A service of Scott P. Rogers, Associate Broker, Funkhouser Real Estate Group 540.578.0102 | scott@HarrisonburgHousingToday.com
November 2022 Harrisonburg & Rockingham County Real Estate Market Report
November 14, 2022
There were fewer home sales in Harrisonburg and Rockingham County this October as compared to last October with an 11% decline in the number of closed sales. This results in a year-to-date sales pace of 1,385 home sales in the first ten months of the year which is a smidge (half a percent) behind the pace of home sales in the first ten months of last year. The prices at which homes are selling in 2022 is still quite a bit (11%) higher than last year, and homes are still selling just as fast (median of five days of the market) as they were last year. While the market may be slowing down a bit, it has yet to make much of an impact on the overall 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. Over the past 12 months we have seen virtually no change (-0.53%) in the pace of detached home sales, and a 13% increase in their median sales price. There has been a similar (+0.37%) stability in the pace of attached home sales, and a slightly smaller (9%) increase in the median sales price of those attached homes. The median sales price of detached homes is now up to 325,000 -- an increase of over $35,000 over the past year.
More than twice as many homes sell each year in Rockingham County as compared to the City of Harrisonburg. Over the past year we have seen a slight decrease in City home sales -- with 8% fewer sales -- alongside a 9% increase in the median sales price of those homes. Meanwhile, in the County, we have seen a slight increase of 3% in home sales over the past year and a larger 11% increase in the median sales price in the County. The median sales price in the County is a good bit higher ($309,375) than the City ($246,000) though likely because more townhomes, duplexes and condos are located in the City.
During each of the past four months (July, August, September, October) we have seen fewer closed home sales than during the same month last year. As such, yes, we are starting to see fewer homes selling in Harrisonburg and Rockingham County, though these recent slower months of sales are offset by multiple very strong months of sales earlier in 2022, keeping us on pace with 2021 when looking at the entirety of 2022. Looking ahead, it seems very likely that we will see fewer home sales in November and December of 2022 than we saw last year. Much of the slow down in buyer activity seems to be related to higher mortgage interest rates.
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. For four years (2016-2019) we were consistently seeing about 1,300 home sales per year. Then, in 2020, at least partially fueled by primary and secondary effects of the Covid-19 pandemic, the pace of home sales escalated quickly in Harrisonburg and Rockingham County. We jumped from 1,300 sales a year up to nearly 1,500 in 2020 and then even higher (1,669) in 2021. Sales during 2022 were keeping pace with 2021 up until October, and may fall further behind in November.
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 sold during these time frames. Each data point shows one year of home sales, which eliminates the volatility of evaluating sales figures on a monthly basis. The annual pace of home sales dropped off in late spring 2020 due to COVID but a few months later started rising rapidly, flying past 1,500 sales per year, then eventually past 1,700 sales per year, though it is declining now. The median sales price has been trending upwards for several years now and has reached $295,000.
This graph provides an overall indicator of the state of our housing market, showing both the number of homes being sold each year (yellow bars) as well as changes in the median sales price during the same time period (blue line). Over the past 11 years we have seen relatively steady increases in the number of homes sold each year in Harrisonburg and Rockingham County - with a surprisingly large 13% increase in 2020 followed by another strong 12% increase in 2021. The median sales price has also been consistently increasing for ten years now, up to an all time high in 2021 of $270,000 thanks to 10% increase in 2020 and 2021.
The single family home market in Harrisonburg and Rockingham County has improved rather steadily over the past 11 years with increases almost every year in the number of homes sold. After having peaked in 2016 with 978 home sales, we finally broke through 1,000 sales per year with 1,041 home sales in 2020 and we saw even more sales (1,122) in 2021. The median sales price has now been rising for seven years straight now, from $190,000 back in 2014 to a new (all time) high of $291,250 in 2020. The median sales price of detached homes rose 12% in 2020 and then 8% in 2021.
The pace of sales of attached homes (duplexes, townhouses and condos) rose steadily between 2011 and 2017 and then plateaued for a few years right around 370 home sales per year. But then, 2020. The sales of attached homes jumped significantly in 2020, showing a 22% year over year increase, with 452 home sales. This 22% increase in sales in 2020 was only slightly higher than the 20% increase in attached sales seen in 2021. The median sales price of attached homes has been rising (for the most part) for nine years now and has hit a new (all time) high of $225,000 in 2021, up from less than $150,000 only five years ago.
Historically, well before Covid, many had considered six months of inventory (active listings) to be an indicator of a balanced market between buyers and sellers, but many are reconsidering that metric now. The “BUYERS” trend line above shows how many buyers are buying in a six month period. The “SELLERS” trend line above shows how many sellers are in the market (active listings) at any given time. Over the past several years saw seen a steady increase in buyers and a declining number of sellers, leading to a strong seller’s market. Over the past six months we have seen buyer activity starting to level out and inventory levels starting to rise slightly.
