rather than a restrained demand (only so many buyers wanting to buy). | |
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Fewer Home Sellers, Thus Fewer Home Buyers, But Ever Higher Sales Prices In Early 2023 |
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 Happy Tuesday morning, friends! Indeed, February flew by quickly -- such a short month ;-) -- and now we're headed into what is typically a very busy spring in our local real estate market. Read on for an overview of everything happening right now in our local market... but first... a local highlight and an opportunity for you to be a winner! :-)  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 A Bowl of Good, a Steel Wheels concert, and Grilled Cheese Mania. This month... I'm giving away a $50 gift card to another of my favorite local restaurants, Taste of India. My go to order is the Chicken Tikka Masala, but you will find an extensive menu of unique and flavorful dishes at Taste of India, located on University Blvd. Click here to enter for a chance to win the $50 gift card! And now, let's move on along to the most recent data on our local real estate market...  As per my headline, there are definitely fewer buyers buying homes right now, but I am fairly confident that it is a result of fewer sellers selling homes right now - as inventory levels are not rising. As shown above... [1] There were 28% fewer home sales this February (71) compared to last February (98) in Harrisonburg and Rockingham County. [2] Looking at the past three months (Dec, Jan, Feb) there was an even larger drop off in home sales... with a 34% decline from last year (346 home sales) to this year (230 home sales). [3] If we look back at an entire year of sales we will only find an 11% decline in home sales (from 1,687 sales to 1,509 sales) indicating that the majority of the slow down is in the more recent months. [4] Despite these decreases in the number of homes that are selling... home prices keep rising! The median sales price during the past three months (when the number of sales was 34% lower than last year) was $309,205... which is 8% higher than the median sales price one year ago of $285,750. [5] Looking back at the entire year again, the median sales price over the past 12 months was $304,485 which is 11% higher than in the 12 months before that when it was $274,000. [6] The number of days it takes for a home to go under contract is -- maybe, possibly -- on the rise. This (most recent) December through February homes went under contract with a median "days on market" of nine days... which is (50%) higher than the median of six days a year ago during those same three months. So, fewer homes are selling, slightly slower, but at ever higher prices!?! Now, let's look at the number of home sales January and February compared to past norms for these months...  The red line above is the current year -- 2023 -- and you can see that the number of home sales in January and February is quite a bit lower than... [1] The number of home sales last January and February -- shown in blue. [2] The average number of home sales in each month over the past four years -- shown in grey. So, there have been fewer home sales this January and February than in other recent years. Thus, what comes next? I expect we will continue to see lower number of home sales per month as we move through March, April and May 2023 as compared to last year and as compared to the average of the past four years. Let's put the declining number of home sales in a bit of a historical context...  The annual pace of home sales peaked at 1,374 home sales back in March 2020 after declines in monthly home sales in early 2020 due to the start of the COVID-19 pandemic. The annual pace of home sales slowed for a few months... but bottomed out at 1,302 home sales per year just three months later. Then, the annual pace of home sales started climbing, and climbing, and climbing. Two years ago, homes were selling at an annual pace of 1,520 home sales per year in Harrisonburg and Rockingham County. Then, annual home sales accelerated all the way up to 1,727 home sales per year in in June 2022 -- before they started declining again. Now, as we close out February 2023, the annual pace of home sales (1,509) has returned to the same approximate place that we were in two years ago. I expect that this annual pace of home sales will continue to decline over the next six months. But, yes, sales prices keep on rising, as shown with a green line above. The annualized median sales price seems intent on continuing to rise, month after month. It has now risen from $222,150 to $304,485 in just three years! But, perhaps the increase in the median sales price is... slowing?  If you stare intently at the green line above, you'll see the slope changing a bit, which perhaps is an indicator that the rate of price increases is slowing. Maybe. 2020 increase in median sales price = 9.8% 2021 increase in median sales price = 10.2% 2022 increase in median sales price = 11.1% 2023 increase in median sales price = 6% Don't read this too quickly... home prices are not declining... but the pace at which home prices are increasing... might be slowing. Or, then again, maybe not. We are only working with two months of data for 2023. Stay tuned over the next few months to see how the 2023 median sales price adjusts as we move further through the year. Now, to predict where home sales might go next, let's look at contract activity...  