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Economy
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Standing Firm: The Harrisonburg and Rockingham County Real Estate Market Holds Steady In February 2010 |
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Click here or on the image below to view the full March 2010 Harrisonburg & Rockingham County Real Estate Market Report (PDF). Read on below for a few highlights.  Some high level February 2009 to February 2010 observations include:
 Don't delay -- get all of the exciting (and not as exciting) details and beautiful charts by downloading the full March 2010 Harrisonburg & Rockingham County Real Estate Market Report (PDF). If you find the information in this report to be helpful....
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2000-2009: Population Up, Home Sales Down |
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Over at hburgnews I noticed a link to a new study from the Weldon Cooper Center indicating that the Harrisonburg / Rockingham County MSA has grown roughly 13% between 2000 and 2009. [ read more at hburgnews ] Knowing that home sales have decreased during the same time period, I thought I'd see how the two data sets lined up. First, though, please note that:
 This graph shows something (somewhat) similar --- a higher percentage (1.43%) of our population bought a home in 2005 than the percentage in 2000 (0.77%) and 2009 (0.66%). As I ponder this data, I wonder what will be "normal" over the next 20 years as to what percentage of our population will buy a home in any given year. Is 0.77% the magic number (shown in 2000 and 2008)? If so, home sales were depressed in 2009 (how surprising). Or perhaps we should expect about 1% of our population to buy a home each year. The most pressing question in my mind is when we will start to see an increase again in home sales --- both as a raw number, and as a percentage of the population. I thought we'd see in 2008 (we did not). I thought we'd see it in 2009 (we did not). I think the third time might be the charm, and we'll see home sales (quantity, not sales prices) increase in 2010. What do you think? Also, another interesting way to look at the data above is as follows:
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Harrisonburg, Rockingham County Housing Market Stabilized By Low Unemployment Rates |
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In conversation today about our local housing market, I was asked how in the world Harrisonburg and Rockingham County home values have stayed relatively level over the past few years when many parts of the state and country are not. One key reason for the relative stability in our housing market is continued LOW UNEMPLOYMENT. Thanks to Jim over at RealCentralVA, for pointing out the Washington Post's interactive unemployment map. As unemployment has increased in other parts of Virginia, and the United States, there have been many ripple effects that directly impact those local housing markets:
 As seen above, all areas in Virginia and most in neighboring states experienced sub 7% unemployment rates in July 2007.  As shown above, quite a few areas in neighboring states, and a few in Virginia started to see unemployment creep up to the 7% - 10% range in July 2008.  OUCH! The vast majority of states surrounding Virginia were above 7% or above 10% or even above 13% in 2009. Most areas of Virginia outperformed these neighboring states --- and Haririsonburg and Rockingham County STILL experienced an unemployment rate below 7%. | |
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6,500 Reasons Why It's Great If You Have Owned And Lived In Your Home For Five Or More Years! |
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 Somehow, the $8,000 tax credit for first-time buyers is getting all of the attention, meaning that most people don't even know about the $6,500 tax credit available to you if you've lived in your home for five years. If you have owned your home for five or more years, you will (almost certainly) receive a $6,500 tax credit if you buy your next home by April 30th, 2010. To clarify -- you must have a contract on the house by April 30th and close by June 30th. Many people that I talk to who would be eligible for this $6,500 tax credit don't even know that it exists. If you're in this situation and planning to buy a new house in 2010, you really ought to consider making a move in the first four to six months of the year. Click here for more information (from the IRS) about both tax credits. Again, to try to really drive this point home: If you've owned your house (and lived in it) for more than five years, you are very likely eligible for a $6,500 tax credit if you buy a new home by the spring/summer. | |
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Selling For A Profit All Depends On When You Bought! |
