At the end of 2008 I made some predictions about what the real estate market would likely look like for this year.

We've now got enough data from the first half of the year to take a look at how accurate I've been.

First of all, I predicted that the Obama administration would intervene in the housing markets and that this intervention would make a difference in the real estate market locally.

I got this one partially right. They did intervene almost immediately with a moratorium on foreclosures. You could argue about how much it helped, but we did see some let up on the loads of foreclosures coming on the market in the 1st quarter. And I would argue that it gave some mortgage holders time to rethink their strategy. Some of them decided dumping large numbers of foreclosures in the same market at the same time was not all that smart!

But I also anticipated that the adminstration would use that extra time to put in place a real plan to reduce the number of foreclosures. Unfortunately, this administration's plans, like those of the Bush administration before it, have proved inadequate to the challenge at hand.

The one measure that I would say has made a considerable difference in this market is the $8000 first time homebuyer tax credit. There are homebuyers out there buying homes purely because of this incentive. Between that additional demand and the reduction in the dumping of scores of foreclosures, we have indeed, seen some bottoming.

I was partially right and partially wrong on the inventory question as well. I anticipated that while the overall trend would be down, year over year, that we'd see a rise in inventory briefly in early spring, 2009. This is a seasonal pattern and I expected to see what we've normally seen. I was wrong and the decrease in inventory continued, even through the early spring. There was a blip of an increase in Fauquier County. And Rappahannock continued it's tradition of bucking the trend with an inventory that continues on an upward trajectory. But overall, inventories have declined steadily throughout the year.

I suggested prices would stabilize during the summer months. I may still get that right, we'll see. What it looks like right now is price appreciation at the lower price ranges, price stabilization in the mid range and continued price declines in the upper price ranges. The average sold price is down 31% year over year in Culpeper County thus far. The median sold price is down just 11% (close to my prediction of 10%). In Fauquier the average price is actually up an astonishing 45%, with the median sold price down 8.69%. In both of these instances I'd pay a lot more attention to the median number. The average is too easily skewed by large transactions. In Prince William county the average price is down about 5% and the median down 6.67%. But anyone trying to buy a home in Prince William under $400K knows how tough the competition is. Prices are definitely increasing in that market segment.

The number of homes sold for the year looks like it will slightly beat my projections. We're slightly ahead of where I thought we'd be right now. Barring a large drop off, we'll beat my projections, probably by 5-10%.

At this point, nothing I said makes me look like an idiot, always a good feeling! But it's only August!

Want to go out on that limb with me? What are your projections for the rest of the year?

There is nothing dramatic in the numbers for June. This is good news. The market is relatively stable at this moment.

With the exception of Rappahannock County, inventory remains almost unchanged from May. Rappahannock had a huge jump (for Rappahannock) from 89 to 100 homes for sale. But they also had another good month for sales with 6 homes sold.

In Fauquier, Culpeper and Prince William Counties there was a change of a few properties in the overall inventory. But look at year over year and it's amazing how much we've improved. Prince William has roughly half the inventory it had a year ago. No wonder we're seeing things go under contract in days with multiple offers!

While Fauquier and Culpeper haven't seen the dramatic decrease we've seen in Prince William, each of them has at least 30% less inventory now than a year ago.

As you'd expect, the county with the lowest inventory, Prince William at less than 4 months, shows the most stability in prices. Culpeper and Fauquier both have roughly 8.5 months of inventory and prices still appear to be declining there. But the stats are a little misleading there. Year over year stats show a price decline of approximately 25%. And, while June stats show a price decline over May, the month to month numbers are not very reliable in this category. Because the volume of homes sold in any given month is relatively small, the numbers are easily skewed. Still, prices remain at bargain basement levels.

We are bouncing along the bottom in my opinion, maybe moving up a little in Prince William County. The big question here is still, how long will we stay on the bottom.

I'll be working over the next couple of weeks on a look back at my 2009 predictions and how I'm doing so far. Stay tuned for that and your chance to make fun of my skills as a prognosticator!

May proved to be mostly a month where the numbers went sideways.

Whether you're looking at Culpeper, Fauquier, Prince William or Rappahannock County, there are no dramatic changes.

There were some subtle signals that things have slowed down a tad in Culpeper county. Both new contracts and sales actually fell last month.

