HarrisonburgHousingToday.com :: Market Updates, Analysis and Commentary on Harrisonburg and Rockingham County Real Estate

Harrisonburg Has A Tremendous Over-Supply of Student Housing for JMU Students

Scott Rogers — Mon, 06 Jul 2009 03:50:17 -0400

Two years ago there was a relatively even balance between students and housing. Now, as we approach Fall 2009, there will be 822 additional students, and 3,292 additional bedrooms for students. Woah ––– did you catch that? An extra 2,470 bedrooms!?!

I've written about it before....

.... but let me try to clarify a bit more, since the numbers changed just last week.

The Students
Enrollment Projections Data Source: http://www.jmu.edu/instresrch/project.shtml

The total on–campus enrollment for Fall 2007 was 17,428.
The total on–campus enrollment for Fall 2009 is projected to be 18,250.
Of note, prior JMU enrollment projections showed that there were to be 885 new students between 2007 and 2008. In the end, there were only 536.
Of SIGNIFICANT note, prior JMU enrollment projections showed that there were to be 1,500 new students between 2007 and 2009. But approximately a week ago, these enrollment projections were amended by JMU, with current projections now showing an increase of 822 instead of 1,500. Enrollment projections have been significantly scaled back over the next five years because JMU is not receiving enough funding from the state to be able to grow their faculty, staff, campus and degree programs to meet their prior enrollment projections.

The Housing
The following new housing projects (with the corresponding number of "beds") all make up the 3,292 new "beds" that will exist as of August 2009.

JMU Residence Hall (422)
Charleston Townes (172) ––– with 356 more to come
Sunchase (96)
North 38 (816)
Campus View (192) ––– with 476 more to come
865 East (274)
Copper Beach (1,220)
Urban Exchange (100)

The Impact
Only time will tell what the impact will be of this over supply of student housing. So far, it has translated into many lease incentives for students, and higher than expected vacancy rates for many apartment complexes. Many student housing developers say that the newest complexes in the closest proximity to a college campus will be the most successful –– so far this seems to be playing itself out here in Harrisonburg, as many new complexes are doing quite well, and some older complexes are having difficulties leasing.

Have Any Questions? Contact Scott Rogers at 540-578-0102 or scott@cbfunkhouser.com

Everything You Need To Know About Buying An Investment Property in Harrisonburg, Virginia

Scott Rogers — Sun, 05 Jul 2009 23:07:47 -0400

This won't actually cover absolutely everything you need to know, but I believe it will give you a good overview. These questions were posed by a reporter from the Shenandoah Valley Business Journal, and my responses (below) were in print a month or so ago. If you missed the newsprint version, keep reading...

1. Is real estate still a good investment? What should investors know about this market?

Real estate is still a good investment over the mid to long term time horizon. The days, however, of buying an investment property and selling it for a profit one year later are likely gone for good.

Our local market experienced record price increases between 2003 and 2006 ––– which brought a lot of new investors into our market. The perfect storm included a combination of low prices as compared to rental rates, low interest rates on investment loans, and lenders willing to finance 95% – 100% of an investment loan. In 2003 a brand new two story townhouse would sell for $100k and rent for $750/month. Three years later, in 2006, the same townhouse would sell for $160k and rent for $900/month. The 60% increase in value was accompanied by just a 29% increase in rental income. As becomes evident, the investment opportunities are not as exciting now as they were in 2003.

2. What's the difference between residential and commercial investing? Is one better than the other?

A "residential investment property" is typically a single family home, townhouse or condo that will be rented to a tenant with the rental income being used to pay the monthly mortgage payment. A loan on a residential investment property will often be amortized and paid off over 30 years, similar to loan on a home being purchased as a residence. A "commercial investment property" might be a duplex building, a small or large apartment building or complex an office space, a shopping center, a farm, undeveloped land, or factory space. A loan on a commercial investment property may be amortized over 20 (or possibly 30) years, but it often will have a balloon payment after 3, 5 or 7 years ––– requiring the borrower to pay off the loan or refinance it.

Commercial investing is much more complex, with many factors to analyze to understand the value of any given investment opportunity. Residential investing is a much more straight forward analysis with fewer variables. Given this basic difference, those considering investing in real estate for the first time should like start with residential investing to familiarize themselves with the concept before considering the purchase of a commercial property.

3. What should potential investors look for in an investment property?

Most investors start by examining cash flow ––– how much cash the property will generate each month compared to the expenses that must be paid. The expenses may include: a loan payment, taxes, insurance, repairs, association dues, management expenses, utilities, advertising and supplies. Just a few years ago, positive cash flow (more income than expenses) could be achieved with 80% of even 90% financing. Today, there are many available investment properties that barely (if at all) provide positive cash flow when financed at 80%. This change is a result of property values increasing more rapidly than rental rates.