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Thankfully, the value of homes in Harrisonburg and Rockingham County hasn't taken a nose dive like has happened in many other markets. As you can see below, modest (normal?) growth in values occurred between 2000 and 2003, unbelievable (and unsustainable) growth in values occurred between 2003 and 2006, and prices became stagnant between 2006 and 2009.  That being said, since we haven't seen consistent growth in home values since 2006, there are some homeowners who are unable to sell their house (after costs) for as much as they bought it. Conventional wisdom pre-2003 said that you should only buy a house if you knew you'd be living in it for 5 or more years. You see, with the principal balance of the mortgage declining SO SLOWLY at the start of a 30-year mortgage, it would take a full five years to have paid down the mortgage enough to cover the costs of selling. As you might imagine from the graph above (or from talking to your friends), some people bought in 2003, 2004 or 2005, and then sold a year later at a tidy profit. The market was going up so quickly that they could sell one year later with no financial detriment because of the high rate of appreciation. Let's take a look at how our market has performed over the past decade by imagining that someone has to sell three years after they buy.  As per the chart above, a homeowner buying 2000 or 2001 would have been experienced a good sized gain.  The gain is starting to be more and more unbelievable at this point. Buying in 2003 and selling in 2006 would have resulted in a whopping $53,000 gain, or roughly $18,000 per year.  While things are starting to slow down, we see here that someone could have bought as late as 2005 and been just fine, given that there was such a big jump in median home values between 2005 and 2006.  OOPS! Wait a minute! A $16,000 loss?? It's true --- if you bought in 2006 or anytime thereafter, and you want to sell your house, you'll need to prepare to do so at a loss, given the costs of selling. The big question: When will the median sales price start to stabilize? When the supply of homes for sale starts decreasing more rapidly than it has, I believe we'll start to see the median price inch upwards again --- though not at the pace it did between 2003 and 2006! | |
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Pondering The Future Of The Harrisonburg and Rockingham County Real Estate Market |
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 Over the last few days I have had quite a few discussions with developers, builders, buyers, sellers, and other Realtors regarding the exciting change of pace our local real estate market experienced in November 2009. To remind you of this astonishing news:
All of these are wonderful indicators, and we find yet another one at the top of this post, showing that while online property views (defined below) have been declining over the past few months, they are much higher than could be expected. In fact, there were more properties viewed online in November 2009 than in March 2009. Wow! We would typically expect that most buyers would be looking at properties online (and in person) at the start of the spring "buying season" -- but the graph above shows that there are still LOTS of buyers looking (at least online) at properties for sale. Online property views is the sum of all property views on the Coldwell Banker Funkhouser Realtors network of web sites, including our company web site, and all agent web sites. | |
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Are Smaller Homes Faring Better Than The Overall Market In Harrisonburg and Rockingham County? |
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My hypothesis was that smaller homes were performing better in Harrisonburg and Rockingham County than the market at large. After all, there is a significantly greater supply of homes for sale in the higher price ranges --- which would suggest that the real winners are the lower priced and smaller homes. Plus, the $7500 followed by $8000 tax credits were certain to bring lots of new buyers into this segment of the market.... The data, however, shows otherwise....  As shown above, the overall market experienced a 44% drop in home sales between 2005 and 2008. However....  As shown above, the market defined as homes with less than 1,500 square feet experienced a 47% drop in home sales during the same time period. Now, let's look at prices....  As shown above, median sales prices of all residential properties have decreased by 1.5% between 2006 and 2009. However....  As shown above, the market defined as homes with less than 1,500 square feet experienced a 4.5% drop in median sales price during the same time period. How could this be?? The best explanations for this (slightly) lower performing segment of the market (1,500 SF or less) that I can offer are....
