There have been several articles in the local press over the last week or two announcing that construction will begin at Clevenger's Corner next spring. Since April's numbers show approximately 23 months worth of inventory sitting here unsold in Culpeper County it's interesting timing! Overall, houses are not exactly selling like hotcakes in Jeffersonton, Virginia.

Now I will admit that what is selling is almost entirely new construction.  And it's selling because the builders are providing incredible deals. K Hovnanian, for example, has been advertising that if you buy a house from them now there are no payments until 2008. We're seeing $10,000 credits towards closing costs. $10,000 towards upgrades and sometimes more.

What the public doesn't see are the incentives to real estate agents. My inbox receives multiple e-mails daily offering me $5,000 or $10,000 bonuses, chances to win cars and trips, etc. All these are offered as incentives to bring my buyers to the builder.

Given all this as background, it seems like a poor time to begin this project. I'm not saying they won't do it. But I will say that spring of 2008 is quite a ways off yet. They can do some site work and watch the market. Don't be surprised to see them building very slowly or pushing back the date.

Of course, perhaps by next spring everything will have turned around and we'll be looking at a much more robust market. But....don't put any money on that scenario just yet! Let the big builders place those kind of bets!

Tonight a client asked me what I thought it would take to get the market moving again in this area. Here is my list of what it will take to change current market conditions.

1. Lower gas prices

Gas prices are clearly playing a role. They played a dramatic role in slowing the market, initially and they're still a drag. The vast majority of people who are moving into this area are commuting into Northern VA and DC. If gas prices suddenly dropped by, say, 25 cents, I'd be willing to bet you'd see a jump in activity almost immediately! Unfortunately, I have to say I don't see that happening any time soon.

2. Lower interest rates

While interest rates are already historically low, an additional drop would likely move some fence sitters to jump in now. If enough of them jump you get a lot of other buyers who were waiting for a sign that it's the right time. I don't see any interest rate cuts in our future, but I'd bet on this before I'd bet on lower gas prices!

3. Large reduction in inventory

I believe this one will occur, it just won't happen overnight. Over the course of the next six months, you'll see inventory fall. The faster it falls, the better for the overall market. But there are still way too many people with houses for sale who don't really need to sell now. If you've got no reason to sell this year rather than next...wait!

4. Large price drop

If sellers drop their prices enough, buyers will start to jump on the bargains. Right now we've got a standoff going on. Buyers still think prices are too high and sellers have dug in their heels and declared their not going any lower. In this kind of standoff, in my opinion, sellers always ultimately lose. That may not be true on an individual basis, but if you look at the larger market over time, it's true. Generally, sellers need to sell more than buyers need to buy.

5. A huge influx of new buyers

I don't know where they might be hiding, but this would definitely jump start the market. If you saw a major employer announce 100 new, high paying jobs locally, I believe it would have a pretty quick influence on the local real estate market.

I've given you some of my impressions of how likely I think these things are. What do you think? What other factors do you see that could change the market that I've missed?

The April numbers are out and they're not pretty! Here's a snap shot for the local five county area.

APRIL MARKET STATISTICS

These numbers by themselves don't reveal the entire story. The really bad news here is that inventory jumped substantially, across the board. In every jurisdiction we're very near our all time high for inventory. New contracts and solds revealed very little improvement. In fact, in Culpeper County solds dropped pretty dramatically. And year over year numbers look pretty dismal.

Sorry sellers, but there is absolutely no good news to be found here. I'll say it again. (And I know I sound like a broken record!) There is no way to change this market without substantial price drops from sellers! Two other possibilities for salvation exist, but they seem like a long shot to me.

One is that over half of current inventory gets taken off the market. Given that the trend is in entirely the opposite direction I wouldn't count on that. And, there are truly some people who must sell. I think at one time we had enough sellers who just hoped to sell that they could have all taken their homes off the market and it would have made a difference. Now I don't believe that's the case.

The other possibility is that hoards of buyers come out of the woodwork, ready to buy. While I do think there's some pent up demand out there. And there are some smart buyers who are aggressively negotiating good deals ahead of the pack. But the vast majority of buyers will wait until everyone else jumps. It appears human nature is to follow the herd!

Culpeper still looks worse than the other counties and I still believe it's because of the rate of appreciation there as well as the impact of gas prices. Most of the peope who bought homes there were commuters into Northern VA and DC. The trade off of longer commute for more house is looking less attractive now!

If you'd like to look at the big picture you can go back to my earlier blogs on market statistics over the last year by county. They can be found under the category Local Market Conditions.

I'm interested to hear your thoughts as buyers, sellers and real estate agents about what you're seeing in the market. Do these statistics match up with your experiences?