In Fauquier county inventory actually rose, ever so slightly (3 houses). But sales jumped month over month from 54 to 70, well above last year's pace at this time.

Prince William continued to shed inventory with only 3.7 months of inventory now available. I continue to see buyers discouraged with what they're finding available under $400K in Prince William.

Rappahannock County had the biggest jump in sales with 7 units selling last month. This being Rappahannock and the universe being so small, it appears to be a big jump (SALES TRIPLED!). But inventory is exactly where it was a month ago and we're unlikely to see any sudden movements in this quiet corner of the market.

Overall, signs would still seem to indicate we're at or very close to a bottom. Prince William still looks to be on its way back up with price appreciation. And, with a tiny amount of inventory available, prices there will likely continue to rise throughout the summer months.

Governor Kaine announced the Virginia recipients of the Neighborhood Stabilization fund grants yesterday. Unfortunately, neither Fauquier or Culpeper made the cut. Incredibly, Prince William county doesn't appear to have gotten a dime!

This would have had a small impact, but every little bit helps.

There was a little money given to Shenandoah, Frederick and Warren counties, $2.5 million for all three combined.

I'm not sure you could argue they are harder hit than places like Culpeper. In fact, I'd make a pretty good argument against that.

CLARIFICATION/CORRECTION:

It appears Prince William got funds as part of an earlier $7 million award, along with Fairfax county.

The original announcement said there was $20 million available for the Open Submission portion of the program and another $10 million available for the Competitive Program. Between the $17.5 announced yesterday and the earlier $7 million awards, there should be another roughly $5 million available. So there may yet be funds available for Fauquier and Culpeper.

There have been some positive signs lately in the real estate market. And, being an optimist at heart, I probably tend to focus on those pieces of news. (Let's face it, it's easier to get up and do this every day if I'm optimistic!)

But I don't want to be an unthinking cheerleader for the industry. The news is truly mixed right now and I want to highlight a couple of pieces today that give you the other side of the picture.

Bloomberg has a piece today on the latest mortgage delinquence/foreclosure numbers. To say the numbers aren't pretty is to put a little too good a spin on it. The delinquency rate and the numbe of loans entering foreclosure are both the highest since 1972. And, these are not sub-prime loans. We're talking about the loans any lender, in any market, would have thought were good. These are foreclosures occurring because of a combination of a terrible economy and the huge decrease in the value of the homes. If you lose your job and your house is worth half of what it was 5 years ago; even if you put 20% down, there's a good chance you've got a problem. If you have to sell quickly there may not be buyers at a price that gives you even enough to pay off your mortgage. Foreclosures continue to drive prices down and they continue to come onto the market at an alarming rate. Even locally, whether you're talking Prince William, Fauquier or Culpeper counties, the foreclosures are a continuing problem.

Meanwhile, the Wall Street Journal (subscription required) takes a look at whether a home is even a good long term investment. The article is not exactly an encouragement to buy instead of rent.

Here's the heart of their argument:

Yet look at the numbers. Since 1987, when the Case-Shiller index of 10 major cities begins, it's risen from an index value of 63 to 151. Annual return: Just 4.1% a year. During that period, according to the Bureau of Labor Statistics, consumer prices rose by 3% a year. Net result: Home prices produced a real return of just 1.15% a year over inflation over that time.

Critics may point out that the analysis is unfair -- after all, it starts counting near the peak of the 1980s housing boom. Fair enough. Look at the performance since, say, early 1994, when home prices were near a historic trough. Surely someone who bought then has made a bundle.

Not necessarily. Since then the ten-city index has risen from a value of 76 to 151. Annual return: 4.7%. Inflation over that period: 2.5%. That's still only a real return of 2.2% a year above inflation.

They go on to add that a home could cost you an additional 2% in things like property taxes, insurance, repairs, maintenance, etc.

I'm not saying I agree with their analysis. They admit that focusing on these 10 cities is not necessarily a representative sample. But I do think that not everyone should own a home and that it's important to think it through carefully before you buy, especially now.

The nationwide numbers out today show that, year over year, home prices continue to decline. That decline was over 18% nationally. Because everyone hears national numbers, rather than local, the tendency is to assume that whatever you're hearing is also the situation locally.