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Sellers Must Really Be Dropping Their Prices, Right??? |
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Sort of....but maybe not effectively?? The chart below shows the number of price changes per year of homes that have sold for each of the past nine years. Some houses that sold may have had multiple price changes --- these figures show the total number of price changes, counting each change on each property.  There was a sharp increase (+29%) in price changes in 2006 (compared to 2005), which would be expected because it was the first year of a reduced number of home sales. However, there was also a sharp increase (+22%) in 2005 (compared to 2005) when the market was still peaking. Perhaps of even more interest is that the number of price reductions per year has slowly decreased over the past several years (-4% in 2007, -7% in 2008). This may be explained by the declining number of home sales, as the number of price changes shown above only accounts for price changes of listings that have sold. This year there have been approximately 600 home sales, and roughly 200 price changes of those homes that have sold . . . but nearly 700 price changes when we include the many houses that are still on the market. Stay tuned for more analysis of how price changes affect the sale of your house. | |
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Just In Time, The Shenandoah Valley Economy Recovers! |
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I discovered today that the Harrisonburg and Rockingham County economy is in recovery!  According to the data above, Harrisonburg is in "Recovery" --- though that includes a drop in employment, a drop in housing starts, and a drop in industrial production. Data apparently wasn't available for housing prices, so I'll fill in the blank: median sales prices have decreased by 4% over the past year in Harrisonburg and Rockingham County. So.....does this sound like recovery to you? Dr. Rosser sheds some light on a property perspective in his comment at hburgnews.... "...we are now doing better than most other places, even if it may not feel all that great. The story is correct, and that it does not feel all that great here is just a reminder of how bad it is in so many other places." I have to agree -- we're in a lot better spot than most other areas of Virginia and the U.S., though we still have progress to make before we see those metrics increasing again. | |
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Is the Pace of Home Sales Finally Increasing In Harrisonburg and Rockingham County? |
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There are some who are predicting that the coming months will be QUITE slow in terms of home sales. After all, the first time buyer tax credit is ending, and we're entering into winter -- a season that always brings slower sales. But looking at the trajectory of sales between the most recent two quarters (2009-Q2, 2009-Q3), I'm left starting to wonder whether things might be picking up in pace....  As you can see in the graph above, there were a roughly equivalent number of Q2 and Q3 homes sales last year. This year, however, despite both data points lying below the 2008 figures --- we saw a 15% increase in sales between Q2 and Q3. With last year's astonishingly slow fourth quarter, I think there is a good chance our local real estate market will finish out the year strong with lots of home sales in October, November and December. Why are home sales picking up in pace? One plausible reason is that lots of first time buyers are getting in the market who might not have otherwise, or might not have last year. Check out the graph below, showing the change in pace of home sales under $175k.  As you can see above, home sales in Q3 of this year surpassed (barely) last year's Q3 sales figure. It seems quite plausible that this trend will continue in Q4, and that it may be largely a result of the tax credit for first time buyers. Stay tuned as we move into and through October, November and December, but I don't believe real estate sales will be as slow as some predict. | |
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So, what do we do, just wait? |
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 I was chatting with a client today who asked me this question --- "So....what do we do....just wait?" I am marketing this person's property for sale, but their segment of the market is particularly slow right now, and we haven't had much solid interest in their property in quite a few months. So....what DO we do? Many homeowners today likely feel this frustration --- that there is only so much that can be done in trying to sell their property --- and that at the end, they are just left waiting. Some homeowners, in fact, go months without a single showing of their home. It's easy to be discouraged in times when it seems like all you can do is wait, and while I won't try to cheer you up or encourage you that "it will all be ok", I will offer a few suggestions of things you CAN do if you find yourself just waiting:
And to circle back around to answer the original question more simply, no, we don't "just wait." It is vital to be constantly re-evaluating the pricing and marketing of a property to most aggressively and proactively expose it to potentially interested buyers. Don't get depressed waiting --- get busy brainstorming ways to actively market your property! | |
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The State of Our Local Housing Market |
