April 2019 Harrisonburg & Rockingham County Real Estate Market Report
April 15, 2019
Home sales slowed a good bit (-10%) in March as compared to last March - though they weren’t the absolute slowest March seen in the past few years, as the 90 sales seen in March 2019 was slightly stronger than the 85 seen in March 2016. This brings the year-to-date pace of sales down as well as we are now lagging 9% behind last year with 222 sales so far in 2019 as compared to 244 a year ago. The median sales price, however, has increased during the first quarter of 2019 - rising 5% to $215,000 - up from $205,000 one year ago. And though fewer homes are selling, they are doing so more quickly with a 26% drop in the median days on market.
The green charts above shows trends in detached home sales -- as compared to the orange charts which show attached home sales, comprised of duplexes, townhouses and condominiums. While the pace of sales of detached homes did increase by 3.33% over the past year, the median price of those homes has not increased at all over the past year - remaining at $225,000. The pace of attached sales, however, has declined 5.65% over the past year - from 372/year to 351/year - while the median price of those sold, attached, properties has increased 7% from $160,296 up to the current level of $171,500.
It continues to hold true that each year almost twice as many homes sell in Rockingham County as compared to the City of Harrisonburg. Over the past 12 months, that trend continued - though with a slight year-over-year surge of sales in the City (+1.4%) as compared to an even slighter slight increase in the County (-0.36%). The median sales price increased in each of these two regions of our local market -- though the median sales price continues to be a good bit higher in the County ($223,700) than in the City ($190,000). The lower City median sales price is likely a result of the majority of our area’s townhouses being located in the City.
This year has been off to a comparatively slow start. When comparing January, February and March home sales to the same month in each of the past three years, 2019 came in last place in February and second to last place in January and March. We have yet to see an above average finish for a month of home sales in Harrisonburg and Rockingham County in 2019. April could be the month that we finally see things awaken, given a strong month of contract activity in March - but regardless of how you slice and dice the data, fewer homes are selling this year than last - at least thus far.
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 in 2016, and then a modest decline between 2016 and 2017. That trend reversed itself in 2018 -- with an increase as compared to 2017, up to 1,304 home sales in 2018. We didn’t quite match the strong sales seen in 2016 -- but we came very close -- and broke the 1,300 mark again, for only the second time in the past 10 years.
This graph shows a rolling 12 month trend line of the number of homes sold 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. The pace of home sales peaked in mid-2017, declined through early 2018, rose again until late 2018 and has been generally declining for the past five months. Median prices, however, have been steadily rising for the past three years with only a few exceptions and with no end in sight.
This graph provides an overall indicator of the state of our housing market, showing both the number of homes being sold each year since 2003 (yellow bars) as well as changes in the median sales price during the same time period (blue line). After six years in a row (2011-2016) of an increasing pace of home sales, we then saw a 4% decline in the pace of home sales in 2017. This trend reversed itself in 2018 with a 3% increase in the pace of sales. We have now also completed our seventh year in a row of seeing an increase in the median sales price in our area. The median sales price of all residential sales was $211,750 in 2018 -- up 7% from last year.
The single family home market in Harrisonburg and Rockingham County improved significantly between 2015 and 2016 with a 20% increase in the number of homes sold but then took a step backwards in 2017 with a 9% decline. In 2018, sales started charging forward again with a 6% increase in the pace of sales. Median sales prices of single family homes has increased for each of the past four years -- though the pace of those increases slowed in 2018 to only 2%. The median sales price of single family homes last year was $228,000 -- the highest median sales price on record for Harrisonburg and Rockingham County.
Townhouse (and duplexes and condo) sales took a small step backwards last year after six years of steady increases in the pace of sales. At year-end, 2% fewer attached dwellings (361) had sold in 2018 as compared to in 2017 when 370 sold. Despite a slight slow down in the pace of sales -- possibly caused by very low inventory absent much new construction -- the median sales price continues to climb, now up to $167,800. Here is yet another record broken -- the median sales price of $167,800 (seen in 2018) was the highest we have ever seen in Harrisonburg and Rockingham County. And in 2019 it is climbing even higher - eclipsing $170K.
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 several years we have seen a steady increase in buyers and a declining number of sellers. In June 2016, these two trajectories crossed, and there are now many more buyers buying in a six month period than there are homes for sale -- though the buying pace has leveled off.
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 15 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 several years (2015 through 2018) we have seen increases in 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 similar sizes. Looking at 2018 figures, this graph illustrates that the median price per square foot of larger homes (2500+ SF) is a good bit lower ($111/SF) than that of homes with less than 1500 SF ($139/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 98% in 2001 before the pace of home sales started escalating. Then, when the pace of home sales slowed (through 2010) this metric dropped to 96%, where it stayed for three years. Sellers started selling for slightly more in 2013-2015 when they could obtain 97% of their list price. This increased to 98% in 2016, held steady in 2017, and returned to 99% in 2018.
