A service of Scott P. Rogers, Associate Broker, Funkhouser Real Estate Group 540.578.0102 | scott@HarrisonburgHousingToday.com
January 2017 Harrisonburg & Rockingham County Real Estate Market Report
January 11, 2017
Home sales increased 12% in December 2016 to add to the overall excitement of the year and we now, finally have a full year of data to work with -- and my oh my, what a year it was in the Harrisonburg and Rockingham County residential real estate market! With all of the data in, we find that there were 16.25% more home sales in 2016 than in 2015 -- rising to an annual pace of 1,309 home sales. The median price rose 4.05% during 2016 to $192,500 -- as compared to $185,000 one year ago. Homes are also selling slightly more quickly -- with a median of 52 days on the market in 2016 as compared to 54 days on the market in 2015.
Looking back at 2016, home sales increased ever so slightly more in the County (+16.49%) than in the City (+15.79%) while at the same time, median prices have risen more in the County (+3.64%) than in the City (-0.15%) during that same timeframe. Homes are selling much faster in the City (median of 35 days) as compared to the County (median of 62 days). Perhaps the larger number of buyers who purchased in the County (869) as compared to the City (440) combined with slightly faster sales growth in the County to create that larger increase in median sales price in the County over the past year?
The graph above shows the month-by-month breakdown of home sales in Harrisonburg and Rockingham County with a red line for 2016 and a blue line for 2015. After a slow and somewhat disappointing month of October home sales (97) home sales shot up to 113 in November, which far exceeds the number of sales seen in each of the past three months of November. The 94 home sales seen in December 2016 also exceeded the amount (84) seen in December of last year, which closes out a strong year of home sales during 2016.
This colorful graph offers another way to look at the overall sales trends for the past few years in the Harrisonburg and Rockingham County housing market. While we saw a significant improvement in the number of annual home sales between 2012 and 2013, we then saw just slow and steady growth over the subsequent two years (2014, 2015) -- but that all changed in 2016. Annual home sales finished out the year at 1,309 sales -- the highest (by far) that we have seen anytime in the past five years. In fact -- this marks a 57% increase in annual home sales when comparing 2011 to 2016. Now we must wonder -- can 2017 keep pace with 2016?
This graph shows a rolling 12 months of the number of home sales in the Harrisonburg and Rockingham County area, as well as the median price of the homes that sold during these time frames. Each data point shows one year’s worth of home sales, which eliminates the volatility of evaluating sales figures on a monthly basis. Over the past 30 months we have seen relatively consistent increases in the annual pace of home sales, which has now risen to more than 1,300 sales/year. And after many years of median sales prices hovering between $173K and $175K, they finally made their way up to $185,000 by summer 2015 and have now risen to $192,500.
This graph provides an overall indicator of the state of our housing market, showing both the number of homes being sold each year since 2000 (yellow bars) as well as changes in the median sales price during the same time period (blue line). This past year (2016) marks the sixth (!) year in a row when we have seen an increase (+17%) in the pace of sales in our local market, which was also accompanied by a 4% increase in the median sales price. This 17% increase in the pace of sales far exceeded the increases seen in the prior two years (2%, 3%) and likely contributed to the additional 4% increase in the median sales price.
The single family home market in Harrisonburg and Rockingham County improved significantly between 2015 and 2016. After three years of relatively little change in the number of single family home sales (813, 819, 818) we saw a sudden and dramatic increase to 978 home sales. Looking back, there have only been two years (2004, 2005) when more single family homes were sold in Harrisonburg and Rockingham County. This 20% increase in the pace of single family home sales was accompanied by a 7% increase in the median sales price.
After six years (2005-2011) of rapid declines in the pace of townhouse sales in Harrisonburg and Rockingham County, the pace of sales has been rebounding since 2012. The 331 sales seen in 2016 marked the highest level of sales seen anytime between 2008 and 2016. Despite the continuing increase in the sale of townhouses (and duplexes and condominiums) we did not see any further market recovery in 2015 when it comes to price, and in fact, the median sales price of these properties dropped slightly to $149,500 -- down 1% from the median sales price of $151,750 in both 2014 and 2015.
It happened! It really happened! Most housing market analysts consider six months of inventory (active listings) to be an indicator of a balanced market (between buyers and sellers). The “BUYERS” trend line above is illustrating how many buyers are buying in a six month period. The “SELLERS” trend line above is illustrating how many sellers are in the market (active listings) at any given time. Over the past four years we have seen a steady increase in buyers and a declining number of sellers. And finally, in June 2016, these two trajectories crossed! There are more buyers buying in a six month period than there are homes for sale!