After a decent month of contract activity in January (116 this year compared to 110 last year) we saw a marked decline in contract activity in February. The 93 contracts that were signed in February 2023 was significantly lower than the 125 contracts signed last February, and also well below the four year average of 107 contracts in a typical February. Thus, it is unlikely that we'll start to see an increase in home sales in March, given the decline in contracts signed in February. Furthermore, the number of pending sales (homes under contract) also declined in February...  There are currently 239 homes under contract (pending) in Harrisonburg and Rockingham County which is quite a bit lower than a year ago (blue line) when there were 318 homes under contract... and is also lower than the four year average of 241 homes typically being under contract at this time of year. All of these different metrics are all showing the ways in which our market is cooling off -- as it pertains to the *number* of homes that are selling -- not as it relates to the value of homes in our area. Circling back to my headline this month... I think the cause of fewer home sales is mainly due to fewer sellers selling, which is resulting in fewer buyers buying, because...  Inventory levels are lower than ever. There are currently 119 homes for sale (not under contract) in Harrisonburg and Rockingham County which is even lower than the inventory levels a year ago at this time of the year (131 for sale) and significantly lower than the four year average of 173 homes for sale at this time of year. If fewer buyers were buying... and just as many sellers wanted to sell... we would start to see inventory levels increasing. Fewer home sales, combined with ever lower home sales, is a very good indicator that the decline in the number of home sales is a result of fewer sellers being willing to sell -- more so than a result of fewer buyers wanting to buy. All that said, there is one trend in our local market that runs at least a bit counter to all of the other trends...  The median "days on market" figure has started to trend upwards over the past few months. For over a year, the median number of days it took for a home to go under contract was only five days. That has now drifted slightly upward to seven days. This means something... but maybe not much. Homes are going under contract *slightly* more slowly now than they were over the past few years. It is now taking them (as per the median calculation) about seven days to go under contract, instead of only five days. I'll continue to monitor this over the coming months to see if this trend continues when we get into the thick of the spring market. And one last graph... that looks like it had one too many cups of coffee this morning with all of its jittering all over the place...  Mortgage interest rates have been all over the place over the past year. A year ago the average 30 year mortgage interest rate was 4%, and now it's 6.5%. But during the past year we have seen multiple months of increases and some decreases. It's hard to say what will happen next with mortgage interest rates. Perhaps the only reasonable prediction is that rates will go up and go down in the next six months. ;-) So... if you're looking to buy or sell a house in Harrisonburg or Rockingham County this spring, what should you conclude based on all of the data above? If you will be selling... [1] The market is still very favorable for home sellers. [2] Home prices have never been higher. [3] Half (or more) of homes that well are still going under contract in a week or less. [4] Diligent preparations, proper pricing and thorough marketing will likely still result in a speedy and favorable home sale for most sellers of most homes in most price ranges and locations. If you will be buying... [1] The market is still very competitive in most price ranges and for most property types. [2] It is still important to be pre-approved and to go see homes within the first day or two that they are on the market. [3] There will likely be fewer options for buying this year than last as fewer home sellers are seeming willing to sell. There's plenty more that we can discuss about your particular scenario if you are thinking of selling or buying, so feel free to reach out (call or text me at 540-578-0102 or email me here) if you'd like to chat or find a time to meet. If you're not quite ready to sell or buy yet, but have questions about the market or the process, I'd also be delighted to hear from you. Touch base anytime. That's all for today, folks. I hope that March treats you well and that you enjoy the suspense of not knowing whether we'll get that surprise March snowfall that we sometimes see in the Valley. ;-) Regardless of whether we get some snow or not, I hope you enjoy the changing of the seasons as we move through March. It is certainly a beautiful time in the Shenandoah Valley! P.S. If you want even more charts and graphs than I have included above, you'll find them here. | |
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First Look At February 2023 Home Sales |
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 Perhaps unsurprisingly, February 2023 home sales don't quite match up to February 2021 or 2022. Of course, during 2021 and 2022 we were experiencing... [1] Surging buyer interest due to super low interest rates. [2] Many, many buyers trying to upgrade their living arrangements due to Covid induced life changes with working from home, etc. Interest rates are higher now, and there is a bit less urgency to upgrade ones living arrangements if you haven't already done so as we seem to be settling back into life after Covid. And what do you know... home sales in 2023 aren't quite as crazy high as they were in 2021 and 2022. I should also note that... [1] Home sales in February 2023 were (a bit) higher than in 2019 and 2020. [2] The decline in home sales is not (thus far) leading to an increase in housing inventory levels. Fewer buyers are buying... but fewer sellers are selling as well... so inventory levels are remaining low. I'll publish a full accounting of February housing market updates soon. | |
