Loudoun County, VA 1st Quarter Real Estate Market Update – 2018

Loudoun County, VA 1st Quarter Real Estate Market Update – 2018

The Loudoun County, VA 1st quarter real estate market had a great first quarter. The market continues to expand, home prices continue to climb and distressed properties continue to decline. It’s going to be a sunny Spring.

Loudoun County, VA 1st Quarter Real Estate – Average Sales Price

There was a 6% average sales price improvement over the first quarter of 2017. The Loudoun County, VA 1st Quarter Real Estate Market Update - 2018average home sale price was $516,700. In 2017, that number was $486,382. Most of the past five years have shown some level of improvement, but the 2017-2018 increase is the highest. The 2014-2015 average sales price increased 2.2%, but 2015-2016 dropped slightly at .02%. That quickly rebounded with a 1.4% increase from 2016-2017.

Loudoun County, VA 1st Quarter Real Estate – Number of home sales

The number of home sales in the first quarter has followed a similar pattern over the past five first quarters. In 2018, 1250 homes were sold. That was a minor decline (-4.8%) from 2017, which has 1313. The 2017 first quarter improved over 2016 by 4%, and 2016 first quarter improved 6% over the first quarter of 2015. The biggest jump in the past five first quarters was 2014-2015. That jump was 10%.

The challenge for 2018, and the most reasonable explanation for the small decline is the lack of existing homes on the market. The lower inventory that has plagued the country for the past nine months most certainly affected the volume of home sales. Now that Spring is upon us, the market is likely to show increased numbers over the same period last year.

Loudoun County, VA 1st Quarter Real Estate – Distressed properties are no longer distressing

Loudoun County, VA 1st Quarter Real Estate Market Update - 2018The number of distressed properties also continues to decline. The first quarter only 2.9% of all sales in the distressed category. There were 17 short sales and 19 foreclosures. That is the lowest number in five first quarters. The 2017 market had 6.1% distressed properties and 2014-2016 averaged 7.5% over the three first quarters.

The nationwide foreclosure rate dropped to a 12 year low in 2017. The drop was 27% from 2016 to 2017. The largest change can be seen in the 2010 to 2017 market which was a drop of 76%. Currently, the national foreclosure rate is at the lowest it has been since 2005. The national first quarter foreclosure rate is below the pre-recession rates, and it has been for six consecutive quarters.

The Loudoun County, VA 1st quarter real estate market’s 2.9% is a good sign for home sellers. The lack of foreclosures and short sales on the local market will give greater stability to local housing prices, and that can be seen in the continually improving average sales price.

Loudoun County, VA 1st Quarter Real Estate – Active listings and pending home sales

The current pending home sales in the Loudoun County, VA real estate market are now at 980. That number nearly eclipses the total sales for the first quarter of 2018. The average list price of the pending sales is $545,766. If that number holds or stays close through closing, the second quarter may see a rise in average home sale prices.

With lower than needed inventory, buyers are scrambling to buy homes soon after they hit the market. The current number of available existing homes in 1134. In a market as big as the Loudoun County, VA market, that is not many. There is some light at the end of the low inventory tunnel. The January 2018 inventory increased year to year by 13.35%.

If the trends of higher home sales, high average sales prices, lower distressed properties and improved inventory continues, the Spring is going to be very sunny for Loudoun County, VA real estate. When you’re ready to list your Loudoun County, VA home, give Cornerstone Business Group, Inc., a call. We are your local real estate sales pros.

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Winchester-Frederick County, VA 1st Quarter Real Estate Update – 2018

Winchester-Frederick County, VA 1st Quarter Real Estate Update – 2018

The Winchester-Frederick County, VA 1st quarter real estate market had a good first quarter. The first three months of the year tend to be a slower home sale period, but the local market increased sales by 13% over the 2017 first quarter. That’s a great jump year to year. The change is more of a sign of stability than the previous five first quarters.

Winchester-Frederick County, VA 1st Quarter Real Estate Update – Five year change.