After understanding the cash flow of a property, an investor should also analyze their potential one–time maintenance costs upon purchasing, or within the first few years. If a property has wonderful cash flow, but needs new flooring, paint, appliances, windows and a roof, then it is not as exciting of an opportunity as it may have first appeared. Additionally, an investor should examine other investment properties in the same neighborhood or area to evaluate whether property values and rental rates are stable, increasing, or decreasing.

There are a variety of other aspects of an investment property that should be evaluated as well, including the tax consequences of buying and the potential benefit from principal reduction, tax savings and appreciation.

4. How long should investors plan to commit to their property?

There are a limited number of opportunities for flipping a property in our current market. There are still, occasionally, properties that can be purchased, fixed up, and re–sold for a profit. Most investment properties, however, will need to be held/owned by the investor for at least 4 to 5 years. Residential properties in Harrisonburg and Rockingham County increased in value by an average of 15% per year between 2003 and 2006. In contrast, they decreased in value by an average of 0.67% per year between 2006 and 2009. An investor could have bought and sold in a 1 year time horizon in 2003, 2004 or 2005, but since then the time horizon would need to be much longer.

While an investor won't necessarily see quick gains in appreciation if they buy an investment property now, they will have the potential for lots of negotiating room on price depending on the property being considered. That opportunity to buy below the value of other comparable properties, combined with record low interest rates, makes it a valid time for an investor to consider a purchase.

5. What tax and legal issues should investors consider before making their purchase?

Consult a tax accountant and an attorney! Some of the issues that deserve consideration include: increased tax liability based on investment property income, the short and long term impact of reported property depreciation, methods for limiting legal liability, the best type of ownership structure for investment properties (personally owned, LLC, corporation, etc)

6. How does the Valley compare to the rest of the state/country in terms of investment potential?

The Shenandoah Valley has not seen dramatic drops in property values that have occurred in other parts of the state and country. As a result, we may not have as many great investment opportunities in the short term, but the investor is also likely more protected from value drops in the long term. Our real estate market, and local economy have proven to be much more stable than other economies, which provides value to the investor because of a lower likelihood of losing tenants, or having difficulty leasing a property.

7. There are lots of programs designed to help first–time home buyers enter the market. Are there any incentives for investors?

The government has created many incentives for first–time buyers, but there are very few incentives for investors. Investors, in fact, were a large part of the turmoil seen in real estate markets across the country. In many larger markets, investors were speculating on new construction ––– signing contracts to buy 10 or more condos or other residential properties, and then selling them by the time the construction was complete to the eventual end user for 20% (plus) more than their contract price. Large scale investor speculation on new construction led to higher prices than would have been experienced otherwise, as well as a false sense of demand that led to some of the overbuilding in those markets

8. What are the best resources for potential investors?

There are many concepts, calculations, measures and benefits that an investor must understand as they are considering an investment property purchase. Perhaps the most important is to understand the nature of and changes in the local real estate market –– for this, I recommend that investors review the market reports on HarrisonburgHousingToday.com. Investors interested in foreclosures can either review the printed "Trustee Sale" notices in the Daily News Record, or browse recent foreclosure notices on HarrisonburgForeclosures.com. Perhaps the most important is finding a Realtor who can assist you in evaluating individual investment properties, and comparing several investment opportunities side by side.

Have Any Questions? Contact Scott Rogers at 540-578-0102 or scott@cbfunkhouser.com

Psssssst......my home is for sale, but keep it quiet!

Scott Rogers — Tue, 30 Jun 2009 03:09:42 -0400

If you're trying to sell your home, DON'T keep it a secret! I have had several conversations lately with homeowners who want to sell their home, but haven't listed it with a Realtor. They have shared the information with one or two Realtors that their home is (potentially) for sale, but they don't want to take it any further.

That is not the best way to sell your home!

A number of years ago (more than five), buyers used to start working with a Realtor and ask about what homes they should go and view that might be of interest to them. Nowadays, most buyers have spent countless hours on the internet researching homes and neighborhoods on their own.

When all of those buyers were online searching for homes, did they see your home, and was it presented in the best possible light?

Consider working with a Realtor who can develop a strategic marketing plan for selling your home ––– and who can expose it to the widest possible audience to maximize the opportunity for a sale!

Have Any Questions? Contact Scott Rogers at 540-578-0102 or scott@cbfunkhouser.com

Listing Price --- It's All a Matter of Perspective

Scott Rogers — Sun, 28 Jun 2009 15:36:30 -0400

If you really think about it, the listing price of a house means ABSOLUTELY NOTHING ––– regardless of what kind of a market we're in. Below are a few common conversations that explore this issue.

BUYER: Well....this house is priced at $185,000 and we can't spend any more than $160,000 so we might as well not even go look at it.

BUT WAIT: If the house is only worth $165,000 (and just happens to be priced at $185,000), then it would certainly be worthwhile looking at –– because when an offer comes in the owner might be reasonable about the actual value of the house. You need to know more than the asking price of the house ––– you need to know what it's actually worth.

BUYER: I really like this house, it's listed at $295,000 so perhaps we could offer $285,000?

