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This post is based on Harrisonburg and Rockingham County data — perform the analysis on your local market data to provide a similar guide to homeowners in your area….

If you bought during....

The chart above is calculated based on comparing this year’s median sales price to the median sales price in each of the prior eleven years.

Several key points to take away from this chart….

  • For many, many home owners, this chart may have very little pertinence to the value of your home.  These calculations are based on median sales prices, and your home (and/or neighborhood) may have performed VERY differently during any of these time periods.
  • If you bought your house between 2005 and 2008, it’s a tough time to try to sell.  (Hopefully, that’s not news to anyone.)
  • Home values are still declining (year-over-year), so despite today’s buyers getting great deals on their houses, they still need to plan to be in them for at least five years to be sure to see gains in their home value.
  • If you bought in 2004 or prior, you should do just fine if you are selling today.

But again, the most important point is that while this might provide a general guide to what has happened with home values over the last decade (+), every home and neighborhood is unique.

Again, this post is based on Harrisonburg and Rockingham County data — perform the analysis on your local market data to provide a similar guide to homeowners in your area….


Why are we waiting so long to order appraisals??

I have had five transactions thus far this year where this dynamic seems to be at play….
Loan Process
The diagrams above are not showing the new reality for all lenders — it is just a reflection of my experience with many lenders recently.

For whatever reason, (many) lenders (on many transactions) seem to be waiting to order an appraisal until they have completely finalized the approval of the borrower.

This is problematic for several reasons:

  • Sure, if a borrower can’t be approved the deal won’t close, but if the appraisal is not satisfactory, the deal also won’t close.  Why, then, must we wait so long to order the appraisal?
  • Sometimes the final approval of the borrower can drag on (and on and on) — which delays (and delays and delays) the ordering of and completion of the appraisal.

If you’re buying a house, make sure your lender orders your appraisal as soon as you have made loan application — especially since the fee that you pay at application is at least partially for the appraisal.

If you’re selling a house, don’t assume that the appraisal has been ordered as soon as the buyer makes loan application.  Follow up and make sure that the appraisal is ordered ASAP.

If any lenders can explain why this is happening, or provide any good reasons for it happening this way, I’m all ears.

In talking to several potential clients this past week, I have explained that there are two sets of buyers we need to consider when preparing to list, market and sell your home.

The first set of buyers – on the sidelines, ready to pounce . . .

Depending on the price range of your house, location, and other attributes, there may very well be a buyer searching for your home right now, and not finding it because you have not yet listed it for sale.  In many local housing markets, inventory is low compared to a year ago, so some would-be buyers simply aren’t able to find the house they would like to buy.  Thus, we need to have your house in great shape and ready for several very serious, very interested potential buyers who may show up in the first few weeks of having your house on the market

The second set of buyers – actual and contemplative buyers, over time . . .

If we haven’t sold your house in the first month of being on the market, in some ways we are then gearing up for the second set of buyers — those who will be deciding to start looking for a house over the next few months and will then be perusing a wide range of houses as they determine what they are looking for, what they like, what they don’t like, etc.  This second set of buyers (who are stretched out over a longer time period) are not typically as specifically interested in your house as those first few buyers are who may show up in the first month of having your house listed for sale.

So we should aim for the first set of buyers, right?

Certainly, nearly every seller would like a buyer to commit to buy their home in the first few weeks that it is on the market.  That is not always possible, but we can make that the goal depending on a few variables.

Some houses are in under-supplied locations, neighborhoods or price ranges such that there will be pent up buyer demand, increasing the likelihood of a speedy sale.  You can’t move your house, or adjust many of these attributes, however, so we’re either going to have supply and demand working in our favor, or not.

You do, as a seller, have some control over pricing.  The key here is to ask slightly less than what buyers will see to be a reasonable price.  Conventional pricing strategy might suggest that we identify the fair market value of your house (for example $300K) and then price your home slightly above that (for example $310K) to allow for some room to negotiate.  The problem with this strategy is that it doesn’t make it compelling enough for buyers such that they’ll want to act immediately upon seeing your house on the market.  In this example, we’d be much better served to price your home at $299K such that a buyer can imagine being able to buy your home for $290K or $295K, and thus is willing to make an early, fast offer.

There is plenty that goes into preparing your house to go on the market, and understanding the segment of the local housing market that your house fits into, but one serious consideration is how to best position your home for the two sets of buyers described above.

How does this home inspection process work, anyhow?

Here’s a reminder of how the typical home inspection process works in Virginia….
Home Inspection Process
And a brief reminder of a few of the timing issues…..

  • When completing a home inspection contingency (to the contract) a number of days will be filled in (10? 14? 15?) that will dictate the timeframe in which the buyer must inspection the property AND report back to the seller as to any deficiencies found.
  • If the inspection shows the need for a further inspection, an additional five days can be tacked on for such secondary inspection.
  • After the seller has received the response from the buyers, they have 5 days to respond.
  • If the seller doesn’t agree to perform all repairs, there will be a 5 day negotiation period.
  • If the buyer and seller haven’t agreed by the end of the negotiation period, the buyer has 2 days to decide whether to continue with the seller’s last offer of repairs, or to terminate the contract.

To map this all out, here’s how long a home inspection contingency could really take….

  • May 1 – ratified contract with 14 day inspection period
  • May 15 – inspection, showing the need for further inspection
  • May 19 – further inspection
  • May 20 – repairs requests to sellers
  • May 25 – sellers respond
  • May 30 – end of negotiation period
  • June 1 – final response by buyer

Yes, that innocuous 14 day inspection contingency can really turn into a month!