A slow steady change is more indicative of a healthier market. Large swings may show volatility in the market. At the 10 year anniversary of the Great Recession, home sales are in a similar place as they were at that time. That’s no reason to panic in the current market. The major changes since the pre-recession relate to loan qualification and regulation. The subprime and low-document loans are no longer prominent today.

Buyers are being qualified based on verifiable data, and the changes in loan regulations Winchester-Frederick County, VA 1st Quarter Real Estate Update - 2018have lenders crossing all the T’s and dotting all the I’s before a loan is approved. Fewer real estate agents are willing to jump into a car to show property to buyers who have not been pre-qualified for a loan. Those changes alone have added to market stability.

The Winchester-Frederick County, VA 1st quarter real estate market has seen real changes since the dog-days of the recession. The improvement in the volume of home sales is up 53% since 2013. The years between 2011-2015 had periods where the market was brutal. Though there were periods with positive signs, the market did not offer confidence that the worst was behind. Even as late as 2013, the market was still tenuous. Home sales dropped 7% in the first quarters year to year between 2013-2014.

The 2014-2015 market increase in the first quarter was a 17% improvement. The next two years 2015-2016 saw 0% growth in the first quarter. Finally, the 2016-2017 market saw a 24% increase and 2017-2018 increased 13%. Nationwide, the increases have been 3-6%. That puts the Winchester-Frederick County real estate market in a better place than many other communities throughout the country.

Winchester-Frederick County, VA 1st Quarter Real Estate Update – Inventory Issues Continue

Low inventory has plagued much of the country throughout the past nine months. Winchester-Frederick County is no different. The current number of existing homes available is 267. That’s an improvement from February and March, but is woefully low considering the buyer pool.

Sellers do have an advantage in the current market, but the current conditions are giving buyers heartburn. It is common for properties to hit the market followed by multiple offers with lower numbers of contingencies. Buyers are avoiding home inspections, paying more than list and shortening their closing times to gain an advantage.

That works well for sellers, but buyers may be buying homes that have issues that will be expensive to repair once they take possession. By paying more than list, buyers are having to bring more money to the table than they expected. The market inventory problems do create a certain amount of uncertainty for buyers.

Winchester-Frederick County, VA 1st Quarter Real Estate Update – Distressed properties

Another area that is stabilizing is distressed properties. Distressed properties are made up of short sales and foreclosures. The numbers have hovered around 6% year to year, and the first quarter was in the range at 7.4%. There were 23 foreclosures in the first quarter and 3 short sales. They were 7.1% in the 2017 first quarter. That’s consistent since the market has taken a turn toward stability.

The market has been a roller coaster since 2008, but there has been a consistent fight to get back to stability since 2011 and beyond. For those watching closely, it has looked like a street brawl, but the causal observer probably hasn’t noticed the extreme swings. Having looked at every month, quarter and year since the recession, I can see a steady return to a healthy market. It is a welcome sight.

When you’re ready to buy or sell in the Winchester-Frederick County, VA real estate market, give me a call at Cornerstone Business Group, Inc. I am your local real estate sales pro.

 

Wakeland Manor, Stephens City, VA Real Estate Market Report – 2017

Wakeland Manor, Stephens City, VA Real Estate Market Report – 2017

Wakeland Manor, Stephens City, VA is a unique neighborhood of old and new and different. It is made up of older homes from the early to late seventies and more recent construction. It also has a section of luxury townhouses that are spacious and attractive.

The townhouse area has its own playground, tennis courts and a basketball court. In the newer section of detached homes there is a swimming pool that is available to residents. The newer section also has a community center. There are few areas in the Winchester-Frederick County real estate market that match Wakeland Manor amenities.

Wakeland Manor, Stephens City, VA Real Estate Market: The good news

The Wakeland Manor real estate market has two markets running on parallel tracks. Wakeland Manor, Stephens City, VA Real Estate Market Report - 2017The townhouse complex constitutes one market and the detached homes covers the the other one. Even there, the older homes are a market unto themselves. When you look at the market as a whole, the average sale price for 2017 was $260,454. Remove the townhouses from that and the average sales price was $302,489. The townhouse average sales price for 2017 was $215,617.