In addition to monitoring home values by overall median sales prices in our market, it can be insightful to examine the median price per square foot of homes that are selling. The graph above shows the median price per square foot of all single family homes sold over the past 10+ years. The value trend captured by this graph is quite similar to the trend shown in the single family home median sales price during the same time, which validates that assumed set of changes in home values. Over the past year (2015 to 2016) we have seen increases in both the median sales price as well as the median price per square foot of single family homes.
Price per square foot of single family homes certainly varies for many reasons, including the age, location, lot size and structural characteristics of each home sold. However, there are some similarities in homes of a similar size. In looking at 2016 figures, this graph illustrates that the median price per square foot of larger homes (2500+ SF) is a good bit lower ($105/SF) than that of homes with less than 1500 SF ($126/SF). These values cannot be used as an absolute standard against which the value of any home can be measured, but they can provide some helpful guidance when trying to determine the value of a home.
This graph shows the average list price to sales price ratio (red line) over the past 15 years as compared to the overall pace of home sales. At the peak of the housing boom (2004-2006) sellers were able to obtain a median of 99% of their asking price --- up from a median of 97.7% in 2001 before the pace of home sales started escalating. Then, when the pace of home sales slowed (through 2010) we saw a decline in this metric to 96%, where we stayed for three years (2010, 2011, 2012). Sellers started selling for slightly more in 2013-2015 when they could obtain 97% of their list price, and this has now increased to 98% in 2016.
New home builders experienced a steady decline in new home sales between 2006 and 2010 -- dropping 78% from a peak of 186 to 41 sales in a year. Even if we use a starting point of 2001 (before the housing boom) we still see a 70% drop between 2001 and 2010. The number of new home sales per year has not crept up much since that time -- staying between 38 and 54 new home sales per year. This past year, however, was QUITE different. There were a total of 82 new home sales last year, exceeding the full year of sale seen for each of the past six years -- a welcome sign for new home builders!
This graph clearly illustrates what a busy buying season it has been over the past year. We have seen an average of 111 contracts per month over the past year -- as compared to an average of only 98 contracts per month during the same timeframe in 2015. These strong contract numbers, clearly, are leading to the busy season of closings -- and we are likely to see a relatively decent month of closings in January based on the November and December contract figures shown above. Contracts will likely start to slowly rise during January and February before really starting to jump in March 2017.
Overall sales activity is the combined effect of many would-be home buyers deciding to make an offer on a particular home -- and those decisions are not typically taken lightly. In contrast, changes in inventory levels are the combined effect of many homeowners deciding to list their home for sale -- which may be a big, significant, weighty decision, but it is not always so. Some homes that are on the market have been listed for sale by sellers who are “testing the market” and as a result, inventory levels can shift more quickly than home sales trends. Inventory levels have been declining over the past year, to a current level that is 26% down from a year ago.
This graph examines the differences in inventory levels over time when examining only single family homes as compared to attached dwellings (townhouses, duplexes, condos). The number of single family homes for sale has decreased by 22% over the past year, while the number of townhouses, duplexes and condos for sale has decreased by 38% over the past year. As is evident, inventory levels are much lower in the Winter market, and we may see further declines in inventory levels over the next few months as we continue through the winter real estate market.
Trends in inventory level currently seem to, in many ways, transcend the City / County divide, but when looking only at inventory levels in the City, we see that there has been a relatively sizable decline (-39%) over the last year in the number of properties for sale, while in the County, there has been a slightly smaller (-21%) decline in the number of homes for sale. Despite relatively modest changes in inventory levels in the City of Harrisonburg and Rockingham County over the past year, inventory levels in the County seem much more turbulent than in the City.
Declining inventory levels are contributing to an overall decline in the time it takes to sell a home in Harrisonburg and Rockingham County. The current median “Days on Market” is 52 days for homes that have sold in the past year. Remarkably, 38% of homes that have sold in the past year have gone under contract within 30 days of having hit the market. Combine that with those that went under contract during the second month on the market, and you’ll find that 53% of homes that sell go under contract within 60 days. The graph to the right, above, shows the length of time that each active listing has been on the market for sale.