BUT WAIT: Don't base an offering price on the asking price! What if the house mentioned above was listed at $495,000 (and it was the same house) ––– would you then offer around $480,000? The asking price is not necessarily an indication of market value, so take your cues from market values, not asking prices.

BUYER: The house is listed at $225,000 and that seems like a good deal, but in this market, I'm not willing to pay any more than $215,000 for it.

BUT WAIT: Really? What if the three most comparable properties in the city/county just sold for $250,000 ––– and thus we are reasonable assured that the value is $250,000 (+/–) ––– you'd really still only pay $215,000?

SELLER: Let's list my house at $450,000 ––– that's right about the price that all of my neighbors are asking for their houses.

BUT WAIT: Regardless of whether the neighbors' houses are listed for $450,000 or $850,00, if they are selling for $350,000 then those sold houses should be the guide, not what is on the market now.

These are just a few illustrations of the fact that the asking price of a house may mean absolutely nothing. Certainly there are times when the asking price is just at / above / below the market value (the price at which similar homes have recently sold) ––– but that is not always the case.

Beyond the asking price, you need to get comfortable with what the actual market value is of the houses you are considering.

Have Any Questions? Contact Scott Rogers at 540-578-0102 or scott@cbfunkhouser.com

If you're a first time home buyer, you'd better start looking more seriously now -- the clock is ticking!

Scott Rogers — Wed, 24 Jun 2009 02:05:56 -0400

If, as a first time buyer, you close on your purchase of a home by November 30, 2009 you will receive an $8,000 tax credit on your 2009 taxes. That is to say that:

if you owe the IRS $8,000 you won't have to send them a dime
if you owe the IRS nothing, you'll get an $8,000 check
if you are owed a $2,000 refund, you'll get $10,000!

But this only works for you as a first time buyers if you close on your new home by November 30th of this year.

Most homes take 45 to 60 days to "close" –– in other words, it is usually 45 to 60 days after a house is under contract that the closing can take place. That means first time buyers ought to have their house under contract by September 30th in order to have time to close.

And if you're planning to have a contract on a house before September 30th, NOW is the time to start looking. Lots of first time buyers are certainly in the market right now ––– I'm working with quite a few, and I hear stories of many others as well who are buying ––– but I believe there are quite a few other first time buyers who are still sitting on the bench.

If you have questions about the $8,000 first time buyer credit, or if you're ready to start looking at properties, call (540–578–0102) or e–mail (scott@HarrisonburgHousingToday.com) me and we'll get started!

Have Any Questions? Contact Scott Rogers at 540-578-0102 or scott@cbfunkhouser.com

The real reasons why so much student housing is being built for JMU students...

Scott Rogers — Tue, 23 Jun 2009 09:29:04 -0400

This past week the Daily News Record published an article about the new housing complexes being built to house JMU students. I believe the uninformed reader of the article would assume that there is a relatively good balance between students and housing ––– but according to my calculations there is a significant oversupply of student housing for JMU students!

Here are the numbers...

On–Campus Headcount has increased (or is projected to increase) by 1,500 students between Fall 2007 and Fall 2009.
In this same two year time period new housing developments have accounted for 3,340 new "beds".

Why will this oversupply exist?

The Daily News Record consistently uses enrollment figures creatively to exaggerate JMU growth, though I won't speculate as to whether it is innocent or intentional. If you compare the figures in the DNR article with JMU enrollment projections, you'll see that they use a lower enrollment metric (students taking classes at the JMU campus) when referring to past enrollment figures, and they use a higher enrollment metric (students taking classes at the JMU campus, or anywhere else) when referring to current or future enrollment figures. The result is that JMU growth seems more significant than it actually is. Take a few minutes to see where on the JMU enrollment projections page they pulled the figures in paragraph 3 and 4 of the DNR article, and you'll start to see the errors in their comparisons. Their "8 percent increase from last fall" is actually a 5.5 percent increase if you use the same metric for the two data points. Is this simply an error, or does 8 percent sound better than only 5.5 percent?
Harrisonburg created an incentive (with good intentions) for student housing developers to build now, now, now. Much of the land in the City that was annexed several decades ago was zoned R–3, which allowed (until recently) a property owner to build student housing (in the form of three–story apartment buildings) without asking for permission. Much of this R–3 land was adjacent to single family home neighborhoods, and thus Harrisonburg took this "use by right" out of the R–3 zoning classification. R–3 property owners were left with a three year window of time in which they could build this higher density housing (student housing) without asking for permission –– and thus the construction began!

Don't Build Anymore! My concern when I read an article such as the one that ran last week in the DNR is that a local (or out of town) developer will read the article and will decide to build more student housing because of the (exaggerated) enrollment growth and the (fictional) even balance between students and housing. If you're a student housing developer feel free to contact me (540–578–0102, scott@HarrisonburgHousingToday.com) to discuss this further ––– but please don't start building more student housing before completing a thorough market study beyond the figures reported in the Daily News Record.