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Despite continued turbulence in many real estate markets across the country, the Harrisonburg and Rockingham County housing market continues to perform well, with stable values, despite a continued decline in sales pace. Many housing markets across the country have experienced net losses of 30% - 50% in housing values over the past three years. Harrisonburg and Rockingham have seen only a 2% downward shift in housing values over the past three years, as measured by the median price of sold residential properties per the Harrisonburg/Rockingham MLS. The Central Shenandoah's diverse economy has remained very stable in most sectors over the last several years, and our area's continued low unemployment rates have allowed our housing market to continue to perform well. While there are still those in our local community that are seeking employment, our local unemployment rate has been below the state and national rate for many years. This employment stability gives local home buyers confidence in moving forward with their housing purchases. While it hasn't created an enormous, market-altering boost in sales, the $8,000 credit to first time buyers has allowed many hopeful homeowners to buy over the past few months in Harrisonburg and Rockingham County. The $8,000 is returned to the home buyer when they file their 2009 taxes, but can also be used as a down payment or closing costs in some cases. Of note, time is now running short for those hoping to take advantage of this $8,000 first time buyer tax credit. The deadline for closing on a home under this government program is November 30, 2009, and the financing process generally takes 45 to 60 days to complete. In addition to low unemployment, and the $8,000 first time buyer tax credit, very low foreclosure rates in our local market have also contributed to stability in home values. Home values increased quite rapidly between 2003 and 2005 in Harrisonburg and Rockingham County, but did not increase fast enough and far enough to push large numbers of buyers into risky loan programs. In many other high priced areas of the country, buyers purchased homes using extremely risky loan programs during the market boom, which led to high foreclosure rates in those areas during 2007, 2008 and 2009. These foreclosed homes then re-entered the market and sold by the new owners (the banks) at values much lower than pre-existing market values. Since Harrisonburg and Rockingham County have such a low foreclosure rate, these few home sales have not significantly affected local housing values. Thus, it seems that our local housing market has experienced the lesser of two evils. Most local homeowners are glad that they have not seen 30% - 50% declines in the value of their home, yet the drastic decline in the number of homes that sell per year makes it difficult to sell a home in a timely fashion. Interestingly, many of the market that experienced huge drops in home values have now seen the pace of home sales increasing yet again. Prospective buyers in today's market ought to research home values carefully in the neighborhood(s) where they may buy, and shouldn't buy if they will need to sell again within a one to two year time period. Hopeful sellers in today's market should price and market their home aggressively to maximize the chances that it will sell amidst very high inventory levels. | |
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Is Harrisonburg Insulated From National Economic Conditions? |
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 Yes and no. I am participating in an economic survey group striving to create a true picture of the impact of the national economy on our region. In our first meeting yesterday, we discussed our local economy as it pertains to retail sales, manufacturing, farming, construction, and many other sectors. The participants included chambers of commerce, representatives from employment commissions up and down the valley, and many other perspectives on our Valley economy. After hearing some not-so-great news followed by some so-so news, followed by some plain-old-depressing news, one participant commented that it sounded like our local economy wasn't really as sheltered as some consider it to be. I quickly jumped in to clarify that (as it pertains to real estate) we are definitely affected by the national economy, but also significantly insulated from the effects that it has had in other areas. Take these two facts, for example:
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Breaking Economic and Real Estate News |
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 All kinds of news over the last few days related to our local real estate market and our local economy... Bridgewater annexes 45 acres for new housing development Office Depot closes 112 stores including Harrisonburg's Site on Port Republic Road approves residential to commercial rezoning Public hearing to determine outcome of age-targeted development in Elkton | |
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Another sign of strength in Virginia's economy |
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 The Virginia Resources Authority sold an unprecedented $215 million in infrastructure revenue bonds to raise funds for projects around Virginia. This was, in fact, the largest transaction in the pooled financing program in VRA history --- in what is otherwise a challenging economic time. "Bricks and mortar projects mean jobs and income in Virginia communities," said Sheryl Bailey, Executive Director of the Virginia Resources Authority. "We can't over-emphasize the importance of such projects in stimulating the local and state economy. Infrastructure is a key to America's economic recovery. " According to the Daily Press, the projects to be financed will include "upgrades to bridges and wastewater treatment plants, replacement of water and sewer lines, and construction of a firehouse, a library, and a public safety academy." | |
