Selling
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Home Buying Activity Will Slow But Not Stop Over The Winter |
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 Generally speaking, folks don't use their outdoor hose spigots in the winter. I suppose you might use it from time to time, but it's just not as fun to wash your car in the driveway on most December days. Oh, and if you did use your hose spigot, and left the hose attached, you'd potentially have serious problems when the water in the hose freezes, backs up into the spigot, maybe into the pipe, and something splits, cracks or bursts. As such... Once we get into Winter, most folks are turning off their hose spigots for the last time until Spring. But... Not so with the local housing marketing. Looking back over the past five years... Between March and August (Spring and Summer, as we'll call it) an average of 140 buyers signed contracts to buy houses each month. A pretty rapid pace of buyer activity. So, this winter, what should we expect? Will that supply of buyers be turned off like a hose spigot, and will the buyers slowly drip out at a rate of (for example) 10 - 15 buyers per month? Nope! Looking at last Winter (December, January, February) there were an average of... 95 buyers signing contracts per month! Yes, you read that correctly, we only saw a 32% decline in buyer activity during the Winter months -- as compared to the Spring and Summer months. So, unlike your hose spigot, which will likely be barely used during the Winter -- the local housing market doesn't slow down, or cool down, or shut down, nearly as much. | |
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Demand Is Likely To Keep On Rising For Contractors And Home Renovators |
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 We seem likely to see a continued increase in demand for contractors and home renovators in Harrisonburg and Rockingham County in 2024. If you're thinking about getting into the home renovation and repair business -- this might be your time! There are two main factors that seem to be creating this increased demand for home renovation professionals... 1. Higher mortgage interest rates are causing plenty of homeowners to decide to stay and upgrade rather than sell and buy. If you bought a home a few years ago and have a 3.5% mortgage interest rate, you aren't likely to sell your home and buy a new one with a 7% mortgage interest rate just to get that one extra room, or nicer interior finishes, or larger back deck. You're much more likely to stay in your very nice home -- with a very, very nice mortgage interest rate -- and hire a home renovation professional to help you add a deck, finish a room in the basement, update your interior paint or flooring, and on and on. 2. The several year period of having multiple offers on every new listing within days (or hours) seems to have drawn to a close. During those years, home sellers often didn't need to make many updates to the condition of their home before selling it. Now, with the possibility that your home won't go under contract within five minutes, many sellers are evaluating whether to have some repairs or upgrades completed prior to listing their homes for sale. So... 1. If you're in the home renovation business - you'll likely be busy over the next year or two - or more. 2. If you're a homeowner who is staying - or selling - you might have a slightly longer wait for someone to help you with your home updates. | |
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Sometimes Upgrade Your Home (Selling And Buying) Results In An Even Larger Upgrade In Your Monthly Payment |
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 "Our house isn't working well for us anymore. We are thinking of selling it and buying a new house." Sounds good, but let's look at a few basic numbers first... You bought for $190K, put $20K down and have a mortgage payment of $955 per month thanks to a refinance a few years back at 3.5%. Your house is now worth $275K and you are thinking of selling it to move up to a house priced at $375K. When you sell your $275K house, you'll end up with about $90K in your pocket after closing costs and paying off the $170K balance on your mortgage. You'll spend about $10K of that $90K on closing costs for your purchase, so you'll put down $80K as a downpayment. You'll be borrowing $295K ($375K - $80K) and you'll be financing it at a current mortgage rate of about 7.25%. Your new monthly payment will be $2,392. Wait... what!? You're moving from a $275K house to a $375K house and your monthly mortgage payment is going to increase from $955/month to $2,392/month. Yikes! Why is this happening? [1] Your current mortgage payment is based on your initial purchase price of $190K... which is a good bit lower than your home's current value of $275K. [2] Your current mortgage payment is based on on a mortgage interest rate of 3.5%... which is a good bit lower than the current rate of 7.25%. [3] The costs of selling and cost of buying reduce the amount of equity that you can roll from one home into the next. So... before you dive right into upgrading your $275K house (with a $955/month payment) to a $375K house... let's run your version of the numbers above to help you determine your new potential monthly payment. | |
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Despite Fewer And Fewer Home Sales, There Are Plenty Of Reasons Why Buyers Will Still Buy And Sellers Will Still Sell |
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 January 1, 2022 through November 20, 2022 = 1,445 home sales January 1, 2023 through November 20, 2023 = 1,082 home sales As of this week we have seen 25% fewer home sales this year than last! With fewer and fewer homes selling, sometimes it might feel like there aren't that many homes selling in our area. But yet, there are still plenty of reasons why buyers are still buying and sellers are still selling. Sellers are selling because:
Buyers are still buying because:
We are likely to close out 2023 with 25% fewer home sales than in 2022 -- and at this point it seems likely that we'll see even fewer in 2024 -- but there will always be some buyers buying and some sellers selling, even if not in as great of numbers as we have seen over the past few years. | |
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Home Buyers Signed Contracts On These 15 Homes Over The Past 7 Days |
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 Over the past week (15) home buyers in Harrisonburg and Rockingham County signed contracts to purchase (15) homes. A few observations...