There were 62 combined sales in 2017. The detached homes sales made up 32 of those sales. In the combined number, there were 4 distressed properties. Each parallel track had 2. In all areas of Wakeland Manor, the real estate recession of 2008 caused a substantial drop in home values.

The 2007 home average sales price was $299,280 compared to the $260,454 today. That is a 13% drop in value over that 10 year period, but that is in line with the broader Winchester-Frederick County, VA market. The average, market-wide, is still 12% below the 2007 market. When you consider that the overall market took a 37% hit in 2008-2009, the recovery is fighting its way back to the pre-recession values.

Wakeland Manor, Stephens City, VA Real Estate Market: Distressed Properties

The continuing improvement in the Wakeland Manor real estate market is also seen in the number of distressed properties. Distressed properties are short sales and foreclosures. Both types can hurt home values when the numbers are high. In 2013, the total number of distressed properties were 25% of total market sales in Wakeland Manor. When those sales, which tend to be lower, are factored into area property values, they tend to reduce property values on a broad scale.

The 2017 distressed property sales in Wakeland Manor were 6.5%. That is in line with the overall Winchester-Frederick County, VA real estate market. This is an area that has been showing signs of improvement since 2013. From 2010-2012, distressed properties averaged 30% in Wakeland Manor. From 2014-2017, distressed properties averaged 7.25%. That leaves 2013 as the last dismal month for distressed property sales. That’s a good sign of an improving neighborhood economy.

When you’re ready to buy or sell in Wakeland Manor, give Cornerstone Business Group, Inc. a call. We are your local real estate sales pros, and we’re here to help make some great happen.

 

 

 

 

The cost of low housing inventory and rising interest rates.

The cost of low housing inventory and rising interest rates.

The real estate market, nationwide, has enjoyed the benefits of lower home prices coupled with lower interest rates for the past ten years. Unfortunately, that is about to come to an end. The costs of rising home prices, low housing inventory and rising interest rates are starting to impact housing across the country. There are a few areas throughout the country that are busting with inventory, but many areas with low inventory are presenting buyers with a conundrum.

When interest rates fell at the beginning of the 2008 recession, buyers were able to jump into the market and pick up great deals. There were plenty of foreclosures, and they were followed by short sales. Distressed properties presented buyers with great opportunities to get their dream home at a lower price, and lower interest rate which offered a lower mortgage payment. Even fair market prices were down because of the recession and the impact of distressed properties. As the economy has turned into a healthy economy again, those benefits are about to change.

The cost of low housing inventory and rising interest rates: Low Inventory and the psychological factors.

Low inventory can create a major problem. For instance, when there are 1,000 buyers and 200 houses available, tension forms in the market. Buyers get into multi-offer situations often causing them to pay more for a home than the list price, and creating a higher mortgage payment than they wanted when the search began. It’s stressful and can create anger, hurt feelings and often animosity among the parties involved.

The season may be partly responsible for some of the low inventory. Granted, it is Winter, and homes may sit a little longer during the colder months, but according a RealtyTrac study released in the Fall of 2015, January, February and December are three of the top five selling months nationwide. There may be other factors keeping some homes on the market.

Low housing inventory has a psychological impact on buyers. For instance:

  • Buyers get frustrated because they can’t find anything, and they quit looking.
  • Buyers get tired of racing out to see the latest listing only to find that it’s in terrible shape, in a less desirable neighborhood, or that it has three offers before they opened the door.
  • Buyers get irritated at the long process and fail to keep their financial data up to date, and then they don’t have the required documentation available when a deal comes along.
  • Buyers can get depressed and lose hope because they get outbid on deal after deal.
  • Buyers can’t find homes available in the area they wish to live.
  • Buyers adopt a “why-bother” attitude and continue to rent.

When things like this happen, fewer buyers are in the market and the homes that are available sit longer than normal. It gives the appearance that something is wrong in the local market, when in reality, it can be the psychological impact of low inventory on frustrated buyers.