Year over year, our numbers look worse than the national average. The latest numbers available from the local multiple listing service show year over year price declines between 23-32%. But that's only one piece of the picture.

If you're buying a foreclosed home or possibly even a short sale, you may not feel the pricing power you were led to believe you'd have. You see, all the buyers are looking in the same price range. So, even if there are 25% fewer buyers than there were a couple of years ago, if they're all looking at properties, say, on the western end of Prince William County under $350K there is little or no buyer leverage.

So, the pricing picture is considerably more complicated than what you hear in the national press. I'm not blaming them. You can't write a coherent article about prices everywhere! Just be aware that the picture here is a little more nuanced.

The other piece of information in the home price report was that prices nationwide are now at 2002 levels. I suspect we're not quite that low yet. But I haven't yet had an opportunity to do an analysis. I am seeing people who've been in their homes five years or more still under water.

And, if you're wondering when we bounce back up, this Bloomberg article wasn't particularly optimistic:

 “There are very few V-shaped recoveries in the history of real estate, and this one is likely to be even slower because of the size of the bubble,” said Robert Shiller, the Yale University professor who, with economist Karl Case, created home price indexes in the 1980s now used by Standard & Poor’s.

In short, don't expect any rebound in prices soon. I believe from a price perspective we'll bounce along the bottom for quite some time, perhaps a couple of years before we begin very slow appreciation.

If you're looking for a ray of sunshine, one analyst on CNBC suggested yesterday that we could fix the housing problem any time we wanted by increasing the number of immigrants.

April results are in and for the first time in quite awhile we're seeing a small uptick in inventory in most counties. It's not large enough to be a concern at this point. In fact, given that we're in the busy spring/summer season, it's surprisingly small.

In Culpeper there are currently 494 homes for sale. That's still less than we had in January. And it's a huge improvement over the 800+ homes for sale there a year ago. Sales remain strong with 62 homes sold as opposed to 48 last year at this time.

Fauquier remains flatter. Inventory also rose slightly here. There are 569 homes for sale here now as opposed to 556 a month ago. And we're still much better off than April of 2008 when there were 764 homes for sale. But sales aren't much better than a year ago. 54 homes sold in Fauquier County in April. 49 were sold in this period a year ago.

Prince William was the exception to the increase in inventory. It continues to shrink there; good news for sellers, not good news for first time home buyers. There are 2944 homes for sale in Prince William county, roughly half of what was for sale there a year ago at 5880. Sales decreased very slightly month over month: 741 this month vs 750 last month. But homes are still selling much faster than they were a year ago when only 639 sold in April.

Rappahannock County showed a very large jump, from a percentage point of view. There are now 89 homes for sale here vs 76 last month. 27 new properties came on the market, a lot for this small county. That's the highest number of new listings coming on the market in one month in the last four years. But the number of contracts written also jumped to 5 even though sales fell to 2 last month. Large jumps in inventory in Rappahannock previously have resulted in a subsequent withdrawal of many of those listings as people tested the market and then changed their mind about selling. We'll see if the same scenario plays out this time around.

Overall, the market appears to continue to recovery. The only worry here is the seemingly unending stream of foreclosures coming on the market. Between foreclosures and short sales there appears to be no likelihood (except in Prince William) of price increases any time soon.

Prince William county continues on its headlong pace towards a seller's market. There's now only a four month supply of inventory in Prince William county. And, that's not because there's no inventory coming on the market. 1116 new listings were added last month. Meanwhile, 1200 went under contract. We are seeing many fewer new listings added than a year ago at this time. 1631 new listings were added in March of 2008. Meanwhile, closed sales were at 750 in March of 2009 compared to 502 a year ago. Meanwhile, the average sold price crept up from last month's $204K to $210K this month.

I'm not expecting big leaps in pricing in Prince William county. But given the short supply and the increasing demand I think we'll likely continue to see small gains in prices throughout the spring/summer season.

I'm thrilled at the progress we're making in Culpeper. We're down to 8 months of inventory there. Last year at this time there were over 800 homes for sale. This month there are only 464. Last year in March we sold 42 homes, this year 58. There is a March jump in new listings in Culpeper and the other counties, but nothing like the jump we've seen in recent years. And, as long as the net result is still declining inventory, the indicators seem pointed in the right direction.