What do you notice about these (15) homes that went under contract in the past week? What will go under contract over the next seven days? | |
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Collecting, Organizing And Studying Showing Feedback Is Important, Again |
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 For most of 2020, 2021 and 2022, nearly every listing went under contract quickly - often with multiple offers. During that time, feedback on showings was collected, but it was mainly a question of... "Will your clients be making an offer? We have three so far." Now, with 65% of active listings of existing homes having been on the market for more than 30 days, it is important (again) to collect, organize and study showing feedback. And as we start collecting that showing feedback, sometimes we start wondering whether all showing feedback is really actually about price... My house is needs many cosmetic updates, but all of the potential buyers (who did not make an offer on my house) didn't provide feedback about price, they provided feedback about the need for cosmetic updates. My house is next to the railroad tracks, but all of the potential buyers (who did not make an offer on my house) didn't provided feedback about price, they provided feedback about the railroad tracks. My house has a steep driveway, but all of the potential buyers (who did not make an offer on my house) didn't provided feedback about price, they provided feedback about the steep driveway. Guess what --- unless you're going to flatten the driveway, move the railroad tracks (or the house), or make all of the cosmetic updates -- it really probably is an issue of price! If you're getting consistent feedback about your house that is unrelated to price, in almost all cases, you need to adjust the price to accommodate for that specific issue. If the price is lower then buyers might actually buy despite the specific issue that they were complaining about. | |
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If Your Home Will Need Improvements Costing X After Closing, Consider Adjusting Your List Price By 1.5X |
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 Let's say your three neighbors just sold their homes for $400K... ...but when comparing your home to the homes sold by your neighbors... Your house needs $10K of painting - or your house needs $16K of new flooring - or your house needs a $22K new roof. When pricing your home, you shouldn't just subtract the price of that improvement from your neighbor's list price to arrive at... A list price of $390K - or $384K - or $378K. You likely need to subtract 1.5 times the cost of the improvement when pricing your home. Would be home buyers will likely round up somewhat in their mind when estimating the cost of making the improvement -- AND -- it will be much more of a pain for them to make the improvement after closing as compared to you have already completed it before selling your home. As such, it will likely be more realistic to consider a list price of $385K - or $376K - or $367K. | |
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If Your Home Has Been For Sale For More Than 30 Days, You Are Not Alone |
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 The numbers above might surprise you given that the median days on the market in 2023 is a mere six days. But that median of six days on the market is related to homes that have actually sold. We get a slightly different story when looking at currently available listings When considering active listings of resale homes (not new homes) we find that... 35% of active listings have been on the market for less than 30 days 65% of active listings have been on the market for more than 30 days So, if you are selling a home and it has not gone under contract within six days, or within 30 days, you are not alone. 65% of sellers with homes on the market for sale have had their homes on the market for more than 30 days. | |
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It Does Not Seem That Home Prices Are Declining, Overall, But Some Sellers May Elect To Sell At Lower Than Expected Prices |
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 The median sales price in Harrisonburg and Rockingham County has risen 10% over the past year. That's an increase from $292,000 to $322,750. As such, it really does not seem that home prices are declining, overall. But... some (but likely not many or most) sellers may elect to sell at lower than expected prices. Here's why... Let's say you're selling a home priced at $322,750 that you purchased five years ago. That $322,750 is the median sales price... so let's just walk it backwards to imagine what your home might have been worth 1, 2, 3, 4 and 5 years ago. Today = $322,750 1 Year Ago = $291,950 2 Years Ago = $265,700 3 Years Ago = $238,400 4 Years Ago = $215,250 5 Years Ago = $212,000 So... you bought your home for $212,000. Last year you estimated it was worth $291,950... a $79,950 gain in four years. Today you estimate it to be worth $322,750... a $110,750 gain in five years. So, if you are selling your house today, and you price it at $322,750... and it doesn't go under contract within the first few weeks... or not within the first month or two... will you keep it priced at $322,750 indefinitely? Likely not. You -- and some other sellers -- would likely be happy to sell for somewhere between $291,950 and $322,750. Selling (this fictional house) for $291,950 is certainly quite a bit below where we believe the value to be today, but it is also a $79,950 gain in five years. All this is to say, that if you are serious about selling, and you have your house on the market, and it hasn't gone under contract... we shouldn't get too stuck on what your house should be worth today, and what it is worth today... we should evaluate the price at which it makes sense for you to sell... and how we might price it to have it go ahead and go under contract... even if that is at a lower price than we might otherwise expect. Put more simply... home sellers from three or more years ago potentially have a LOT of equity to play with when pricing their home to sell... and can likely tweak the pricing to motivate a buyer to go ahead and commit to buying. | |
