Developments in the Real Estate Market in Harrisonburg-Rockingham County

 
Charting and graphing various statistics about our market recently has revealed significant changes in our market.  For instance, check out this graph:

As you can see, the number of sold residential properties has plummeted to a level not seen since the same period in ’03 to ’04 and prior to that all the way back to ’00 to ’01. 

 
Now, consider this graph:

As you can see, average and median Days on Market have zoomed to levels not seen since the MLS started keeping such statistics.

 Now consider this graph:

Obviously, listing and selling prices haven’t reacted yet to the realities of classical economics that we learned in ECON 101, i.e. that in an elastic market, an excess of supply, which we are experiencing right now coupled with a shortage of demand, (See the first chart above) will result in lower prices.   Notice, however, the Polynomial Trend Line MS Excel has plotted on the chart above.  It’s hard to see in this graph, but a four month projection of the Polynomial Trend Line shows a small projected downturn in prices based on past performance. 

This morning on the WSVA radio website, the news item below was posted:

VALLEY COULD BECOME HOUSING ANOMALY

Rockingham County 03/02/07 Central Shenandoah Planning District Commission's latest study shows parts of valley may find themselves in a unique position when it comes to the real estate market.

The Housing Costs Comparisons report says the local housing markets in this region could potentially experience increases in demand and prices that exceed those occurring in recent years. This would be due to competition for available housing between retirees moving from areas outside the region, the local workforce seeking to live within the region in which they work, local retirees from within the region seeking to stay in the area, and senior populations already within the region who are looking to downsize from their current housing.

I searched the SCPDC website for the full text of the report, but couldn't find it.  I emailed the SCPDC just now to ask them to fax or email it to me.  I'm wondering which "parts of valley" they're talking about. 

My thinking is that Harrisonburg - Rockingham County is one of those "parts of valley" they're referring to.  Our area is booming now with the coming SRI facility, the expanding enrollment at JMU, the plant expansions planned or coming online at Merck and Coors, and the healthy market for poultry products the area poultry plants are enjoying. 

I will post the details of the report when I receive them.

"BusinessWeek.com headlined a story last week, "An Awful October for Housing Starts," subheading the story: "With new-home construction dropping to its lowest level in over six years, markets are betting the Fed could start cutting rates by June."

"So should buyers wait for the fed to cut rates in seven months? Sure -- if you want to miss out on the $25,000 closing costs, 2.5 percent special financing, and free rec rooms. Builders aren't stupid (just wanted to mention that at this point in the column)."  (Go to realtytimes.com/rtcpages/20061201_gooddeals.htm to see the full text.)

Looking at today's real estate news, one cannot help but get a feeling that no one really knows what is going on.  For instance, NAR's "Realtor Magazine Online" says in one article: 

"Greenspan Says the Worst is Over for Housing
Former Federal Reserve Chairman Alan Greenspan says that the worst of the housing adjustment is over and “sales figures have stabilized.”... "  (For the full text, go to http://www.realtor.org/rmodaily.nsf/pages/News2006112904)

Going further on the same website, we read:

"Fed Chief Bernanke Sees Housing Still at Risk
The biggest risk facing the economy right now is the flat housing market, Federal Reserve Chairman Ben Bernanke said in a Nov. 28 speech to the National Italian American Foundation.... "  (Go to www.realtor.org/rmodaily.nsf/pages/News2006112905)

Interesting comments that, on the surface, appear to contradict each other.  Granted, there are subtle nuances that could be discerned to not be contradictory, but the general tone of Mr. Greenspan is obviously optimistic, while Mr. Bernanke is guarded, if not overtly pessimistic. 

Earlier on the website, we read:

"Home Owner Equity Just Fine, Says ULI Report
Although housing could stay flat in the coming year, equity losses aren’t in the cards for a majority of home owners, says Emerging Trends in Real Estate 2007, an annual outlook... "  (Go to www.realtor.org/rmodaily.nsf/pages/News2006112903)"

This news item seems to paint a picture of a market that is flat and stable.

In yesterday's (11-28-2006) Realty Times website, we find this article:

Twenty-one metro markets actually showed doubled digit price increases. Overall, prices nationwide dipped 1.2 percent to $224,900 from $227,600 a year earlier. As to sales, they're down 12.7 percent when compared to the third quarter of 2005, but 2005 was an amazing year. ..."  (Go to realtytimes.com/rtcpages/20061128_yellowflags.htm )

This article indicates a market where prices are still increasing, but not at the pace of the past, but sales volume is down from a year ago.