Prices are still falling in Culpeper County, but I predict we'll see some stabilization by the end of the season. There are already signs of that in the bidding wars on properties priced under $300K.

Fauquier is moving in the right direction, but more slowly than Culpeper or Prince William. We've still got almost 13 months of inventory in Fauquier County. As in the other counties, the lower priced tier of homes is moving pretty quickly. But there's an awful lot of inventory above $350K that's just sitting. There are fewer foreclosures in Fauquier and, in some sense, that's hurting the market. Many of the buyers out there are bargain hunters. And, the bargains are harder to find in Fauquier County.

Still, the inventory is down to 556 as compared to 734 at this time last year. But unlike Culpeper and Prince William County, Fauquier's inventory actually rose this month compared to last month. That's not unusual for March, but is unusual compared to what's going on around us. Last March 35 homes sold in Fauquier County. This year in March it was 43. Again, we're headed in the right direction, but slowly.

Prices are still falling in Fauquier. The average sales price is $224K now as opposed to $318K a year ago. Fauquier is the hardest county to make a case for price stabilization this year. I don't anticipate stabilization in prices until we get a lot closer to six months of inventory. We may hit that level if we have an extraordinary spring/summer season. For now, my bet is that Fauquier prices remain the most likely to continue to fall.

Rappahannock County shows inventory rising slightly (76 compared to 71 a year ago). New listings were 17 in March of this year compared to 11 a year ago. There was 1 new contract in March and 3 closed sales. Those are typical Rappahannock numbers. This is the county that tends to be more sheltered from the real estate trends in the rest of the area. Prices do seem to still be falling in Rappahannock, although it's hard to identify by looking at the overall trends. And, Rappahannock residents continue to take their properties off the market rather than suffer the loss in value.

In the tough seller's market of the last few years a lot of sellers have tested the waters by putting their house up for sale, and, in the end, retreated. All those houses that will theoretically come back on the market when the market improves are called shadow inventory.

We're looking at two basic kinds of shadow inventory. The first is individual owners. They want to sell, maybe even already tried and are just waiting for the right moment to put their home on the market.

The second kind of shadow inventory is foreclosure inventory. The banks are reportedly sitting on 600,000 homes nationwide that they've already foreclosed on, but aren't yet putting on the market.

Both of these categories have the potential to dramatically increase inventory, which has been steadily dropping for at least a year now.

The thing is, I'm not overly worried and I think the danger has been exaggerated.

Yes, there are a lot of homeowners who still want to sell. But it's not just the low number of sales that keep them from trying. They also don't want to sell at these prices. And, if they're going to wait for prices to recover even a quarter of what they've lost, I think they're looking at waiting several years. Some of those homeowners will have changed their mind by then. They'll remodel the house to suit their needs and they'll stay. Those that do still sell will not do so in one huge mass. Some will have a higher tolerance for lower prices and will sell sooner. Others will likely wait a year or two or three. I don't believe there will be some magical month where all this "shadow" inventory pops onto the market at once.

The foreclosure properties are a bigger concern. But I'm still not convinced it will be a huge problem. A lot of those 600,000 homes will be in CA, FL, NV and MI, places hit harder than we were. So, the numbers will likely be smaller than people anticipate. Secondly, the bulk of these are likely to be at the lower price ranges. We've actually got a shortage of inventory at those price levels. In places like Prince William County and even Culpeper County, a lot of inventory would be absorbed very quickly by first time buyers. And, I believe the banks are deliberate spreading out the foreclosures in order to manage their losses. It's not in their interests to dump everything on the market at once.

So when someone tries to scare you with all the shadow inventory waiting to hit the market, take it with a grain of salt. It may not be all that bad!

According to an article in Sunday's New York Times, it's not just homeowners that are walking away.

Apparently more and more banks are deciding some properties just don't have enough value to be worth the foreclosure process. When you consider that NAR (National Association of REALTORS) has estimated that the foreclosure process can cost a bank $60,000, properties at the low end of the market quickly become more trouble/expense than they're worth.

Of course, if you're a municipality with vacant, deteriorating homes where no one is paying any property taxes, you've got a big problem.

We haven't yet seen much of this in our area. Prince William would, perhaps have been most vulnerable to this with their high volume of low cost condos going into foreclosure. But the prices fell fast enough and demand jumped enough that the problem has been dodged.