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Real Estate Seemed Like A Liquid Asset For A While There, But That Was Not Normal |
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 A liquid asset is an asset that can be easily converted into cash in a short amount of time. Is real estate a liquid asset? Nope. Did it feel like it was during 2020, 2021 and 2022? Yep. For a few years there, you could list your home for sale, it would almost certainly go under contract VERY quickly, with very favorable terms, with few contingencies, and would almost certainly get to closing. Real estate felt like a liquid asset. You could sell most any house and could "convert it into cash" within 30 to 45 days without much difficulty. But... we're not quite there any longer. Many houses -- but not all -- will still go under contract very quickly. We are starting to see many more inspection contingencies and/or appraisal contingencies. You may very well be able to convert your real estate (house) into cash within 30 to 45 days -- but you can't be as confident that it will definitely happen in very short order with very few speed bumps. And... that's normal. Real estate is not a liquid asset. It just felt like it was for a few years. | |
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A Return To The Question Of Whether To Take Your House Off The Market For The Holidays |
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 For a few years now, just about every new listing was going under contract in a matter of days, regardless of the time of year it was listed for sale. Big house, small house, high price, low price, good condition, not so good condition, big yard, small yard, flat driveway, steep driveway, optimistically priced, realistically priced, listed in April, listed in December -- everything was going under contract quickly. But now, some homes are coming on the market and are NOT going under contract right away. It might have even been 30, 60 or 90 days that some have been on the market without a buyer making an offer. Some such sellers are now returning to the question of whether to take their property off the market for the holidays. After all, if we aren't having many showings, maybe it makes sense to take the house off the market for a few months and start afresh in early Spring? It will be interesting to see if inventory levels drop as we get past Thanksgiving and/or as we get past Christmas. In years gone by we would often see these houses that were coming off the market for the holidays either vanishing in mid/late November (just before Thanksgiving) or in mid December (just before Christmas). | |
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Buyer Demand Still Exceeds Housing Supply, But Not For All Properties |
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 In 2020, 2021 and 2022, almost every new listing had LOTS of interest and likely had multiple offers. There was some variation by price range and property type, but they were all quite favorable scenarios for sellers and quite frustrating scenarios for would be buyers. For example, with three fictional properties at different price points or in different locations or of different property types, etc., here's how the first week might look... First Property = 30 showings, 10 offers Second Property = 20 showings, 5 offers Third Property = 10 showings, 2 offers Again, great fun for sellers, no fun for buyers... mostly brought on by super low mortgage interest rates and Covid-induced changes in how people thought about the space they needed or wanted in their homes. Today, things are a bit different... mortgage interest rates are much higher (twice as high as their recent low point) and a global pandemic is no longer stretching our use of our homes in quite the same ways. This is resulting in a slightly different market response to those same fictional properties in week one of being on the market... First Property = 10 showings, 4 offers Second Property = 3 showings, 1 offer Third Property = 1 showing, no offers As represented above, we're seeing several dynamics here... [1] Some properties are still seeing lots of buyer interest and are having multiple offers the first week they are on the market. [2] Some properties are seeing a few showings in the first week, one of which results in an offer from a buyer who is happy to go ahead and move forward with purchasing the home. [3] Some properties are having very few showings the first week, and no offers. Seller #1 is still delighted. Seller #2 is quite satisfied and decides they are OK not having had multiple offers because they just needed one buyer. Seller #3 might think their house will never sell, might wish they sold their house a year ago, might be discouraged, might be frustrated, might be surprised. My general advice for Seller #3 is to remember the market before 2020... it often took a few weeks or a few months for many properties to sell. That's OK. Be patient. Collect feedback from buyers who are coming to look at your home. Make adjustments to your home's condition, marketing and/or price to best appeal to prospective buyers. But again, be patient. We're not in 2020-2022 any longer. | |
