How Is Our Local Real Estate Market?

7 03 2011

Every morning the animal kingdom awakens thinking about three things: food, shelter, and migration. It is no different for those folks contemplating selling or buying a home.  They are thinking about shelter and migration, too.

That’s when they ask themselves the question “I wonder how the market is?” Naturally, since it is the next expected question when the shelter-migration realization comes into sharper focus for them.

No matter if I am attending church, one of my kid’s sporting events, or out to eat with my family, I am almost always asked by someone “How’s the market?  What do you think about the upcoming year?”

Because of my experience and knowledg in the real estate industry for so many years now, I pick up on the leading indicators almost intuitively.

The first rule in real estate is “Location, Location, Location”.  That too is important when answering the question “How’s the market?”  What’s happening in another part of county or another state has no immediate bearing on the current value of your home.

Therefore, I have divided our market area into sectors.  I am pleased to provide my opinion about each sector.  If you are thinking the shelter-migration question for yourself, please call me.  It would be my pleasure to share my knowledge of your very specific circumstances.  My knowledge and expertise is available to you at no charge and without obligation.  I simply want you to have the information you need to make a wise and informed decision.

By the way, answering the question “How’s the market?” always needs a point of comparison.  So, my comments below indicate how the market has behaved compared to this time last year.  It sort of reminds me of my friend from North Dakota.  When he asked what the temperature was and I told him it was cold because it was 28 degrees.  He said, “Oh, you mean you are enjoying a heat wave because it is -20 degrees here right now”.

MY OVERALL PERSPECTIVE

We start 2011 with cautious optimism. And at the latest Congressional hearings, that’s exactly what Ben Bernanke, the Fed Chairman, said. As my team has recently told me, this is scary. They were not talking about the market; they are talking about my outlook.  They reminded me that this is my first hint of optimism since Fall 2005 when I told them all to “run for cover…the sky is falling!”

Our team has been creatively navigating through today’s market challenges with great success.  We continued to work hard with pigheaded determination by creating and implementing marketing campaigns that best serve our clients.

What I view as Positives

Interest Rates: Historically low interest rates continue to drive first time homebuyers into our market where they are making the purchase of a lifetime.  Most of these buyers will look back at their purchase in five or seven years, and pat themselves on their back for their decision to purchase today.  The wealth they will likely create for themselves during this period will be unmatched by their ability to otherwise save money in a savings account.

Government policy:  The government has done an admirable job leading our nation from near financial disaster.  Their policies, although not always popular, have had a successful impact for our local recovery.   The home buyer tax credit was a huge boost locally and propelled home price appreciation nearly 25% even though our market reluctantly gave back some of the gains in the last half of 2010.

Local Job opportunities:  Northern Virginia continues to lead the nation with net job gains.  Obviously, the federal government’s proximity is a key factor in this equation.

Rental Prices:  Residential rental prices have seen enormous growth over the last three years appreciating at near double digit growth each year.

MY OVERALL FORECAST

I predict slightly modest price appreciation through the Spring market into the Summer.  If inventory levels continue to be weak and demand remains stable, we should realize a 4% to 8% appreciation in home prices this year.

Rental rates and demand will continue to be strong fueled by those that cannot afford a home currently, have recently lost their home to short sale or foreclosure, or those that still are not convinced it is time to jump into the market.

I expect short sales to continue well into Fall 2011 with a slight possibility of a second wave of foreclosure inventory hitting around September.  Even if a second wave of foreclosure inventory hits our market, I don’t expect the bottom to drop out of the market like it did in 2005.

Statistical Comparisons

In Northern Virginia as a whole, there is mixed news as inventory levels are down 15% in January 2011 vs. January 2010; however, “Days on Market” (the length of time it took to get a contract) have increased by 28%.  So, there are fewer homes available, but they are taking longer to sell.   Overall sales prices are up nearly 4% compared to last year, but pending homes sales are down 21% so far this year.

In Fairfax County, average single family home prices rose 3% to $618,933 over the last 12 months.  Currently, there is 10% less inventory available this month vs. January 2010, but “Days on Market” have crept up 24% to an average of 94 in January 2011.