There seems to be no chance of seeing this kind of thing in Fauquier or Rappahannock Counties. Culpeper does have some foreclosed townhouses selling below $100,000. But the numbers are very small and there seems to be enough demand in that price range to absorb what comes on the market.

I'm going to do it! I'm calling a bottom!

You can tell me I'm crazy. And, I won't entirely disagree. Bottoms are unknowable when you're there. You know it's the bottom after the fact when the statistics confirm it. So, anyone who tells you this is the bottom is, at best, guessing.

And, I will admit that this is an educated guess. But I look relentlessly at the numbers, day in and day out. I watch for trends. I study this stuff as though I was prepping for a final exam.

And, everything I see makes me believe we're at a bottom here. In places like Prince William I think it's clear we've already passed the bottom and all those people who are still waiting had best hurry up! Prices are already starting to rise.

In places like Fauquier and Culpeper it's much less obvious. There's still too much inventory and we have a ways to go to get to "normal". But the trend is solidly in the right direction. Even now, at the end of March when there should be tons of new inventory coming online for the spring market, inventory is still dropping. But new buyers are coming out.

Let me add one note and one caveat.

This is a sales bottom. I don't believe we'll see sales numbers fall from here, other than the seasonal dips we would ordinarily see. This is not a price bottom everywhere. In Prince William I believe prices have bottomed as well. I think you'll see small appreciation in Prince William this year.

In Faquier and Culpeper I believe you're still looking at a very small downward adjustment this year, perhaps flat if we get very lucky.  And we will not bounce off the bottom quickly. Expect relatively flat prices next year as well.

And, the caveat is, this assumes that we are not, in fact, entering another Great Depression. It assumes that the recession lingers through much of this year but that there is some recovery in 2010.

And, if the plan Republicans are introducing today for a $15,000 tax credit should become law, we could even see more price appreciation than I'm currently predicting. A note that this new tax credit is predicated on the buyer being able to put 5% down on the house.

Happy bottom!

Despite what you read in the news media and hear from banks, in Culpeper County, at least, there does not appear to be much slowing down of foreclosures.

There were 78 new listings in Culpeper last month. 38 of those were foreclosures. Another 17 were short sales, meaning the house is worth less than it will sell for. That's 55 listings or just over 70% of new listings being bank owned or influenced.

It's going to be tough to get to a stabilized market as long as that's true. While Prince William county appears well on its way to a more normal real estate market; Culpeper county clearly still has  way to go.

So, what hapened to all the banks who were supposed to be holding off on any more foreclosures?

In general, we're seeing a long lag time between a foreclosure happening and that particular home being put up for sale. So, most of these homes that came on the market in February probably actually went into foreclosure some time in 2008.

If the banks really are following a moratorium on new foreclosures, I'd expect to see the impact of that in the April/May time frame. Will owner occupied homes then start to come back on the market to fill that void? I suspect that most will hold off waiting to see some evidence of appreciation in values.

That may mean the tightest inventory we've seen in Culpeper during the spring and summer for at least three years. And, if that happens, there may, finally be some good news for sellers.

Good news in this case simply means a stabilization of prices. I think we're still a long way from much in the way of seeing rising prices!

It's not only the Days on Market and number of offers and volume of sales that are improving in Prince William. I'm also seeing some strength in pricing there.

The sale price as a percentage of list price has risen year over year from 87.64% to 90.97%. While it's true that much of this strength is in the lower price ranges, the fact remains that inventory is selling and prices are firming up. And, in the under $350K inventory, the pricing strength is even more apparent with very little selling much below asking price.

And since we're still not seeing the typical early spring flood of new inventory, prices, so far, seem likely to continue strong.

There's some indication of firming of prices in Fauquier, although it's too small to assume there's anything in the way of a trend here yet.

And Culpeper prices remain soft at best, probably still declining.

The question continues to be whether higher prices and lower inventory in Prince William and east will push people further out as the peak sales season approaches.

Final February numbers became available today. There are no startling changes to current trends. Inventory continues to decline. Sales continue to look pretty strong.

Culpeper's absorption rate indicates that current inventory would be entirely absorbed in just under 13 months. That's the best that number's looked in a very long time.  In fact, for the first time in several years Culpeper's absorption rate is higher than Fauquier County's rate. Fauquier County's absorption rate shows it would take almost 16 months to get rid of current inventory. Prince William County stays at an astonishingly low 5 months. And, Rappahannock continues to move along at its own pace!