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Maybe We Will See Seasonal Declines In Housing Inventory Levels Again This Year? |
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 All the way through 2019, we would see a seasonal decline in housing inventory levels each winter. Inventory levels would typically be the lowest between November and February as some sellers took their homes off the market for a few months -- and as some sellers decided to wait until spring to sell their homes. But then between 2020 and 2022, that all changed. The real estate market was on FIRE as Covid-induced work/life/home changes and super low mortgage interest rates pushed more buyers than ever into the housing market. Inventory levels that had been dropping for several years (2016 - 2019) dropped even further. All of a sudden, inventory levels were ALWAYS low. Spring and summer inventory levels - low. Fall and winter inventory levels - low. We stopped seeing seasonal shifts in housing inventory levels. But over the past few months inventory levels have been drifting back upwards a bit. So, as we (eventually?) start to see cooler temperatures, will we start to see seasonal declines in housing inventory levels again? | |
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Many (Most) Home Sellers Are Adjusting Their List Price If Their Home Is Not Under Contract Within 30 Days |
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 Here's how I get to the conclusion above... Today, there are... 200 homes for sale in Harrisonburg and Rockingham County per the HRAR MLS. Of those 200 active listings... 116 homes have been on the market for 30+ days. Of those 116 listings that have been on the market for a month or more... 65 homes have seen a price reduction in the past 30 days. So, yes, it would seem that many (most -- 56%) home sellers are adjusting their list price if their home is not under contract within 30 days. It makes sense... If a buyer hasn't made an offer, a price reduction may... 1. Cause existing buyers to reconsider your home. 2. Cause a new buyer consider your home for the first time. 3. Cause a buyer who has viewed your home to make an offer. Should all home sellers reduce their list price after 30 days on the market? Not necessarily. Should it be a discussion about the merits of making such a price change? Absolutely! | |
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How Many Homes Are Selling For Less Than The List Price? |
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 If we look at homes that have sold in the past six months... [1] 68% have sold for the list price or higher. [2] 32% have sold for less than the list price. [3] 40% have sold for over list price. Maybe several of these stats surprise you. Maybe none of them do. I think the most surprising to me is that 32% of homes sold for less than the list price. If often feels like buyers are barely ever able to negotiate on price -- and sellers are barely ever willing to negotiate on price. Interestingly, let's look back a year and a half (ish) to 2021 when mortgage interest rates were in the 3.something range...  The numbers here are certainly different, though not quite as different as you might imagine. For all the homes that sold in 2021... [1] 73% sold for the list price or higher. [2] 27% sold for less than the list price. [3] 43% sold for over list price. So... is every home selling over asking price? Nope. Back in the crazy times of 2021, was every home selling over asking price? Nope. | |
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If Your Home Has Not Sold We Should Look At What Buyers Are Actually Buying |
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 As an aside... the market is definitely shifting in some ways... as we are no longer seeing every house go under contract in hours or days with multiple offers. We're still not seeing prices adjust, overall, but some homes are sitting on the market longer than they would have over the past few years. That nuance aside... let's say your house is listed for sale, and it just hasn't sold after 30, 60 or 90 days. How should we think about that? What information would be helpful in understanding why your house has not sold? I believe context is key here... [1] How many buyers have contracted to buy homes that are similar to your house since your house has been on the market. If you are selling a 3 bedroom, 2 bathroom, 2000 SF home -- let's look at how many buyers have contracted to buy 3 - 4 bedroom, 2 - 3 bathroom, 1800 - 2500 SF homes in the same timeframe that you have been trying to sell your home. Have lots of buyers contracted to buy similar homes? Or just a few? How have the prices of those other homes compared to your list price? [2] How many other sellers of similar homes are trying to sell their homes right now? If you are selling a 3 bedroom, 2 bathroom, 2000 SF home -- let's look at how many other sellers are trying to sell a 3 - 4 bedroom, 2 - 3 bathroom, 1800 - 2500 SF home right now. Do you have lots of competition? Or not very much? How do the list prices of those competing homes compare to your list price? -- As the local housing market continues to shift over the coming months it will be important to understand the context in which you are selling your home and making sure you are pricing and marketing your home in a way that will give it the best chance to sell relative to what buyers are buying and what other sellers are trying to sell. | |