Tell Your Friends! Last week I was told of a (usually) well informed local business leader who was convinced that JMU will be growing to 30,000 and then 40,000 students within the next 5 – 10 years. This type of casual conversation will lead to an even wider sentiment that we need more student housing in Harrisonburg ––– and this individual is often in conversation with student housing developers.

I'm stepping down from my soap box now, but I hope that student housing developers, and those that advise them, will carefully study our market before continuing on a rampage of building college student housing!

Have Any Questions? Contact Scott Rogers at 540-578-0102 or scott@cbfunkhouser.com

A picture may be worth a thousand words, but perhaps a million are needed for a housing decision!

Scott Rogers — Mon, 22 Jun 2009 04:01:52 -0400

Two weeks ago I showed some clients two houses in Massanutten. My clients had reviewed the photos (interior and exterior) of both homes online, and were quite a bit more excited about the second house.

And yet ––– when we went to see both homes they were somewhat surprised to discover that the first house was MUCH more attractive (generally speaking, and specifically to their interests).

As it turns out ––– beautiful photos can be taken of a less than attractive home to make it look moderately interesting and exciting. And yes, not so great photos can be taken of a beautiful home, making it seem mediocre and drab.

What does this mean for you?

BUYERS ought to consider going to visit homes that they have disqualified based on interior photos. Unless you are convinced that the photos are a true, accurate, fair representation of the extent and condition of the home's interior, you should go take a look!

SELLERS ought to make sure that their home is presented in the best possible manner when it comes to exterior and interior photographs. I have found that a wide angle lens and an external flash unit can make an extraordinary difference in photo quality.

Have Any Questions? Contact Scott Rogers at 540-578-0102 or scott@cbfunkhouser.com

Which segment of our market is more stable? Expensive homes or starter homes?

Scott Rogers — Tue, 16 Jun 2009 10:03:35 -0400

If you ask most people, you'll be told that starter homes are a much more stable segment of our market right now ––– and that the higher end market is definitely doing much more poorly.

As it turns out, both markets are performing well, depending on how we examine the issue.

Starter homes are performing well!

As you can see in the chart above, there is a much healthier supply of homes below $200,000 than in any other price range. Put a few other ways:

It would take 10 months for all homes currently on the market under $200,000 to sell, as opposed to the 24 months it would take for homes priced above $400,000.
Each month 1 in 10 homes on the market priced under $200,000 is sold ––– as compared to 1 in 15, 16 or 24 for the higher price ranges.

Yet at the same time, expensive homes are performing well!

*** 2009 total sales figures are extrapolated from Jan 1 – June 15 data.

Of note, the decline in home sales in our market has not affected all price/size ranges in the same way. Since prices change over time (homes shift into different price segments), I examined the change in pace of home sales by dividing our market into starter homes (0 – 1499 SF), mid–range homes (1500 – 2500 SF) and large homes (2500+ SF). You'll note that:

The pace of starter home sales has fallen 58% between 2006 and 2009.
The pace of mid–range home sales has fallen 58% between 2006 and 2009.
The pace of large home sales has only fallen 30% between 2006 and 2009.

So, while it almost certainly takes longer for larger homes to sell, it's not because there are fewer buyers seeking that product. In fact, the buyers haven't fallen out of that price/size range nearly as much as they have disappeared from the starter home and mid–range sized home markets.

Have Any Questions? Contact Scott Rogers at 540-578-0102 or scott@cbfunkhouser.com

East Wing of Urban Exchange Nearing Completion

Scott Rogers — Mon, 08 Jun 2009 02:41:59 -0400

We're now less than four weeks away from the first residents moving into the brand new upscale condos in the East Wing of Urban Exchange located in downtown Harrisonburg. Click on the image below to view updated construction photos.

Have Any Questions? Contact Scott Rogers at 540-578-0102 or scott@cbfunkhouser.com

May 2009 Harrisonburg & Rockingham County Real Estate Market Report

Scott Rogers — Sat, 06 Jun 2009 23:24:32 -0400

View a video introduction to the May 2009 Real Estate Market Report:

Read on for a full review of the state of the Harrisonburg and Rockingham County residential real estate market. Or....download the full report:
May 2009 Harrisonburg & Rockingham County Real Estate Market Report

The four most commonly referenced measures of our local housing market (sales volume, median sales price, average sales price and average days on market) are all in worse shape in May 2009 than they were a year ago. However, the median sales price is likely the most meaningful of the measures, and it continues to show a decline of only 3% when comparing May 2008 to May 2009, or when comparing January–May 2008 to January–May 2009.

In this graph, we see that 2009 sales volume (purple line) is still hovering well below 2008 sales volume (blue line) ––– but the gap closed slightly in May as compared to March and April. Perhaps we are seeing a normalizing trend, and sales volume in June, July and August of this year will be much closer to 2008 sales levels. Greater stability will return to our market when sales volume stops declining.

This graph captures all residential real estate activity as reflected in the Harrisonburg/Rockingham MLS. The 2009 year–to–date sales figures now include five months of sales data, and show only a slight decline in median sales prices. Of note, the median residential sales price has not significantly changed since 2006.