The biggest surprise to me in this month's data is that we did not see the big jump in new listings that I expected we'd see. Typically this is when you see sellers trying to get a jump on the spring market and inventory starts to climb. And we did see small increases in the number of new listings in a couple of counties. But they were very small increases and sales increased enough that there was no impact to overall inventory.

Sometimes what I see on a particular day is more striking than numbers. Today I was out showing properties in Prince William County. I showed four properties. The first one had already gotten one offer in today. At another property we were greeted by an agent and her clients who informed us that the bank had already accepted their offer. At the third a property that had just gone on the market this week already had cards from 21 agents that had shown it. And, our showing was interrupted by another couple right behind us.

The only property of the four that didn't appear to be overrun with potential buyers was one that clearly had water issues and possibly even foundation issues in the basement.

If you're looking at properties in Prince William County that are under $350K we're back to multiple offers, bidding wars and potential buyers tripping over each other in houses.

Overall, the market seems healthier and I'm pretty optimistic that the number of sales overall will be substantially above 2008. I still don't anticipate a big jump in prices. However, prices in Prince William are likely to increase this year if current trends continue.

Sellers have reason for optimism. Buyers still have a great market, but there's definitely a sense of urgency if you're buying in Prince William County.

It's time to take a look at what the market results for January had to say. And, once again the picture remains positive if you're looking for good sales numbers.

In Culpeper the sales for January dropped by about 50% from the previous month. But lest you think that's a negative, that's still about 30% higher than at this time last year. Inventory continues to shrink, down to about a 16 month supply right now. And, based on the number of contracts written, things continue to sell. This is all good news for sellers. The bad news remains that what is selling is primarily foreclosures and they're selling at a steep discount. The average sales price fell about 40% year over year. And, as long as the foreclosures continue to hit the market, pricing will remain depressed. More on the picture later.

In Fauquier County we see the same kind of patterns with inventory falling to a 15 month supply. Sales fell there in January as well, but again, that may have more to do with the holidays than with any specific market forces. And, the number of contracts written remains strong. In Fauquier sales prices were more stable in January, falling only 4% year over year. That's one month's data so it's too soon to tell if that's an anomaly. With 15 months of inventory I'd be surprised to see any significant strengthening of prices in the short term.

Prince William County is the place to be if you're a seller, but may be becoming problematic for buyers. We're down to a five months supply of inventory. That indicates we've got a pretty balanced supply of inventory there. And, my experiences there bear that out. As I was showing homes this weekend in Prince William, a smaller percentage of what I showed were foreclosures or short sales. But prices are still down significantly, 34% year over year.

Rapphannock County also saw inventory shrink this month, falling to 73 homes for sale. That's a pretty fast turn around from the high of 103 we saw in October. Some of that is attributable to sales, but much more of it is from properties being withdrawn from the market. And, even in Rappahannock County there are foreclosure sales. One occurred just down the road from my house this month.

The real estate market may be about to see some changes, however. In anticipation of the President's announcement on Wednesday of a plan to help the real estate market, many banks have now announced foreclosure moratoriums. The banks include giants such as Citi and Bank of America. And Fannie Mae and Freddie Mac had already announced foreclosure moratoriums of their own. With only five months of inventory available now in Prince William County we may be on the verge of seeing some price stabilization at the very least over the next couple of months. Depending on what happens after the moratorium there's even the potential for some price increases.

If I were buying in Prince William county I'd be tempted to jump sooner rather than later. As I believe this is the best combination of inventory, prices and incentives you're likely to find for the next several months. In Fauquier and Culpeper inventory levels are high enough that I think you could justify waiting a couple of months to see what will happen. And, in Prince William, it's possible that next fall the edge would go back to the buyers again. But that's a little too far out to predict without knowing what actions we'll take from DC.

The recent market trends continued in December without much significant change. Prices and inventories continue to fall, this month even in Rappahannock.

Prince William county stands out as inventory there is now down to four months' supply. That's astonishing given the state of the overall real estate market, the economy and how many foreclosures there have been. With only four months of inventory it's hard to see prices falling much more in Prince William. But there are probably still some owner occupied properties there that are overpriced.