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Virginia maintains strong credit rating! |
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 Amidst turbulent economic times across the country, Virginia is a bright spot! Governor Kaine announced yesterday that all three credit rating agencies (Moody's, Fitch, and Standard & Poor's) have assigned their triple-Abond rating with a stable outlook to the Commonwealth's GeneralObligation Bonds. "The triple-A ratings are a testament to Virginia's fiscal strengths,"Governor Kaine said. "They also underscore the timely efforts we havemade to address the impact on Virginia of the slowing national economy." Read more here, and be glad you live in Virginia! | |
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Making sense of turbulent economic times |
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It can be terrifying to watch the business news these days…
Low interest rates are now lower In large part because of the government takeover of Fannie Mae and Freddie Mac, mortgage interest rates have dropped considerably. Recent rates from local lenders are as low as 6.0% for a 30-year fixed rate mortgage, which is a great opportunity for buyers. Don't forget the first-time home buyer credit If you haven't owned a home in the last three years, you are likely eligible for up to a $7,500 tax credit if you buy a home before July 1, 2009. This is a great opportunity to get a boost up in the first year of homeownership by helping offset closing costs or moving expenses. High inventory empowers buyers As a result of the basic rules of supply and demand, the current elevated levels of inventory (in almost all price ranges) provide buyers with a great opportunity to buy a home at a competitive price. That isn't to say that home sellers are universally negotiating large chunks off of their asking prices, but simply that buyers often have the upper hand in negotiations. A strong and growing local economy While local economic conditions vary to some degree in different parts of the Shenandoah Valley, the economic climate in Harrisonburg and Rockingham County continues to be very favorable. Unemployment is still very low, and many companies are expanding or opening their businesses in this market. Buy smart As you consider, with excitement, a home purchase – remember that buying a home should be viewed as a long-term investment. Run the numbers with your Realtor or lender to understand your financial position 3 years, 5 years and 7 years after purchasing a home. Have reasonable expectations about how long you will stay in a home, and how that will affect the financial perspective of a home purchase. Despite the economic storm we are in the midst of nationally, it can still make good sense to buy a home in the Shenandoah Valley. Get to know your segment of the real estate market so that you are comfortable with the price you are paying, and the value of the home you are purchasing. | |
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Breaking Economic News: Rosetta Stone to go public? |
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 Rosetta Stone Inc., one of several prominent Harrisonburg-based technology companies, filed to raise up to $115 million in an initial public offering on Tuesday (9/23/2008).Of note from the MarketWatch report: "Rosetta Stone rang up net income of $2.9 million on revenue of $83 million in the six months ended June 30, compared to net income of $399,000 on revenue of $59.5 million in the year-ago period." Wow --- what an improvement in net income! This is likely to be great news for our local economy! Read more details/commentary at hburgnews.com. | |
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Wall Street Journal: "The Housing Crisis Is Over" |
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"The dire headlines coming fast and furious in the financial and popular press suggest that the housing crisis is intensifying. Yet it is very likely that April 2008 will mark the bottom of the U.S. housing market. Yes, the housing market is bottoming right now." The article goes on to make some very interesting observations based on housing market data and historical comparisons. It's worth a read! | |
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Yesterday (May 6, 2008), the Wall Street Journal ran an opinion piece entited " |
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"The Recession That Never Was is Now Over" -- Briefing.com |
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 Thanks to a client of mine for pointing me to this great economic commentary entitled "The Recession That Never Was is Now Over" from Briefing.com.Some interesting thoughts from the article in regards to whether we have been or are experiencing a recession . . .
And touching on why everyone seems to think we're in a recession . . .
Again, be sure to read the full article here, from Briefing.com. | |
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Scott Rogers
Coldwell Banker
Funkhouser Realtors
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scott@cbfunkhouser.com
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