When examining only single family home sales in Harrisonburg and Rockingham County we see that the median sales price continues to decline at a relatively slow rate (1%, 4%, 7%) when comparing 2009 to 2008. Amidst these slight declines, the pace of sales (yellow bars) continues to decline drastically.

When examining only townhome sales in Harrisonburg and Rockingham County we note that while the sales volume has dropped dramatically since 2005 (–18%, –15%, –37%), the median sales price has gained during that time period (2005 vs. 2009) and has stayed steady between 2006 and 2009.

This graph shows a normalized trend of home sales by charting the ongoing sum of the preceding 12 months' sales. We continue to see a decline in this metric, and likely will until the pace of sales stops its decline.

Of note, inventory declined slightly between the end of April and the end of May. This is great news for the overall health of our market, as it will reduce the high inventory levels and slowly start to balance out our market. This is a surprising trend for the early summer months!

With inventory levels holding steady, the number of months of supply of homes in each price range noted above has stayed relatively steady. Of note, this is the first month that any of these trend lines have crossed, as can be noted between the $200k–$300k and $300k–$400k lines.

The median price per square foot of all single family homes sold since 2002 in Harrisonburg and Rockingham County shows that homes have started selling at a somewhat higher rate over the past several quarters when examining their cost per functional space.

The chart above examines time on market for homes sold in Harrisonburg and Rockingham County during the past six months. Homes with the lowest price points are selling the quickest, and homes in the upper price ranges are taking the longest time to sell.

For example, overall only 10% of homes took longer than 1 year to sell, but 26% of homes selling over $400,000 took longer than a year to sell.

In contrast, only 13% of these homes over $400,000 sold in the first three months, while 37% of homes selling for less than $200,000 sold in the first three months of being on the market.

When examining only new single family homes in Harrisonburg and Rockingham County, we can see a steady decline since 2005 in the number of such homes that are selling (yellow bars) accompanied by a slow decrease in the median price per square foot since 2006 (green line).

The graph above depicts the number of lots (less than 1 acre) selling in Harrisonburg and Rockingham County since 2000. The last several years have been unbelievably slow for lot sales, likely because many builders have been holding back on starting construction on new homes given the trends in the residential sales market.

Land sales (tracts larger than 1 acre) have also markedly decreased since 2005, but aside from the spike of activity in 2005, the pace of these land sales remained relatively constant between 2002 and 2007. Last year, and the projected figures for this year show that there are very few buyers in the market for land at this time.

Download the full report here:
May 2009 Harrisonburg & Rockingham County Real Estate Market Report

Have Any Questions? Contact Scott Rogers at 540-578-0102 or scott@cbfunkhouser.com

New Construction Price Per Square Foot Trends in Harrisonburg and Rockingham County

Scott Rogers — Tue, 02 Jun 2009 23:50:45 -0400

For some time I have been tracking price per square foot trends for all single family homes in Harrisonburg and Rockingham County. These appear in my monthly market report, and show a median price per square foot of $80/sf back in 2002, a high of $131/sf in 2006 and a current value of $123/sf.

In talking to a potential developer last week, he inquired about price per square foot trends for new construction. This isn't an easy thing to calculate, for several reasons:

We don't have a consistently used "New Construction" field in our MLS.
Single family homes built on larger parcels would inflate the median price per square foot
Finished and unfinished basement square footage can muddy the waters.

We devised a plan to account for two of these three challenges. First, I would search in any given year for homes reported as being built that year or the year prior (for 2003 homes, I'd look for 2003 closings where the home was reported as being built in 2002 or 2003). I'd also limit the search to homes built on lots of one acre or less to remove the value of the land as a significant factor.

Below you will see the results, with a starting value of $99/sf in 2002, a high of $150/sf in 2006, and a current value of $140/sf.

I also graphed the number of applicable home sales in each year since 2002 to put the market into perspective. Click here, or on the image above, for a clearer PDF version of this graph.

Closing thoughts:

This represents all single family homes, regardless of size or location.
If you're pricing a new construction home to sell, you'll need a more specific analysis to address your level of construction quality, the location of the building lot, etc.
If you are evaluating a builder's proposal, please bear in mind that these figures are based on homes sold as total packages, thus including water/sewer/well/septic, driveways, sidewalks, etc.

Have Any Questions? Contact Scott Rogers at 540-578-0102 or scott@cbfunkhouser.com

Exploring Home Value Trends in Harrisonburg and Rockingham County (again)

Scott Rogers — Mon, 01 Jun 2009 23:22:00 -0400

The questions continue:

Are home values increasing or decreasing in our local real estate market?
Are homes more or less affordable now as opposed to a year ago?
Will homes in Harrisonburg and Rockingham County hold their value over the next year?

Looking back at last month's real estate market report showed that the median value of single family homes had held steady between 2008 and 2009. The median sales price during Jan–Apr 2008 was $215k, and it was again $215k for Jan–Apr 2009.