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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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Should Home Sellers Expect Offers With Home Sale Contingencies? |
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 You're getting ready to list your home for sale. You aren't desperate to sell, and you don't need a lightning fast sale... but you want things to move along at a steady pace. Should you expect to receive offers with a home sale contingency? It's not thrilling to think about a home sale contingency as a home seller... you'd just be trading in needing to sell your home... for needing someone else to sell their home. Is it reasonable to hope to or plan to only consider offers without a home sale contingency? Good news, home sellers (and bad news contingent home buyers) as current local housing market conditions still favor home sellers. As such, most home sellers are not finding it necessary to consider offers with home sale contingencies. Typically, if a home seller were to accept a contract with a home sale contingency, they would do by also adding a "kickout clause" that would allow them to continue to market their property to other buyers and to kick out the primary (home sale contingent) buyer if a new (not home sale contingent) buyer makes an offer. As such, one way to evaluate whether home sellers are readily accepting contingent contracts is to evaluate how many listings fall into each of the following two categories in the HRAR MLS. Pending - this means the property is under contract, in almost all cases without a home sale contingency, and certainly, without a kickout clause as per the status below. Active with Kickout - this typically means the property is under contract, but has a kickout clause, likely because the buyer still needs to sell their home in order to buy the listing. Here's how things currently shake out as of 2/19/2023... Pending = 231 properties Active with Kickout = 2 properties So, indeed, most home sellers do not seem to be finding it necessary to accept an offer with a home sale contingency. | |
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Home Sales Still Slowing, Home Prices Still Rising, In Harrisonburg, Rockingham County |
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 Happy Friday morning, friends! We're about halfway through February, so it's time to take a moment to look back and see what we can learn about our local real estate market based on January's data. Thanks for joining me as I break things down so that we can all better understand the data and trends.  I hope you have had a fun start to your year. Some fun on our end included a quick extended weekend trip to the beach for Shaena, Luke, Emily and I a few weeks ago. I was reminded anew of the value of disconnecting (at least partially) from work for a bit, and spending time with loved ones. Whether it is the beach, the mountains, a long walk on an unusually warm February day, or relaxing on your back porch, I hope you find some time to disconnect from the busyness of life and spend time with those who you love in the coming days or weeks.  Before I get into the market data, I also want to encourage you to check out my featured listing of the month, a newly renovated in downtown Harrisonburg pictured above and located at 142 Broad Street. Find out all about it at 142BroadStreet.com. Finally, a fun giveaway, just for you...  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 a Steel Wheels concert, Grilled Cheese Mania, and Walkabout Outfitter. This month... I'm giving away a $50 gift card to one of my favorite local restaurants, A Bowl of Good. If you haven't checked out A Bowl of Good yourself, make plans to do so - they have a delicious menu of comfort foods and many items with an international flair. Click here to enter for a chance to win the $50 gift card! And now, let's move on along to the most recent data on our local real estate market...  Looking first at the overall home sales data above, I'm noting a few things of interest... [1] Home sales are still slowing. We saw a 28% decline in home sales this January, with only 75 home sales as compared to 104 last January. When we stretch the window out a bit further to three months (November through January) we see an even larger, 35% decline in the number of homes selling in Harrisonburg and Rockingham County. [2] When we look at a full year of data (February through January) we see a smaller, 8%, decline in the number of homes selling in our market, though this may become a larger decline as we continue through the year. [3] Despite fewer homes selling, home prices keep on rising! The median sales price has risen 11% over the past year, and even if you narrow the focus down to the past three months (when home sales were slower) the median sales price was 10% higher than during the same three months one year prior. So, home sales are definitely slowing, but home prices are definitely still rising. Now let's start to slide into some graphs to further understand these most recent trends...  