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Home Buyers Might Not Request Showings Of Your Home With Minutes. Gasp! |
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 Looking back, one of the humorous things about the (crazy) real estate market in 2020, 2021 and 2022 was how quickly buyers would jump on every new listing when it hit the market. When I would launch a new listing for sale via the MLS, Realtor.com, Zillow, local and national websites, Facebook, etc. -- I would invariably start getting showing requests within the first 15 minutes. It was surreal how quickly home buyers were responding to new listings, running out to go see them that very first day that they were listed for sale. After all... there would often be 20 - 30 showings within the first three days, and 5 to 15 offers within the first three days... so it's not surprising that the showing requests would roll in so quickly. But now, it's back to pre-Covid normals, at least in this regard. When a new listing is launched, I will often have a showing request or two within the first few hours or on that day -- but my phone doesn't immediately blow up with texts from buyer agents in that first 15 minutes any longer. Certainly, the speed at which showings are requested, and the number of showings that are requested varies by price range, location and more -- but the requests aren't starting off quite as quickly as they were during the Covid era. | |
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Price Changes, Even If Small, Can Remind Buyers That You Really Do Want To Sell Your Home |
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 Consider these two listings that a buyer might be considering in today's market... Home #1 A home priced at $435K that has been on the market for 75 days without a price change. Home #2 A home priced at $425K that has been on the market for 75 days and... [1] was initially listed for $439,000 [2] was reduced to $435,000 after being on the market for 30 days [3] was reduced to $429,000 after being on the market for 45 days [4] was reduced to $425,000 after being on the market for 60 days Certainly, buyers are going to see a $10K difference between the two homes ($435K vs. $425K) but they are also likely going to believe that the sellers of the second home are more motivated to sell. A seller who has priced their home at $435K and who hasn't budged at all is likely more motivated to sell for a particular price than they are motivated to make sure that their home sells. A seller who has made several price adjustments to their home over time is signaling to potential home buyers that they are definitely motivated to sell and want to be sure that their home will sell. | |
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Developing Patience When There Will Not Instantly Be A Buyer For Every Listed Home Any Longer |
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 One of the strangest things over the past few years was how nearly every listing had a buyer (or buyers) in very short order once it hit the market. Inexpensive home - of course, lots of interest. Expensive home - still, lots of interest. House with an odd layout - sure, still interest House with a steep driveway - no problem, we are interested House needing repairs - yep, the interest is there And on, and on, and on. Almost every listing would receive nearly immediate attention and typically would see multiple offers within the first week it was on the market. It certainly made it easy to assume your home would sell quickly once it went on the market. Nearly every home was. Now, however, some home sellers are discovering that there is not going to instantly be a buyer for every home that is listed for sale. Certainly, plenty of homes will still see immediate response from buyers, and an offer or offers within days of hitting the market -- but not all homes. Thus, some sellers will have to readjust to a slightly longer time on the market. Just because your home does not go under contract in the first week or two does not mean that we will never find a buyer who wants to buy your time. For the past few years I told every buyer they needed to be patient because they might miss out on quite a few homes before landing a contract on one. Now I am telling at least some sellers that they will need to be patient while we wait for the right buyer for their home to show up on the scene. | |
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Yes, We Seem To Be Back In A Time When Some Offers Might Be Under The Asking Price |
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 Many homes are still going under contract quickly, often with multiple offers. But not all homes. I know it's hard to believe after the past few years of craziness in our local real estate market -- but some homes are actually going under contract below the list price. Between 2020 and 2022: You want to pay less than list price!? Ha ha ha ha ha ha. You're so silly. Now: Let's see whether they have had many showings and if they have any offers. If a few days or a few weeks have passed and the house is still available, yes, we may very well be successful with making an offer under the list price. That's all on the buyer side. On the seller side... it's more important than ever to price your property appropriately for the market. | |
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Scott Rogers
Funkhouser Real
Estate Group
540-578-0102
scott@funkhousergroup.com
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