I'll be issuing my May report in the new few days, but in the meantime I thought I'd explore the big value questions again from a few perspectives. Here's what I found:

Median Homes Prices Decline

When now examining January through May, we see a median home value of $215,000 (still) for 2008, but a median value of $205,000 for 2009. How did we drop $10k when comparing Jan–Apr 2009 and Jan–May 2009? Smaller and less expensive homes sold in May 2009 (avg = $197k, 1906sf) as opposed to during the first four months of 2009 (avg = $240k, 2048sf).

So....despite Jan–May 2009 median home prices being down compared to the same months in 2008, perhaps it is because smaller (and less expensive) homes are selling?

Larger Home Market Outpaces Smaller Home Market

The data above suggests that perhaps median home values are declining because smaller homes are selling right now. Not so fast!

During Jan–May 2008, 39% of homes that sold had 1500 or fewer square feet. This declined in 2009 to only 35% of homes sold during Jan–May 2009.

During Jan–May 2008, 21% of homes that sold had 2500 or more square feet. This increased in 2009 to 26% of homes sold during Jan–May 2009.

These are relatively small differences, and they may not be significantly, but they refute the hypothesis that median home prices are declining because smaller homes are selling.

Are First Time Buyers Procrastinating?

The data above is a bit surprising to me ––– I suspected that we would see an increase in "starter homes" (often less than 1500 square feet) because of the financial incentives currently available for first time buyers. The combination of an $8,000 tax credit, plus historically low interest rates is predicted to bring lots of first time buyers into the market.

These first time buyers don't seem to have shown up in large numbers so far, based on the slower sales in the most affordable price range.

Price Per Square Foot Declines

As one last look at home values, I thought I'd take a look at the average price per square foot of the single family homes sold in Harrisonburg and Rockingham County in Jan–May 2008 versus Jan–May 2009.

Last year we saw an average price per square foot of $130 during this time frame, as compared to $118 per square foot this January through May.

Making it Actionable

To obey my own imperative, here are a few thoughts on how this might affect you and your real estate decisions:

If you're selling a home, or preparing to do so, price it well. Don't get overly greedy (or hopeful) ––– base your pricing on recently sold data, and competing properties for sale.
If you receive an offer on your home for sale, consider it within the context of value trends and supply trends.
If you are buying a home, negotiate knowing that supply is high (good negotiating point) but that home values aren't declining 10% – 40% like they are in some areas of the country.
If you're a first time buyer, get in the game already! Don't forget you need to close by November 30, 2009 to take advantage of the $8,000 tax credit.
If you're a first time buyer, consider renting if you won't be in your newly acquired home for at least 3 or more years.

Stay Tuned!

A far more detailed analysis of our local real estate market will be available in the next few days. Until then, wrestle with the data points above, and let me know if you have any related revelations or hypotheses.

Have Any Questions? Contact Scott Rogers at 540-578-0102 or scott@cbfunkhouser.com

Actionable Statistics

Scott Rogers — Mon, 01 Jun 2009 03:27:43 -0400

In a meeting last week with a potential client, I was asked a great question amidst showing off some of my recent market report:

"You have very pretty charts and graphs, and it's great that you have this report, but so what?? Can these statistics actually help your clients make better decisions?"

What a great point ––– it's marvelous to have lots of interesting analysis of market data, presented in an easily comprehensible format ––– but how do we transform it into something that actually helps my clients make better real estate decisions. Here were/are my responses:

Everyone selling or buying in our local market (or considering doing so) needs to have a solid understanding of the state of our local real estate market, regardless of how "in touch" they consider themselves to be. This should be based on facts (sales data analysis) as opposed to conversations around town about "how things are going."
Once a buyer, seller, builder or developer knows where we are now, they need to be able to guess (with some certainty) where we're headed. My market reports solely provide a perspective on the past, but you can easily follow the local trends to make save estimates of future market performance.
Perhaps the most important aspect to consider is that in almost all cases, a buyer, seller, builder or developer will need more than just my regular market report to make good decisions. You may need specific sales data on townhomes under $160k in the city, or lot sales over 1 acre, etc. The best way to make good real estate decisions is to have data analysis performed that is directly related to the properties in which you have interest.

So....do you have any questions about our local real estate market that would be helpful to answer here in this space, or shall we take it offline?

And by all means, if you see data analysis or reporting on this blog that is not providing actionable information or statistics, call me out! I'd like to make them actionable for you!

Have Any Questions? Contact Scott Rogers at 540-578-0102 or scott@cbfunkhouser.com

All Condos at Urban Exchange To Be Leased, Not Sold

Scott Rogers — Tue, 26 May 2009 00:37:20 -0400

Construction is moving along steadily at Urban Exchange in downtown Harrisonburg. This exciting new mixed–use community will include 194 condos, two levels of structured parking, and approximately 12,000 square feet of retail space.

Over the past 16 months, we have been excited to see that people crossing nearly every demographic have interest in living at Urban Exchange. Those having committed to living at Urban Exchange span an age range of 20 to 80, and include retirees, young professionals, university faculty and staff, undergraduate and graduate students, families with children, employees of growing local companies such as Rosetta Stone, SRI, SI, RMH, and more.