The 75 home sales seen in January 2023 (the red "75" above) marked a significant decline from last year's 104 January home sales. If we look back a bit further, and average out the number of January home sales between 2019 and 2022 we find an average of 94 home sales in January... and we also fell short of that bar in January 2023. Where do we go from here? Interestingly, we usually see a decline in home sales between January and February... so will we see fewer than 75 home sales in February 2023? Or will we see a reversal of that trend and see more than 75 home sales this month? Stay tuned! Here's a visual reminder of how much things have changed over the past two years...  A little less than two years ago, the median sales price in Harrisonburg and Rockingham County was only $250,000. Now, less than two years later, it has just surpassed $300,000! But yet, despite the steady increases in the price of homes in our area, we have seen significant ups and downs relative to how many homes are selling. As per the blue line above, we flew past 1,500 home sales a year about two years ago -- saw that annual pace of home sales climb all the way up to 1,727 home sales per year -- before declining even more rapidly to the current annual pace of 1,535 home sales per year. What does the rest of 2023 have in store for us? I'm predicting that we'll see continued (slower) increases in the median sales price -- and continued (slower) decreases in the number of homes selling in Harrisonburg and Rockingham County. One interesting dynamic to watch in 2023 seems to be the mix between new home sales and existing home sales...  For each of the past four years we have seen an increase in the share of new home sales in Harrisonburg and Rockingham County. Back in 2018, only 11% of the homes that sold were new homes -- but last year (2022) that rose all the way up to 26% of home sales being new homes. With only one month of data thus far it is probably too early to draw any significant conclusions yet about 2023, but in January 33% of the homes that sold were new homes. To get some glimpse of what the next few months might look like for how many homes are selling, we can take a peek at contract activity...  And... surprise! :-) Despite lower than expected home sales activity in January... we saw higher than expected contract activity! Over the past four years (2019-2022) we have seen an average of 106 contracts per month signed in January. Last January (2022) we saw 110 contracts signed. This January that monthly contract figure rose to 116, making it a busier January (for contract signing) than we might have otherwise expected. It's possible that declines in mortgage interest rates (referenced again later on) helped spur on some of that January contract activity. Another interesting trend to watch is the number of pending sales at any given time...  A "pending sale" is a house that is under contract, waiting to get to closing to become a home sale. One year ago there were 271 pending sales in Harrisonburg and Rockingham County. Today there are only 234 pending sales -- which is lower than where we were last year -- but is higher than the average January pending sales figure over the past four years. So, to roughly extrapolate from the past two data sets, home sales in 2023 seem likely to be lower than in 2022, but higher than the average of the past few years. But to be clear, in order for homes to sell, they need to be for sale...  Some folks might observe a decline in sales activity and assume that inventory levels are starting to climb -- with sellers wanting to sell but buyers not wanting to buy. That is not what we are currently observing in the Harrisonburg and Rockingham County real estate market. Fewer sales may very well be equally caused by fewer buyers buying AND fewer sellers selling. There are currently 109 homes on the market for sale (not under contract) which is slightly less than a year ago (115) and much (!) much less than the average over the past four years of 172 homes being listed for sale at this time of year. The big questions for just about every buyer is whether we will start to see meaningful increases in inventory levels as we move into the spring months. Buyers should be encouraged to know that we typically see lots of new listings hitting the market in March, April and May -- but if there are still lots of buyers waiting in the wings for those new listings we may not see inventory levels rise all that much. Lots of new listings plus lots of new contracts will still equate to rather low inventory levels. I mentioned earlier that a slightly higher than expected number of contracts in January might have been related to mortgage interest rates. Take a look at why I'm guessing that might have been the case...  It has been a wild and crazy year with mortgage interest rates. Just a year ago, interest rates were below 4%, then climbed all the way up above 7% and have now decline back towards 6%. Those highest months of interest rates in September, October, November and December almost certainly contributed to the much slower (-35%) months of home sales in November, December and January. The decline over the past three months may have contributed to the increase in contract activity in January 2023. Where will mortgage interest rates be headed in 2023? Probably not above 7%. Probably not below 5%. Probably not anywhere for more than a few weeks in a row. Does that help? Probably not. ;-) Given all of the market data above, when I look ahead to the remainder of 2023, I believe the following will likely be true: [1] We will see fewer home sales than in 2022. [2] Home prices