New home builders experienced a steady decline in new home sales between 2005 and 2010 -- dropping 78% from a peak of 186 to 41 sales in a year. Even if we use a starting point of 2001 (not shown above; before the housing boom) we still find 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. The past three years, however, were QUITE different. There were a total of 82 new home sales in 2016, 77 in 2017, and 82 again in 2018. This was a welcome sign for new home builders -- and buyers -- though things seem to be cooling in 2019.
Here we go again! Contract activity spiked in March 2019 - to the second highest level seen in the past 21 months! It is reasonable to think that we’ll start seeing stronger contract activity in March and this year was no exception. Looking at the past two years, March contract levels were the highest seen all year -- other than for the unusually active May 2018. Thus, it would be somewhat surprising to see more than 132 contracts over the next few months -- but we should continue to see somewhere between 110 and 130 per month for the duration of the Spring and Summer months.
Over the past several years, inventory levels have dipped lower and lower and lower. This has not, though, been accompanied by a decline in the pace of home sales. So -- if just as many (or more) buyers are buying, how are they doing it if inventory levels are so low? They’re doing it with speed. The pace of home sales can increase, with inventory levels declining if the median “days on market” is also declining, which is definitely the case in our local market. So, plenty (maybe, maybe not) homes are being listed for sale, but they are then going under contract quickly, which keeps inventory levels low but the pace of home sales high.
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 detached homes for sale has decreased by 15% over the past year, while the number of attached homes (townhouses, duplexes and condos) for sale has decreased by 21% over the past year. Last year inventory levels peaked at the end of May, so we may see further increases in inventory levels over the next two or so months if we follow a similar trend.
Inventory levels have fallen 10% in Rockingham County over the past year and have fallen an even more drastic 35% in the City of Harrisonburg during the same timeframe. Of note -- while there are approximately twice as many home sales in the County than in the City -- there are almost four times as many homes for sale in the County than in the City. As such, the low inventory levels are much more of an issue in the City right now if we look at both sellers (supply) and buyers (demand). This is likely leading to the faster increases in median sales price in the City, and the lower median days on market 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 23 days for homes that have sold in the past year. Remarkably, 54% 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 68% 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 been declining over the past several years in the “under $200K” category -- though likely because of limited inventory, and fewer properties existing in this range based on increasing home values. We have seen year-over-year increases in all other price ranges -- with the most significant comparative increase in the pace of home sales being in the $200K - $300K price range.
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. Inventory levels of homes under $200K and those between $200K and $300K have both fallen dramatically (-26%, -27%) over the past two years. Some of those homes have appreciated into higher price segments, though inventory levels in the $300K - $400K price range have also declined (-7%) over the past year. The only price range where there are more homes for sale now as compared to a year ago is the $400K+ price range.
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 in our local real estate market. The graph above illustrates that while it would take 9months 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 and if no new listings came on the market -- but it would only take one month (!!) to burn through the under $200K inventory. Many consider a six month supply to be a balance between buyers and sellers.
With the exception of 2016, we have seen between 78 and 84 lot sales of less than an acre for each of the past six years. This is a sharp decline from the 260 - 400 lot sales seen in 2002-2005, but it is an improvement over where things were (58-63 sales) between 2009 and 2012. From a value perspective, the sales prices of these “less than an acre” lots have also been rather stable -- fluctuating no further than between $53K and $60K over the past ten years. That is, of course, after a meteoric rise and then fall to/from $100K. Given the trajectory of lot sales over the last few years, I expect we’ll see something similar in 2019.
Parcels of land larger than one acre in Harrisonburg or Rockingham County increased in pace during 2017 to 88 land sales -- marking the highest year of sales since 2005 -- but then declined again in 2018 to 79 lot sales. The median price per acre also declined in 2018 to $14,818. Of note -- some aspects of this “median price per acre” calculation are affected by which parcels actually sell in a given year. We saw an increase in buyer demand in 2017, which seems to have lead to a further increase in the median price per acre, and then a decline in demand in 2018 accompanied by a decline in prices.
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 has trending downward -- sharply in 2018 -- and the pace of home sales is increasing much more quickly, despite having slowed slightly in 2017.
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% except in late 2016 and during just about all of 2018. Encouragingly, the average mortgage interest rate has decline significantly over the past five months and is now just above 4%. The second graph above illustrates trends in the local unemployment rate -- which has shown a general downward trend over the past several years to a current level of 2.8%. A low local unemployment rate and relatively low mortgage interest rates help our local housing market remain stable.