Source:  KCM

Above you will see the state-by-state change in home prices over the past 12 months.  The majority of states (yellow, orange, red) have seen a decline in prices over the past 12 months — but not Virginia!

More people are moving into Virginia than out

Moving in and out

In another positive sign for Virginia’s economy and thus housing market, there seem to be more people moving into Virgina than out of Virginia.

Of note, Virginia is one of only 9 states where this is the case!

Source: KCM Blog


Buyers, keep a context for price in mind when making your super low offers

Perhaps it doesn’t always happen with such extreme price variations, but certainly you have had a seller who priced their home very competitively and then was shocked by an extremely low offer brought from someone locally.

How Do Virginians Heat Their Homes?

Have you ever wondered how Virginians heat their homes?

The Market Leaders Over Time:  Coal… Oil… Electric

Heating Chart

And for the graphically inclined….

Heating Graph

Source:  U.S. Census


Is Homeownership For Everyone?

Several decades ago (and earlier) home buyers would wait to purchase a home until they had at least 20% of the purchase price saved up in their bank account, and they would only buy if they were going to stay in the same home and town for many years.  At the time, the percentage of homes that were owner-occupied hovered between 40% and 50% (U.S. Census Bureau).

Just a few short years ago, home buyers were buying with no down payment at all (or less), even if they planned to stay in the house for only a year or two.  This led to an ever increasing homeownership rate, which peaked at 69.2% of families owning their home in the early 2000′s (U.S. Census Bureau).

Why the sudden change of pace?  And what is a buyer to do today?

Many of today’s first time buyers are still buying with a very small down payment, and that can be o.k.  Many loan programs are available with a small down payment, such as the FHA loan program which only requires a 3.5% down payment.  The risk here is that a buyer doesn’t have too much built-in equity in case they need to sell sooner than they think.  Purchasing a $100,000 house with a 96.5% FHA loan results in a $96,500 loan, which has only been paid down to $95,000 one year later.  With such a small down payment, it can be difficult to re-sell the home in a short time frame without bringing cash to closing.

As becomes evident, the down payment and the length of ownership are quite intertwined.   As shown above, a small down payment with a small length of ownership can be financially difficult.  A small down payment with a longer length of ownership can work just fine.  Conversely, a larger down payment provides security and makes even a small length of ownership feasible.

What may become clear here is that homeownership is not for everyone.  Even if a buyer is making great money in their current job, if there is a strong chance they will need or want to leave the area in 12 or so months, it may not make sense for them to buy.  But for those with good credit, a down payment of some sort, and a solid job that will keep them employed and in the same geographic area for the next 3, 4, 5, 6, 7 years – homeownership may be a very exciting option right now.  With low interest rates, lots of homes on the market, and many sellers ready to negotiate, this can be a most opportune time for buyers to act.

Owning a home is a passive savings account of sorts, with money accruing as the principal of the mortgage is paid down each month.  Owning a home also provides the ability to establish oneself in a neighborhood that may be a buyer’s home for years to come.  Finally, owning a home provides the ability to invest time, energy and money into the place that you live that will provide a future resale benefit – as opposed to painting, re-modeling or otherwise improving a property when leasing it.

Now being excited about buying and thus owning a home, many might look around and realize that most local real estate markets aren’t booming right now.  Is it wise to invest in real estate when the market, and prices are down?  Many think that it is wise, given that buyers can fix their housing costs when prices are potentially the lowest that they’ll ever be, and when interest rates are potentially the lowest that they’ll ever be.  In many ways, housing costs compared to what a buyer is purchasing couldn’t be much lower than they are right now.

Buying a home isn’t for everyone, but excellent housing opportunities abound for those who plan to stay in the same geographic area for the years to come.

Home values will ALWAYS and ONLY go UP!

Prices Only Go Up!

Here’s an interesting report from NPR telling the story of an employee of Freddie Mac who manages an online calculator that has (intentionally or unintentionally) been telling web users that home values will only go up!

Read more from NPR: Housing Guy Apologizes For Housing Bubble

It is interesting — I do wish home values would only go up — and during most years values do increase.  The last few years, however, have not held that promised increase in most parts of the Commonwealth.

Let’s take a look at what has been happening in the Central Shenandoah Valley….

First, value changes depend on the time horizon that you consider.  In Harrisonburg and Rockingham County, home values decreased for 4 out of the past 10 years.  That is to say that the first six years of the decade showed an increase (’01, ’02, ’03, ’04, ’05, ’06) but the most recent four years have shown a decrease (’07, ’08, ’09, ’10).

But here’s an interesting cumulative look at the value of a $200,000 home purchased in my market area in 2000:

  • 2001: 9% increase to $218,000 (9% cumulative increase)
  • 2002: 2% increase to $222,360 (11% cumulative increase)
  • 2003: 8% increase to $240,149 (20% cumulative increase)
  • 2004: 16% increase to $278,573 (39% cumulative increase)
  • 2005: 24% increase to $345,430 (73% cumulative increase)
  • 2006: 8% increase to $373,064 (87% cumulative increase)
  • 2007: 1% decrease to $369,333 (85% cumulative increase)
  • 2008: 4% decrease to $354,560 (77% cumulative increase)
  • 2009: 5% decrease to $336,832 (68% cumulative increase)
  • 2010: 3% decrease to $326,727 (63% cumulative increase)

Home values can certainly decline over the short term, and perhaps over the long term?  Thus far, home prices are still quite solid over the 10 year horizon — showing a 63% increase.  That said, 2006 through 2016 home values might tell a different story.

What are you seeing in your market?