will likely be higher than in 2022. [3] Inventory levels will likely remain low most or all year. [4] The decline in the number of existing home sales will likely be larger than the decline in the total number of existing and new home sales. [5] Mortgage interest rates will likely close out the year lower than where they started the year. As you look ahead to 2023... do you hope to buy a home... or do you plan to sell your current home? If you are thinking about heading down either path, let's find a time to connect soon to talk about your hopes and plans and dreams and how they will be best accomplished amidst the market trends outlined above. Feel free to reach out to start that conversation by emailing me or texting or calling me at 540-578-0102. If you don't plan to buy or sell a home this year, but want to learn more about our local housing market... [1] You can review even more charts and graphs with further analysis of our local housing market here. [2] I publish a variety of articles about the market, new housing developments, and more over on my blog several times a week here. And that's a wrap, folks! I hope you have a wonderful Friday and weekend ahead. Please be in touch if I can be of any help to you -- with real estate or otherwise! | |
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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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Are Home Prices Cooling? Move Beyond The Headlines To Be Sure! |
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 Many news outlets (typically national news outlets, not local news outlets) are running stories with headlines referencing cooling home prices. Are home prices cooling? Here's a funny one, once you read it... US home prices continue to cool off, reflecting weak housing market Reading that headline, you'd think home prices are dropping, right? Well, here's what the start of the article actually goes on to say... "Single-family home price appreciation eased to a 6.9% pace in December, the lowest rate recorded since the late summer of 2020." Oh... so it's not that home prices dropped... it's that they *only* increased by 6.9%... and that's a smaller increase in home prices than previous increases. ;-) So... before you read a few headlines about cooling home prices and conclude that home prices are falling... click through to read the story. In this area, home prices continue to rise. In many other markets, the same is true, though headlines might not always make that clear. | |
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An Early Look At January 2023 Home Buying Activity |
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 Contract activity slowed considerably in the fourth quarter of 2022 compared to the fourth quarter of 2021... Oct- Dec 2021 = 383 contracts signed Oct - Dec 2022 = 230 contracts signed That's a 40% decline in contract activity! Those higher mortgage interest rates seemed to finally make an impact in the fourth quarter last year. As a result, one of the indicators I am watching closely this year is contract activity in 2023. The graph above shows the number of contracts signed in January for each of the past five years including 2023. Here's what we find...
I expected we would see fewer contracts signed than in the past two to three years when super low interest rates and Covid's impact on the real estate market were driving record amounts of home buying activity. It's encouraging to see that where were more contracts signed in in January 2023 than in January 2019. It will be interesting to see how things continue to track as we move through the rest of the first quarter of 2023. | |
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We Will Likely Have More Clarity On The Pulse Of The Local Housing Market By April |
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 Home sales have been slower in November, December and January. This is somewhat normal from a historical perspective - winter months are normally slower. They haven't been slower during the COVID housing boom, but this winter is certainly slower than the past two winters. Mortgage interest rates have been shifting down a bit in recent weeks but they are still quite a bit higher than they have been over most of the past five years. These higher interest rates (combined with higher home prices) are pricing some would be home buyers out of the market. So, where is our local housing market headed in 2023? Some would say that the number of home sales will decline, prices will level out or decline somewhat, homes will not sell as quickly, and inventory levels will climb. Some say that there will only be a slight decline in the number of home sales, that prices will keep climbing, that homes will still sell very quickly and that inventory levels will not meaningfully climb. Which reality will we see play out in 2023? Both are likely possible... but we are likely to have any indications in one direction or the other until April as we head into the spring real estate market. | |
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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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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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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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Scott Rogers
Funkhouser Real
Estate Group
540-578-0102
scott@funkhousergroup.com
Licensed in the
Commonwealth of Virginia
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