Leaving Rappahannock aside for the moment, Fauquier has the biggest inventory problem at the moment. They're still sitting with 12 months of inventory. There have been fewer foreclosures there and sellers of non-foreclosures have been unwilling to make the necessary price cuts to compete with what's going on in surrounding counties. But prices in Fauquier are unsustainable, even at current levels. If you can buy a townhouse in Manassas or Gainesville for the same price, or cheaper, than one in Warrenton, you're likely to choose the shorter commute.

Culpeper's inventory continues to drop, slowly but surely. Inventory there is down to nine months. While we continued to see bidding wars on foreclosures in lower price ranges in early December, there's some anecdotal evidence that traffic has slowed in the last two weeks. It'll be interesting to see if January's numbers show any change to current trends.

It's also interesting to note that banks have a lot of additional foreclosures sitting, waiting to be put on the market. I suspect they're still trying to spread those losses over multiple quarters. But it's hard to determine how bad the foreclosure problem still is when you know there's another shoe out there, waiting to drop.

Rappahannock's inventory declined spectacularly in December. Some of that may be people taking their homes off the market during the holidays. And, there were 6 properties that went under contract in December. So, January's numbers may give us a better feel for what to expect going forward in Rappahannock.

The other thing to watch in the next month is what steps the government takes, if any, to intervene in the real estate market. Check this space next month to see what those impacts were.

If you had to sum up 2008 in a few words "ugly" would be right up there for sellers as well as for real estate professionals. If you're a buyer or potential buyer I think the word would be "opportunity".

The big change in 2008 was pricing. Prices have dropped dramatically year over year. The range is 35% in Culpeper to 40% in Fauquier and Prince William. Most of the drop in prices has come from foreclosures sales. In fact, much of the sales activity in general has been foreclosure sales. And what wasn't a foreclosure was, more than likely, a short sale.

Inventory continued to drop over the year in every jurisdiction. Inventory dropped because many homeowners gave up on selling. It also dropped because banks got better at pricing foreclosures and they started to sell.

Sellers remained frustrated and in pain. They struggled to compete with drastic price reductions by banks. And, it didn't matter that most owner occupied homes are in much better condition than most foreclosures. Price, price and price were the top three criteria buyers seemed to be looking for. And newspapers everywhere felt the pain of less real estate advertising.

It's a year most of us, whether we're in real estate or not, won't be sorry to see the end of! Here's to a better 2009! More on that tomorrow.

Buyers began looking, but cautiously. Investors (the pros, not the amateur flippers) were out in force. Buyers wanted bargains, and they got them. It was a market made up primarily of first time buyers or those who were able to rent out their home in order to move up. Financing was trickier, but still available. And, the process was a lot slower and more painful as almost every transaction involved painful negotiations with banks.

Real estate agents left the business in some cases. But more often we saw them finding ways to supplement their income. You're now more likely to see your real estate agent at the checkout counter at Home Depot than in the local paper in a real estate ad.

The November numbers are out and there are a few interesting things to note.

Across the board, the number of new listings coming on the market is down, inventory is down and sales and new contracts are down. It's not unusual to see a little drop in new inventory coming on the market in November. But I believe that part of this is that we're seeing fewer foreclosures hitting the market. We do not necessarily see a similar drop in contracts and sales in November. So, there are probably non-seasonal reasons for this. One possibility is that fewer foreclosures on the market means fewer properties of interest to the buyers out there. Another possibility is that all the bad economic news out there has some buyers waiting to feel better about their own financial future. A combination of these is the most likely culprit. And, while you may have heard about the recent surge in mortgage apps, most of those are refinancing applications and may not affect sales here in the next month or two.

Culpeper is showing a further drop in inventory to 592 units. That's the lowest number we've seen in over 2 1/2 years. Only 75 new properties came on the market and only 40 were sold. 42 new contracts were ratified. It's interesting to note that the last time inventory was at this level in April of 2006, there were 67 properties sold and 70 new contracts ratified. The inventory in Culpeper is actually a little overstated. There are two new condominium developments in Culpeper that are showing a lot of individual units listed in the MLS. But since there aren't any actual units built yet, the housing units actually in existence is a little smaller. You don't see this in most of the other counties.

