January 2020 Harrisonburg & Rockingham County Real Estate Market Report
January 14, 2020
Finally looking back at a full year of 2019 home sales, we can say some things with certainty now - sales are up, prices are up, time on the market is down. There was only a slight increase (1.15%) in the pace of home sales between 2018 and 2019 but prices jumped up quite a bit more -- moving up 5.19% to a median sales price of $223,000. The time that it took for a home to go under contract (median days on market) declined 28% in 2019 to only 18 days. This past year (2019) had the highest volume of home sales, the highest median sales price and the lowest median days on market as compared to all of the prior three years.
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. Over the past year, we have seen a few more (+0.74%) detached home sales (951) as compared to the prior year (944) and we have seen a slightly larger increase (+2.21%) in attached home sales during the past year (370) as compared to the prior year (362). The median sales price of detached homes ($240,000) is up quite a bit (+5.26%) over the past year and the median sales price of attached homes ($175,200) has risen a similar amount -- 4.41% over the past year.
Generally, each year, more than twice as many homes sell in Rockingham County as compared to the City of Harrisonburg. Over the past 12 months, that trend continued - though we have seen a 12% drop in the pace of City home sales and an 8% increase in the pace of County sales. The median sales price in both the City and County have each risen (+3.95%, +6.14%) over the past year. The median sales price continues to be a good bit higher in the County ($234K) than in the City ($198K). The lower City median sales price is likely a result of the majority of our area’s attached homes being located in the City.
This has certainly been a year of highs and lows -- which you can follow by tracking the red (2019) line in the graph above. You’ll note that in April, May and July we saw the highest number of monthly home sales in recent history for those respective months - though the pace of sales in nearly every other month were unremarkable within the context of prior years. The 98 home sales we saw in December 2019 was about what one might expect during December based on data from the same month during recent years. We are likely now headed into two slower months of sales during January and February.
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. The pace of sales cooled slightly in 2017 before starting to climb again in 2018 and 2019. The 1,321 home sales seen this past year is the largest number of home sales seen in a single year in at least the past six years. Read on for an even longer look back at sales data to better understand how historic this past year was.
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 annual pace of home sales peaked in May 2017 at 1,340 home sales, then declined for a year and has been fluctuating around 1,300 sales/year over the past 12+ months -- but the median sales price has continued to (mostly) steadily increase over the past three years to the current high of $223,000.
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 and we saw another 1% increase in sales in 2019. The median sales price has been on a much longer rise, however, now having increased every year since 2011 to the current high of $223,000.
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 - and increased only slightly (1%) in 2019. The median sales price of single family homes has increased for each of the past five years -- with a notable 5% increase in 2019 to a median sales price of $240,000, which is the highest median sales price on record for detached homes in Harrisonburg and Rockingham County.
The pace of sales of attached homes (duplexes, townhouses and condos) rose steadily between 2011 and 2017 before declining slightly (-2%) in 2018 -- but then increasing slightly (+2%) in 2019. These recent years of declining numbers of sales is likely correlated to fewer new townhouses being constructed in this area. Over the past three years, the median sales price of attached homes has steadily risen to the current high of $175,200 -- the highest median sales price on record for attached homes in Harrisonburg and Rockingham County.
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 2019) 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 2019 figures, this graph illustrates that the median price per square foot of larger homes (2500+ SF) is a good bit lower ($116/SF) than that of homes with less than 1500 SF ($147/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 (remained there in 2017), and has been holding at 99% since 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 four years, however, stepped things up a notch -- as we now see between 70 and 85 new home sales per year for each year between 2016 and 2019.
December 2019 contract activity was about where you’d expect it to be -- below 70 contracts. The month of December is typically the month when the smallest number of buyers commit to buy homes. We finished out the year with 1,336 contracts having been signed -- an increase over each of the past two years. Looking ahead, we are likely to experience another slow-ish month of contract activity in January, a slight increase in February, and then a large rise in March. Steady buyer activity absent large numbers of new listings continues to keep inventory levels quite low in the City and County.
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 18% over the past year, while the number of attached homes (townhouses, duplexes and condos) for sale has decreased by 56% over the past year. I am hopeful that we’ll start to see inventory levels rise as we get into February, March and April this year -- but if buyers keep snapping up the new listings as fast as they come on the market, inventory levels are likely to remain low.
Inventory levels have fallen 23% in Rockingham County over the past year and have fallen an even more drastic 42% 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 more than three 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 18 days for homes that have sold in the past year. Remarkably, 58% 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 71% 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 three of the other price ranges ($200K-$300K, $300K-$400K, $400K+) over the past year.
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 have fallen dramatically (-50%) over the past year, and the declines in inventory in the $200K - 300K price range (-30%) and $300K - $400K price range (-24%) are not too far behind. The only price range in which we have seen a year over year increase in inventory levels is the $400K+ price range where inventory levels have increased 15% over the past 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 in our local real estate market. The graph above illustrates that while it would take six 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 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 90 lot sales of less than an acre for each of the past seven 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 (58-64 sales) between 2009 and 2012. From a value perspective, the sales prices of these “less than an acre” lots have also been rather stable between 2008 and 2018 -- fluctuating no further than between $53K and $60K -- but now has increased to $73K in 2019. This rise to $73K seems dramatic until you look further back to the meteoric rise and then fall to/from $100K back in 2006.
The pace of sales of parcels of land larger than one acre in Harrisonburg or Rockingham County increased over the past nine years to 99 land sales -- marking the highest year of sales since 2005. The median price per acre declined in 2018 to $14,818 and again (slightly) in 2019 to $14,459. Of note -- some aspects of this “median price per acre” calculation are affected by which parcels actually sell in a given year. The increase in buyer demand over the past nine years has not seemed to have created any upward lifting pressure on values to date.
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 been trending downward over the past nine years and is now at the lowest level seen anytime in the past 15 years!
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 (mostly) decline over the past year and is now below hovering around 3.75%. 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 2.2%. A low local unemployment rate and low mortgage interest rates help our local housing market remain stable.