The cost of low housing inventory and rising interest rates: Low inventory and higher interest rates

Add higher interest rates to low inventory and you have another major challenge for buyers and sellers. Sellers wishing to capitalize on low inventory are trapped when interest rates increase. Higher interest rates reduces a buyer’s buying power, and in turn, can cut the buyer pool. Lower buying power changes what a buyer looks at in the process. Let me show how this works. For the sake of simplicity, let’s say the buyer is not putting any money down and the buyer is working with a 3.92% interest rate. I’m also going to ignore the added cost of taxes and insurance. This will be a purely principal and interest scenario.

The buyer’s dilemma

  • A buyer has been pre-qualified for a loan with a mortgage payment of $946. That’s a perfect payment amount for the buyer. At the time of pre-qualification, the buyer was qualified to buy a $200,000 3 bedroom 2 bath detached home. In the process of working through low inventory, the buyer can’t find a good home in the $200K price range.
  • A month goes by and interest rates have increased to 4%. In order to keep the The cost of low housing inventory and rising interest rates.mortgage payment at the $946 range, the buyer’s buying power drops to $198,000. That’s not too bad, but it may be a little less of a house than the buyer wants.
  • Interest rates are on the rise and within two weeks, they are at 4.25%. Now the buying power is $192,500. Remember, inventory is low and there is a huge number of buyers for properties under $200,000. Competition increases as buying power drops.
  • Another frustrating month goes by with low inventory, and now interest rates are 4.75%. The buyer’s buying power has slipped to $181500. The volume of buyers has increased, but inventory has not. The flurry of contracts thrown at every listing make it nearly impossible to win a bid without forfeiting contingencies that would protect the buyer.
  • Finally, interest rates climb to 5% and the buyer’s buying power drops to $176000. Multi-offer wars are happening everywhere and buyers are buying homes they don’t want in neighborhoods they don’t like, but there is nothing else they can do if they want to own their own home.

This scenario played out before the market downturn in 2008. I’m not saying that we’re heading for another housing bubble, but even without the other issues that caused the last bubble to burst, we’re in a tricky place for buyers. The greatest struggle they have with low housing inventory and rising interest rates is buying power. The higher the rate, the lower the buying power.

The cost of low housing inventory and rising interest rates: Mortgage payments

Another issue that plagues buyers when interest rates increase is the mortgage payment. If our buyer is qualified to buy the $200,000 house at a higher interest rate, the buyer will also find that he has a higher mortgage payment as rates climb.

Our $200,000 buyer would love to keep the mortgage payment at $946, but as interest rates increase, his payment will also increase. The desirable $946 payment rises to $$999 if rates rise to 4.38% when he finally buys. If it goes as high as 5%, that same $200,000 home, will cost the buyer $1,074 a month. Waiting a few months increased the payment $128 a month, or $1536 a year.

The cost of low housing inventory and rising interest rates: Long-term costs of waiting.

In our scenario above, there is a hidden cost that buyers rarely think about. What is the long-term costs of waiting too long to buy a home as interest rates rise. Let’s go back to our $200,000 purchase at 3.92%. If the buyer stays in that home for 30 years, the long-term cost of the home will be $340,427 in principal and interest. Fortunately, a high percentage of buyers move every 5 years.

Most will never realize that cost, but let’s say our buyer does stay through the entire 30 years, and lets say the buyer was qualified to buy the house at $200,000, but interest rates climbed to 5% by the time of the purchase. That 1.08% climb will cost the buyer an extra $46,085 dollars over the life of the loan. When it is all said and done, he will have paid $386,512 for his $200,000 house. Also, his mortgage payment is no longer $946. It ends up being $1074.

The time-value of money has an adverse relationship with interest rates. When rates fall, buyers can buy more and when interest rates climb, buyers can buy less. During the lower rates of the past ten years, buyers could causally look for a home over several months and even years. Today, if a buyer sees a home he likes, that meets his needs and is in his price range, he better move on it. Three months from now, it may be out of his price range or not available.

When you’re ready to buy or sell, give Cornerstone Business Group, Inc., a call. We are your local real estate sales pros, and we’re here to help you make something great happen.