Fauquier County shows an inventory decline as well, down to 631. Sales dropped from 49 to 35, but contracts written stayed steady. In Fauquier as well, it's the lowest inventory number in 2 1/2 years.

In Prince William County we're back where we were, in terms of inventory, in early 2007. There are currently 3919 properties on the market. As in Culpeper, all numbers dropped this month, new listings, new contracts and solds. Since Prince William had also been seeing large numbers of foreclosure sales I suspect the decline in those listings is having an effect.

Rappahannock County, having weathered much of the real estate downturn without dramatic changes, is still seeing stubbornly high inventory. It's edged down from its peak of 103 last month to 98 this month. But I expect that we may be stuck around 100 for a few months, at least. Since sales in Rappahannock remain slow, it will take a very long time to get down to a more rational inventory level.

September's numbers are the kind to make you "ooooh" and "aaaah". They're that good!

In Culpeper, Fauquier and Prince William counties, inventory continues to fall and sales continue to rise.

In Culpeper inventory is down from 823 at this time last year to a measley 632 this year. Sales doubled year over year, 27 last year and 54 this September. And the trend looks to continue with 72 new contracts written in September!

There's good news for those of you in Fauquier as well. Inventory has declined from 832 last year to 696 at the end of September. While sales didn't quite double here they did a very respectable increase from 38 a year ago to 53 now. And new contracts soared to 83.

In Prince William things have changed so much that you've got to feel sorry for the buyers. Total inventory has declined from 5674 to 4489. Meanwhile sales have almost tripled from 327 to 934. 1059 new contracts have been written in Prince William. Multiple offers on foreclosures are now routine there. And bidding wars are back, if the house is in good enough condition and priced cheaply enough.

Rappahannock County is the rain cloud amidst all this sunshine. Inventory continues to rise there with 93 homes on the market now compared to 83 a year ago. There was one sale last month compared to 4 a year ago. And there are three new contracts. In general, sellers in Rappahannock County have been slower to lower prices, believing that the counties unique circumstances protect them from the economic forces at work. And, to some extent that's true. But clearly not to the extent many sellers believe! The other factor at work here are a large number of very expensive properties, owned by very wealthy people, who are perfectly willing and able to wait a year or two for market conditions to change.

Overall, sellers should be singing hallelujahs. But, here's why I suspect many of you aren't. What we continue to see are lots of sales of foreclosures and short sales at very low prices. Many sellers are not willing or able to compete at those prices.

While inventory levels have fallen to around a 12 month supply, it's still not low enough to stop the price declines. If you're a seller in this market, desparate to sell, you're probably thinking that there's not much comfort in this if the only thing selling is foreclosures. But sooner or later, surely, we're going to run out of foreclosures. Here's the question, if that's a year from now, or longer, can you wait?

I know you've been hearing nothing but doom and gloom from the financial markets for the last week. And, it does feel like the sky is falling some days.

But the August numbers actually show lots of reasons for optimism. Almost across the board, by any measure of activity, the numbers look much, much better than they did a year ago.

In Culpeper, the inventory is at 676, down from 814 homes for sale at this time a year ago. Meanwhile, closed sales jumped from 32 to 64. Even new listings coming on the market has fallen from 154 to 121.

In Fauquier the story is much the same. Inventory is at 730 now vs. 823 a year ago. While the sales are still relatively flat, they have increased from 57 to 60.

Prince William has seen dramatic improvements, year over year. Inventory levels right now are at 4835. A year ago there were 5654 homes for sale. Sales have doubled from 419 to 838. The only negative indicator here is that new listings continue to come on the market at a fast clip.  There were 1300 new listings in August. But a year ago there were 1530.

Rappahannock even showed some dramatic results with 5 sales last month compared to 2 a year ago. Inventory, however, remains close to it's highest point (August of last year) at 82 homes for sale.

While activity is very good, prices show no signs of recovery right now. And, I believe you'll continue to see prices flat or falling for at least the next six months. But banks are getting their listings sold. They're not doing it by getting them in great shape. They're doing it by dramatically discounting price.

If you're a seller, that's your dilemna. Do you drop your price to compete with the banks? Can you afford to wait until all the foreclosures work their way through the system, potentially at least another year? Do you rent it out and hope for a better market at the end of the lease?

Whatever you decide, whatever your situation, it's good to hear a little good news this week!