Urban Exchange is comprised of two wings with approximately 100 condos in each, and when we broke ground in February 2008, we did so with the vision of selling the condos in the West Wing, and leasing them in the East Wing. This past week, however, we made the decision to lease all 194 condos instead of selling half of them ––– primarily because of the significant changes in the condominium financing market that have taken place over the past 12 to 18 months.

The West Wing of Urban Exchange is comprised of 98 condos, and Fannie Mae and Freddie Mac guidelines dictate that 51% (soon to be 70%) of such condos must be owner–occupied in order for any purchaser to use a conventional mortgage for purchasing at Urban Exchange. Furthermore, Fannie Mae and Freddie Mac will not allow loans to close on any condos until 51% of the condos are reserved.

Given these guidelines, we knew that it would be difficult to orchestrate the sale of 70 condos nearly simultaneously, but we were determined to attempt to do so. Unfortunately, a few timing and logistical factors conspired against us:

Construction on the East Wing (for lease) was started two months prior to construction on the West Wing (for sale).
Prospective Urban Exchange tenants were willing to sign leases well before their condo was close to being complete. (In fact, I believe the first leases were signed before we even had a single piece of lumber on the work site!) As of last week, 75% of the East Tower was leased, and 25% of the West Tower was leased.
Prospective Urban Exchange buyers were hesitant to sign even a non–binding reservation agreement until their condo and the building as a whole was nearly complete if not entirely complete. As of last week, 15% of the West Tower was reserved for purchase.

Last week, when this decision was made, we were at the crossroad we had anticipated for several months. We were seeing 5 to 6 new leases a week, yet nearly all of the prospective buyers (without reservations) were waiting to commit until construction was nearly complete. We realized that within the next few weeks we would have to start turning prospective tenants away if were to preserve enough owner–occupied units in the West Tower to achieve the occupancy standards from Fannie Mae and Freddie Mac.

Given the vast, early demand from tenants to live in Urban Exchange, and the delayed, hesitant demand from buyers ––– last week we decided to move forward with leasing all of the condos at Urban Exchange.

We have discussed this change at length with all of the buyers who had reservations at Urban Exchange, but we know that there were quite a few other prospective buyers who had not yet committed to purchase. If you are one such person, and are still excited about the possibility of buying a condo in downtown Harrisonburg, we'd like to stay in touch with you.

The developers of Urban Exchange own several other properties in downtown Harrisonburg where they will be developing condos after Urban Exchange is complete. The next two projects that they will be developing will be considerably smaller than Urban Exchange (15–25 units) and thus will be much more feasible for condo sales. In approximately six months we will be starting to hold focus groups with any such interested downtown condo buyers, as we begin the design and planning stages of these next projects. If you would like to know when these focus groups begin, please click here.

Thank you for your continued support of and excitement for Urban Exchange ––– while the decision to lease all of the condos marks a slight change in direction, it will still be bringing dynamic change to our downtown district. In just over a month, the first residents will be moving into Urban Exchange, and as the next few months unfold, we will be building up to over 300 new residents of downtown Harrisonburg in an exciting and diverse community at Urban Exchange

If you have any questions about this change in direction at Urban Exchange, please contact me (Scott Rogers, 540–578–0102, scott@LiveUE.com), and if you have interest in further details on leasing a condo at Urban Exchange please contact Mary Messerly (540–421–9341, mary@LiveUE.com).

Have Any Questions? Contact Scott Rogers at 540-578-0102 or scott@cbfunkhouser.com

Why haven't home values fallen in Harrisonburg and Rockingham County?

Scott Rogers — Mon, 25 May 2009 01:11:30 -0400

I am asked this question quite frequently, often from buyers who are relocating to the Shenandoah Valley from other areas of the state or country. Since 2006, Harrisonburg and Rockingham County has not seen an increase or decrease in median home prices. This is in contrast to the nation (as a whole) and most metro areas around the country who have seen 20% to 40% declines in median home values during the same time period.

So....why aren't home values falling here in the Central Shenandoah Valley? Here are some factors that are certainly at play...

Home values did not increase as much nor as quickly in this area as compared to most other areas of the country.
Since home values were not increasing as quickly here, fewer buyers obtained "risky" loans ––– stretching well beyond their means to buy a home.
Fewer risky loans resulted in fewer foreclosures. High foreclosure rates in other areas of the country resulted in large price declines as banks re–listed homes well below their prior value.
In many other larger markets, investors were speculating heavily on new construction ––– entering into contracts to purchase with the intent of flipping the homes when they were complete before they even closed on the houses. This injected a false (temporary) demand into these markets, which created excess inventory when the market frenzy began to slow.
Our local economy is very diverse (many jobs across many sectors), and we have a very low unemployment rate. This reduced the number of families that "had to sell" their homes.

These are but a few of the reasons why we haven't seen overly significant declines in home values in Harrisonburg and Rockingham County.