In Loudoun County, single family homes dropped in value an average of 8% over the last year to $471,213.  On the plus side, available inventory is down 12% so far this year, and the “Days on Market” average of 93 is the same as January 2010.

In Prince William County, average home prices rose 8% from January 2010 to 2011, ending at $315,041.  Available inventory is down 11% compared to this time last year, while “Days on Market” have risen 40% from 47 to 66.

In Bristow/Gainesville/Haymarket/Nokesville, also known as “Western Prince William County,” we have additional data for you:

As of February 25, there were 265 Active listings in the area.  69% (183 of the 265) were Healthy Traditional Sales, 22% (58 of 265) were Short Sales and just 9% (22 of 265) were Bank Owned Foreclosures.

Currently, there are 277 Pending sales in the area with 18% (51 of 277) Healthy Sales, 13% (36 of 265) Bank Owned Foreclosures, and a whopping 69% (190 of 277) Short Sales.

Many of these pending Short Sales never get to closing, however, as evidenced by the following statistic:  over the past 4 months, 341 listings have SOLD.  Of those, just 30% (102 of 341) were Short Sales, 23% (78 of 341) were Bank Owned Foreclosures, and 47% (161 of 341) were Healthy Traditional Sales.

What does this mean for your specific area?

My Opinion of Condos in Western Prince William County

This market will continue to be underwater for several more years as many of the area’s condos were built between 2005 and 2010.  Traditionally, condos are a more difficult resale than fee simple townhomes similarly priced.  We will continue to see these condo owners recognize that they didn’t exactly purchase a great deal from the builder like they thought they were and choose to remain in their properties sitting it out on the sidelines for better times.  Other condo owners may choose to strategically default on their loans, betting that they can give their property back to the bank in a short sale or foreclosure and reset themselves to purchase in two to three years under the new FHA guidelines as a “first time homebuyer.”  The last group of condo owners will be the high earners who decide to lease their condo and purchase a move up home at a great price with low rates.

My Opinion of Townhomes in Western Prince William County

This is arguably one of the strongest segments of our current market.  Townhouses priced below $275,000 are receiving a lot of attention from first time home buyers.  In some neighborhoods, we are currently receiving multiple offers thereby bidding prices up on these scarce properties.  Townhouses will continue to be the leading market indicator for 2011.  The government’s policy specifically influences our local demand in the form of interest rate and loan qualification guidelines set forth in FHA financing.  Because of this, I expect townhomes to continue to lead the charge.  This will create a more noticeable “move-up” market as we approach Summer 2011.  This is the most important ingredient for our overall market, make no mistake about it.  If these townhomes don’t continue to appreciate, it negatively affects the food chain above.

My Opinion of Single Family Detached Homes in Western Prince William County

Single family homes priced below $450,000 are receiving great traffic and attention.  I expect this price range to be one of the banner niches similar to townhomes.

My Opinion of Luxury Homes in Western Prince William County

This is an interesting topic.  There are some buyers in this price range that are actually purchasing rather than looking.  These buyers feel that prices have fallen enough to get into their luxury homes now.  Generally, these buyers are local move ups.  I do feel that the homes that are being purchased are good purchases for those buyers. It is important to note that only the top houses in their respective price ranges are going to sell. We are going to see continued struggles and long days on market with luxury home sellers that are not motivated by deadlines. The “want-to-sell-owners” are going to continue to chase the “need-to-sell-owners” and the “have-to-sell-owners.”  Expect a bumpy road for some luxury home owners that are just testing the market.  The serious sellers that can sell will be able to move their properties this Spring and Summer.

CONCLUSION

Overall, the market is poised for slight and slow growth through 2011.  Now is the time to create your strategic plan.  In this case, experience really does matter.  Don’t risk your shelter-migration decision by consulting with anyone other than my team and I. Call me 703-485-4663, or email me ALEIGH@ACLTEAM.COM today to discuss your specific location and circumstances.  My team can assist with Selling, Buying, Leasing and Property Management Services, and Short Sale services.

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