After multiple months of 2017 home sales exceeding the same month of home sales in 2016 -- April didn’t quite reach that level. There were only 98 residential sales in April 2017, which is quite a few overall, but is 3% shy of last April. Overall, however, we are still 2.5% ahead of the pace of home sales from last year. The median sales price thus far in 2017 is $190,000 -- showing a 2.15% increase over where the median sales price was at this time last year. As you’d expect (from talking to anyone connected to local real estate) homes are selling more quickly this year (median of 48 days on the market) as compared to last year (median of 53 days on the market).
Nearly twice as many homes sell in Rockingham County each year as compared to the City of Harrisonburg -- but the pace of home sales is increasing in both areas, with a 12.22% year-over-year increase in City home sales and a 14.15% year-over-year increase in County home sales. That said, while the median sales price has increased 4.1% over the past year in the County, it has decreased by 3.12% in the City during the same time frame. Of note, City homes tend to sell much more quickly, with a median of 30 days on the market, as compared to a median of 58 days on the market in Rockingham County.
Last year was an extraordinarily strong year of home sales in Harrisonburg and Rockingham County. As shown above with a blue line, many months of home sales were well above any previously recorded level seen during that same month. Thus far in 2017, January, February and March home sales barely squeaked by in exceeding the same months in 2016. April, however, fell slightly behind. Now, the true test will be whether this year can keep pace with last May and June. I think there is a decent chance that we will not keep pace with last year’s sales trajectory - and not because buyers aren’t trying, but because we don’t have enough inventory.
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. As shown above, our local housing market experienced small incremental growth between 2013 and 2015 before seeing a sharp uptick in home sales last year in 2016. Thus far, even with just four months of data to work with, it appears we could have a similar year in store for our local housing market. We will know quite a bit more as we move through May and June, to see if we are keeping on pace with the robust sales seen last year.
This graph shows a rolling 12 month trend line 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 three years 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 the median sales price has finally started to increase from the $185K range over the past nine month.
This graph provides an overall indicator of the state of our housing market, showing both the number of homes being sold each year since 2002 (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. Thus far in 2017, the median sales price is staying at or above last year’s levels.
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 or 2016 when it comes to price, and in fact, the median sales price of these properties dropped slightly in 2016 to $149,500 -- down 1% from the median sales price of $151,750 in both 2014 and 2015.
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 (many!) 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 ($100/SF) than that of homes with less than 1500 SF ($125/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. This increased to 98% in 2016 and thus far is holding steady in 2017.
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 109 contracts per month over the past year -- as compared to an average of a slightly lower 102 contracts per month during the same timeframe in the previous 12 months. As we continue through 2017, it will be instructive to watch these contract figures to have an early look at what we might see in the way of home sales. Contract activity was quite strong in April as we’d expect -- and per last year’s trajectory, might slow down (slightly) for the rest of the Spring and Summer buying season.
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 effect of many homeowners deciding to list their home for sale -- which may be a significant 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 drastically over the past year -- and are now 29% lower than they were one 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 24% over the past year, while the number of townhouses, duplexes and condos for sale has decreased by 44% over the past year. All we can hope is that these inventory levels will start to climb again as we continue through the Spring and into the Summer market, as there are many buyers in our local market who are anxious to buy, but not finding many properties that they would like to purchase.
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 (-41%) over the last year in the number of properties for sale, while in the County, there has been a slightly smaller (-25%) decline in the number of homes for sale. Despite relatively similar comparative 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 through the year than they are 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 51 days for homes that have sold in the past year. Remarkably, 40% 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 55% 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 (+43% year-over-year) with the other three price ranges (under $200K, $200K - $300K, $400K+) each seeing between a 8% and 18% year-over-year increase.
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 (+48% year-over-year) with the other three price ranges (under $200K, $200K - $300K, $400K+) each seeing between a 4% and 16% 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 (-51%) in inventory levels over the past year -- with buyers in that price range now only having 125 options as compared to 256 one year ago. The $200K - $300K price range has seen a 24% decline in inventory, while the $300K - $400K price range has actually shown a 5% increase in homes for sale, and the $400K+ price range has stayed relatively level at a -3% change year-over-year.
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 13 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 two 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 less than that in two 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.
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 192 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 192 parcels for sale is currently $18,928 per acre. Given last year’s 73 land sales, if no other land is listed for sale, it would take 2.6 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 three years, home buyers have seen tremendously low interest rates -- almost always under 4%. After jumping up above 4%, rates have been slipping down for the past few months, almost back down to 4.0%. 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.