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 2021) 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 2021 figures, this graph illustrates that the median price per square foot of larger homes (2500+ SF) was a good bit lower than that of homes with less than 1500 SF during nearly every year. 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. 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 was been holding at 99% since 2018, but popped up to a median of 100% in 2020 which held 2021 and is holding in 2022.
New home builders built a record number of new homes in Harrisonburg and Rockingham County last year -- 144 -- approaching twice the number built per year in many of the past five to ten years. These figures, of course, only represent new homes being marketed through the MLS. Plenty of additional new homes are built by local home builders on lots already owned by the person who will live in the home - and thus they do not show up in the MLS. These new home sales show a steady increase in the price per square foot of homes being built and sold over the past ten years, with the largest increase in that value taking place in 2020.
Contract activity, buyers and sellers signing contracts to buy and sell homes, are the leading indicator of what we will see in future months of closed sales transactions. Higher mortgage interest rates may have finally meaningfully subdued buyer activity as it took all the way until July 2022 for buyer activity to start slowing down. The number of buyers signing contracts to buy homes in July, August and September of 2022 was significantly lower than the number of buyers signing contracts during the same month last year, but October showed the largest change. There was a 44% decline in contract activity this October compared to last October. Yikes!
Over the past several years, inventory levels have kept dipping 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. So, lots of 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. We have seen inventory starting to increase in 2022, though it seems to be declining again now.
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 declined over the past two years but has increased over the past year... in part due to new construction offerings. The number of attached homes (townhouses, duplexes and condos) for sale has also significantly declined over the past two years though has stayed steadily low over the past year. Normal seasonal changes in inventory levels (more homes on the market in the spring) do not seem to be holding true at this point.
Inventory levels are a somewhat higher right now in Rockingham County (112 homes for sale) as compared to a year ago -- though quite a bit below where inventory levels were three years ago. Inventory levels in the City are also slightly higher now (27) than they were a year ago, though that is not much consolation to home buyers hoping to purchase in the City as these homes continue to go under contract quite quickly. It seems unlikely that we will see inventory levels start to meaningfully rise anytime in the near future as buyer demand still seems to be outpacing the supply of homes for sale.
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 5 days for homes that have sold in the past year. Remarkably, 80% 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 90% 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.
Days on market -- how quickly homes are going under contract -- can be an excellent indication of the mood of the local housing market. Independent of how many homes are selling and the prices at which they are selling -- if they are going under contract quickly then the market is strong and power is tipped towards sellers -- and if homes are taking a longer time to go under contract the market is not quite as strong and power is starting to balance out between sellers and buyers. Over the past three years we have seen a steady decline in how long it takes homes to go under contract, with a current median of five days on the market.
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. Sales have been stable in the $200K - $300K price range and we have seen year-over-year increases in the $300K - $400K and $400K+ price ranges over the past year.
Inventory levels shift up and down seasonally, so this graph looks at changes in average inventory over a 12 month period. Over the past year we have seen relative stability in inventory levels in the $200K - $300K price range as well as the $400K+ price range. We have seen continued declines in the number of homes for sale in the under $200K price range and that trajectory is not likely to change given increasing home values. Inventory levels in the $300K - $400K price range have been steadily increasing 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 most price ranges in our local real estate market. The graph above illustrates that while it would take about two 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 take about a month to go through the inventory between $300K and $400K and less than a month to go through the inventory under $300K.
For six of the seven years between 2013 and 2019 we saw right around 80 sales per year of lots of less than an acre in Harrisonburg and Rockingham County. In 2020, that annual pace of sales increased a good bit to 108 sales of building lots. Despite that increase in the number of lot sales, the median sales price for those lots declined slightly to $69,450. That decline is likely a result of which particular lots sold, not necessarily an indication that all lots are selling at lower prices now than they were a year ago. We then saw 146 lot sales in 2021, which means last year was the strongest year of lot sales in the past decade.
The pace of sales of parcels of land larger than one acre in Harrisonburg or Rockingham County has increased over the past ten years to 133 land sales in 2021-- marking the highest year of sales in over 15 years. The median price per acre had remained right around $15,000 per acre for four years between 2017 and 2020 but increased to just over $17,000 in 2021. 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 10 years has not seemed to have created any significant 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! The moratorium on foreclosures likely kept that figure low in 2020 and 2021.
As shown in the top graph, over the past several years mortgage interest rates steadily declined to a historic low rate of 2.67% in late 2020 before climbing throughout 2021, but not much above 3%. In 2022, mortgage rates have climbed much more quickly, surpassing 5% at the end of April, surging past 6% in September and then hitting 7% in October! The second graph follows the local unemployment rate, which has now returned to the typical 2% - 3% range after having peaked at 10.2% at the start of the pandemic.