The pace of home sales in Harrisonburg and Rockingham County varies significantly based on price range. The graph above shows the average number of home sales per month (given a 12-month average) as we have passed through the past two years. Home sales have increased in all price ranges over the past year, with the most significant (drastic!) increase being in the $300K - $400K price range (+72% year-over-year) with the other three price ranges (under $200K, $200K - $300K, $400K+) each seeing between a 11% and 14% year-over-year increase.
Inventory levels shift up and down seasonally, but we are also seeing differences in year-over-year trajectories in each of the four price ranges outlined above. The lowest price range (under $200K) has seen the largest decline (-38%) in inventory levels over the past year -- with buyers in that price range now only having 176 options as compared to 283 one year ago. The $200K - $300K price range has seen a 19% decline in inventory, which is relatively similar to the 26% decline seen in the $300K-$400K price range. The only price range where inventory levels has increased is the $400K+ price range where inventory levels have climbed 13% YOY.
With so many home sales (lots of buyers) and so few homes on the market (not so many sellers), there are low levels of supply in some price ranges our local real estate market. The graph above illustrates that while it would take 10 months to sell all of the homes currently for sale over $400K if the same number of buyers bought each month as have been buying (on average) over the past 12 months -- it would only take three months (!!) to burn through the under $200K inventory. Many consider a six month supply to be a balance between buyers and sellers, and we are now seeing that (or less) in three of the four price ranges illustrated above.
After some modest recovery in the pace of sales of lots of less than an acre over the past few years, there were fewer of these sales in 2016 (64) as compared to 2015 (78) and 2014 (84). That slowing pace of lot sales did not stop sellers in 2015 from being able to obtain higher prices for their building lots with a median sales price of $59,650 -- but that median price then declined during 2016 to only $54,500. Despite the lack of increase in lot sales, we are seeing quite a bit of stability in the median sales price, which has bounced around between $54,000 and $60,000 since 2008 and continuing through 2016.
Despite the fact that only 64 lots (of less than an acre) sold in all of 2015, there are a remarkable 142 lots currently for sale. Some sanity exists in this listing market, however, as the median list price of lots for sale ($58,500) is not too much higher than the 2016 median sales price of $54,500. Given last year’s 64 lot sales, if no other lots were listed for sale, it would take 2.2 years to sell all of the lots currently listed for sale. As you can see above, a significant portion of the lots currently listed for sale are priced above $60,000 --- thus many sellers have offering prices higher than recent (2011-2016) median sales prices.
Parcels of land larger than one acre in Harrisonburg or Rockingham County increased in pace during 2016 to 73 land sales -- marking the highest year of sales since 2007. That said, during that same timeframe, the median price per acre has fallen from $24,184 (in 2007) down to $10,000 (in 2016). Some aspects of this “median price per acre” calculation are affected by which parcels actually sell in a given year, but it is clear that land prices have been trending slowly down over the past five or so years. We will likely need to see more buyer activity (demand) before we will see any meaningful increases in the median price per acre.
Despite the fact that only 73 parcels of land (of one acre or more) sold in all of 2016, there are a remarkable 151 parcels of land currently for sale. Furthermore, despite the fact that the median sales price of land is hovering around $10,000 per acre, the median list price of the 151 parcels for sale is currently $17,220 per acre. Given last year’s 73 land sales, if no other land is listed for sale, it would take 2.1 years to sell all of the parcels of land currently listed for sale. As you can see above, the vast majority of land listed for sale is listed at median prices per acre well above the median sales price per acre.
The graph above is a comparison of two imprecise measures -- but the comparison can still be helpful. The blue bars show the number of home sales recorded in the HRAR MLS -- this does not include private sales that did not involve a Realtor, nor new home sales directly from a builder. The red bars show the number of recorded Trustee Deeds. Some foreclosed properties then show up again as REO properties. The foreclosure rate in our local market area is definitely trending downward, as there were 6.7 times as many home sales as foreclosures in 2014, 8.1 times as many home sales as foreclosures in 2015 and 9.6 times as many in 2016.
As shown in the top graph above, for most of the past two years, home buyers have seen tremendously low interest rates -- almost always under 4%. With average mortgage rates now starting to increase, it seems unlikely that we will see rates in the 3.X% range again anytime soon. The second graph above illustrates trends in the local unemployment rate -- which has shown a general downward trend over the past several years. A low local unemployment rate and relatively low mortgage interest rates continue to help our local housing market remain stable and start to grow in recent years.