Interesting views and different interpretations of the same real estate market, don't you think? 

Here locally in the Harrisonburg/Rockingham County area, things are still static, to say the least.  On a day to day basis, the number of "New Listings" seem to run about three to four times the number of "Solds," and, as a result, inventory is building.  Sellers seem to be coming around to the realization that they aren't going to be able to realize the profit selling their house that their neighbors made last year, and are modifying their selling expectations accordingly.  As before, Selling Prices run within ten percent of Listing Prices, so properly priced homes are still selling, and prices are still moving up, but not at the torrid pace of last year.  Buyers, on the other hand, are shopping around and not making any speedy, rash buying decisions.  For the most part, they seem to be "setting on their hands" and not "bidding" on properties unless they know beyond a shadow of doubt that the property is a bargain, that they have the means to buy the property, and that their future income picture is stable enough to ensure they can continue to afford what they are contemplating buying. 

However, I believe that there is a pent up demand building that will soon have to be satisfied.  Unemployment is down, employers are expanding their facilities, local governments are deciding to build schools and roads (Just today, the Rockingham County School Board voted to build a new school in the Elkton area, and Page County recently voted to build two new high schools), and new subdivisions are being proposed and approved (Today's Daily News Record reports a 500 home development is being proposed for Luray in Page County).  All the elements of a lively real estate market are there; it's just that something has to supply the impetus to get people to buy.

This is a copy of my recent newsletter:

Below is the text of a National Association of Realtors ad that appeared in national publications recently. For the full ad, go to: http://www.realtor.org/files/home_buyers___sellers/good_time_to_buy_ad.pdf

Call or email me to get you into your dream home while the market is at its best for you.

Trend of Median Residence Selling Prices in our Area.

I took some time yesterday and today to research in the Harrisonburg Rockingham Association of Realtors(R) Multiple Listing Service into the actual trend of Residential Selling Prices in our area.  I was somewhat surprised at what I found.  We have tons of inventory available, agents are "twiddling their thumbs" waiting for the floor calls that are rare, new home builders are offering substantial bonuses for signed contracts, and subdivision listing agents are offering discounts for sales closing before year end, yet look at the chart below.  The median selling price for residences has trended up since January 1!  Granted, there are some gyrations in the last couple months, but the majority of trend lines applied to the data still show an upward trend.  We haven't seen a substantial reduction in selling prices.  In Economics 101 textbooks, an increase in supply with a reduction in demand results in a reduction in selling price.  But this isn't happening.  My thought is that perhaps there is a "pent up demand" for homes in our area, just waiting for something to push buyers "over the top" into buying real estate, particularly homes.  We have a bustling local economy.  Our area's biggest employer, James Madison University, is committing to buy any available real estate within reasonable distance of the campus, including the Harrisonburg High School building and the vacant by 2010 Rockingham Memorial Hospital building.  This would indicate to me JMU anticipates a large increase in enrollment.  Local poultry plants are working near capacity.  Local School Boards are making plans to build more schools.  I am thinking that we will see a substantial upturn in the local real estate market by year end or spring at the latest.  Any comments?

Roger Monger, Realtor, MBA, e-PRO

540-476-4644

mailto:Roger@Roger4Realty.com

http://www.Roger4Realty.com

Your source for Harrisonburg and Rockingham County real estate

As I see it, the real estate market in Harrisonburg and Rockingham County is currently in a state of flux, changing from the hot, run-away seller's market of less than a year ago to a more stable, "normal" market, if there is such a thing.  A perfunctory scan of the MLS indicates this to me.  For example, each day, new listings outnumber sold listings, but not  by a substantial number, maybe 10 to 20 percent.  This is giving us a comfortable inventory to offer prospective buyers, yet not a "flooding the market" surplus.  Sold listings seem to be selling pretty close to their listing prices and appear, for the most part, to be selling in less than 120 days.  This indicates to me that a good listing price supported by a careful comparative market analysis will find a buyer within a reasonable time.  Prices are still going up over year ago levels for comparable homes, but not at the torrid pace of a year ago.  Harrisonburg and Rockingham County is not a "cyclical" economy as the term is typically understood.  The predominant employers are either higher education providers or food producers and processors.  These two industries tend to not be affected greatly by swings in the economy.  This has a profound effect on our market here, giving it stability.  For more information on this market, go to my website http://www.roger4realty.com .