I found this quote today from something I wrote early in 2009.
“The bottom line is that I don’t anticipate home values increasing until at least into 2010. We are going to have to hold our breath and hope that some of the stimulus package will cause things to rebound sooner that we think. For some, this is an excellent time to find a good investment. If you have children or friends who have never bought, this is a very good time to buy that 1st house. Given my comments, if you don’t have to sell right now, you may want to give it a year or so. If you have bought your home in the last 3 or 4 years, it will be tough to sell at a price that will allow you to break even.”
The bad news is it took longer than 2010 for home values to begin to rise again. The downturn was much longer than most of us predicted. Someone said yesterday, “It was like walking into a pitch black room and being sucker punched.” The effect of that lasted a long while and in fact, the estate and higher priced market still hasn’t fully recovered from it.
The good news is we have now had several years where the market has outperformed the year before and in some areas (especially in new construction) we are seeing 2005 prices again. Here is an overview of what was shared by the Charlottesville Area Association of Realtors.
- Home sales increased 7.5% (863) compared to Q4 2016 (803), while year-end indicated a 4.0% gain.
- Greater Charlottesville median sales price rose to $300,000 (12%) compared to Q4 2016 ($267,842), as year-end marked a 7.4% improvement.
- The median days on the market for Q4 2017 remained steady at 71- days, unchanged from Q4 2016, while year-end showed a 8.5% decline (six-days fewer).
- New listings grew 13.4% (822) compared to Q4 2016 (725), as year-end marked a 2.8% increase.
- Pending sales improved 17.6% (761) compared to Q4 2016 (647), while year-end showed a 7.5% surge.
Inventory of homes for sale declined 15.9% (939) in Q4 2017, as year-end indicated a 15.7% decrease.
Anyone’s initial reaction would be to say, “Wow! Everything is going right in real estate these days.” In many instances you would be right but there are parts of the market that are still struggling. For one reason, the lack of homes for sale will continue to put a damper on homes sales. Our market often times follows the Washington DC area trends and lack of inventory there and around the country is certainly a concern for the real estate experts. Additionally what is happening with resale homes between $500,000 and $1,000,000. Although almost 100 more homes in this price range sold than in 2016, almost 50% of them were new construction. This means sellers of existing homes need to price their homes competitively and have them looking as good as they can to offset a buyers desire to choose newly built vs an older home.
A couple of other things to watch in 2018 will be rising interest rates and new home prices increasing. The financial experts believe a better economy will have the feds raising rates which ultimately cause mortgage rates to go up as well.
New home prices will have to go up for three key reasons. 1) The demand from buyers. 2) Rising building material costs because of the need to rebuild from all the disasters that occurred in 2017. 3) Rising labor costs as skilled laborers and contractors will be in short supply so the workers can demand more money.
All of these things were discussed with CAAR leaders. That conversation can be heard in its entirety by clicking on this link.
In summary, 2018 should be another solid year conservatively outpacing 2017. The factors discussed in this article need to be watched but hopefully won’t negatively impact what is now a trend of year over year success in the real estate industry.
-Michael Guthrie, CEO and Managing Broker of Roy Wheeler Realty Co.