This is not to suggest that all homes have "held their value" over the past few years ––– some homeowners have certainly seen declines, but any such declines are quite modest in comparison to most other real estate markets across the country.

Have Any Questions? Contact Scott Rogers at 540-578-0102 or scott@cbfunkhouser.com

I am impressed by my clients!

Scott Rogers — Sun, 24 May 2009 03:23:57 -0400

Without a doubt, we're in a very challenging real estate market right now ––– we've seen fewer and fewer home sales over the past several years. Thankfully, we haven't seen a significant decline in home values (as has been seen in most areas of the country) ––– but it's still a difficult time to sell a home.

Amidst this, it's great to be working with seller clients who are dedicated to working hard to do everything possible to sell their home:

The owners of one of my current listings spent multiple late, late (2am) evenings cleaning, organizing, painting, and doing small carpentry to prepare their home for sale.
The owners of one of my upcoming listings is currently working their way down a list of 15–20 repairs and improvements to make their townhome ready to sell.
The owners of another of my upcoming listings are moving some of their belongings out to to storage, painting, changing light fixtures and more to prepare their duplex for sale.

This isn't to say that my buyer clients aren't also working hard ––– to make sure they are getting a great deal on on the homes they are purchasing:

One of my current buyer clients has a detailed spreadsheet that they use to keep track of homes they might potentially buy, and they are conducting a detailed analysis of comparable sales and listings as they decide on an offering price for the home for which they will make an offer to purchase.
Another set of my buyer clients takes multiple (20+) photos of each home that we view, and then sorts and archives those photos after the showings to keep track of each home they might potentially buy.

If you're willing to work hard, and become educated on our local real estate market, you can find a good buying opportunity, or maximize the value of your home when you sell.

Have Any Questions? Contact Scott Rogers at 540-578-0102 or scott@cbfunkhouser.com

Web Traffic Continues to Grow: Could This Be THE Month?

Scott Rogers — Thu, 21 May 2009 07:26:29 -0400

We've experienced several years of significant declines in sales activity in Harrisonburg and Rockingham County.

There were 14% fewer home sales in 2006 as compared to 2005.
There were 13% fewer home sales in 2007 as compared to 2006.
There were 25% fewer home sales in 2008 as compared to 2007.
Thus far (Jan–Apr) there have been 28% fewer home sales in 2009 as compared to 2008.

My hope for this year, however, has been that we'll be able to at least have as many home sales as there were last year (2008). As mentioned above, we're not doing so well at meeting that target ––– being 28% below last year so far.

However, we (Coldwell Banker Funkhouser Realtors) continue to see a strong increase in the number of properties being viewed on our collection of (65) web sites. This is often a leading indicator of forthcoming sales activity.

So, I'll remain optimistic for the last 10 days of this month and see where we end up. So far this month there have been 45 home sales in our market, and last year during the same time period there were 46 home sales. Perhaps we'll catch up with last year this month, and then stay ahead or surge ahead!?

Have Any Questions? Contact Scott Rogers at 540-578-0102 or scott@cbfunkhouser.com

Real Estate Market Tidbits (good & bad)

Scott Rogers — Wed, 20 May 2009 01:55:07 -0400

As a brief variation from my typical long and detailed analysis, here are two quick market observations...

BAD: Only 11 residential properties sold in the entire month of April in the City of Harrisonburg. There are 338 for sale right now, which makes this particularly unexciting.
GOOD: Thus far in May, 44 residential properties have sold in Harrisonburg and Rockingham County ––– this is in contrast to 46 properties in the same period last May. Perhaps our year–to–date sales trend (29% decline) won't continue into the summer months!?

Perhaps we're starting to see the impact of the $8,000 first time buyer credit? Or the historic low interest rates? Or the huge selection of properties for sale?

Have Any Questions? Contact Scott Rogers at 540-578-0102 or scott@cbfunkhouser.com

$8,000 downpayment assistance for first-time buyers

Scott Rogers — Wed, 13 May 2009 10:26:01 -0400

We've all (hopefully) heard of the $8,000 tax credit for first time home buyers ––– if you haven't owned a home in the past three years you can receive $8,000 if you buy one by November 30th of this year (6.5 months to go).

But yesterday, the HUD Secretary announced that the Federal Housing Administration is going to permit buyers to use the $8,000 tax credit as a downpayment!

More details will be forthcoming –– check with your lender in the coming weeks to see how this might work for your situation.

Have Any Questions? Contact Scott Rogers at 540-578-0102 or scott@cbfunkhouser.com

Urban Exchange: 51 days until move-in!

Scott Rogers — Mon, 11 May 2009 09:31:38 -0400

Construction at Urban Exchange is flying along quickly! In a mere 51 days, the first residents will be moving into these beautiful new condos in downtown Harrisonburg. Click on any of the photos below to view updated construction photos.

Find out more about Urban Exchange:

Have Any Questions? Contact Scott Rogers at 540-578-0102 or scott@cbfunkhouser.com