Mid-Year
Market Report
Market Stabilizes in First Six Months of 2007
By Dave Phillips, CEO
Charlottesville Area Association of REALTORS®
Mark
Twain once said, "When we remember we are all mad, the mysteries
disappear and life stands explained." He could have been talking
about the real estate market over the past few years. After two
years of insanity (irrational price increases and crazy sales numbers),
the market appears to be leveling off at a rational level. As the
charts and graphs below show, 2005 and 2006 were spikes in an otherwise
steady market. The real estate market is now much easier to understand.
Overview
of the Second Quarter
While
the second quarter numbers for 2007 are down from last year’s
mid-year marks, they do show a strengthening real estate environment.
Home prices appear to have stabilized, the glut of inventory of
homes for sale has peaked, the average days on the market has dropped
slightly, and home sales have picked up. There are still soft spots
in the market, but overall this is the most balanced market in years.
We are still in a “buyer’s market,” so buyers
have a slight upper hand on sellers, but the pendulum is gently
easing back to a nice equilibrium.
Homes
Sold
There
were 1,882 homes sold in the first six months of 2007, which was
down 385 (-17%) from last year. All local areas (Albemarle -13.3%, Charlottesville
-33.7%,
Fluvanna -18.5%, Greene -34.7%, Louisa -20.7, and Nelson -24.9%)
posted lower sales
than the same period last year. Looking at the past 6 years (see
chart below), our
region’s core markets have returned to the sales levels of
2003, which was just prior to
the crazy boom years of 2004-2006. Sales outside the core areas
listed were strong, so
the total market is closer to the impressive numbers we saw in 2004.
It should be noted
that the decline of sales in the city is a bit misleading. Last
year the city condo market
exploded and this year has returned to normal. That accounts for
a large portion of the
city’s sales decline.
New Construction
New to the CAAR market report this year is a look
at the number of new homes that were sold through the CAAR MLS system.
It is important to note that many “new” homes are not
included in this statistic. It is very common for a buyer to contact
a builder directly to custom build a home. As a rule, new home statistics
tend to lag behind the rest of the market as far as trends are concerned.
New home sales peaked in 2006, a year after the overall market.
New construction, both locally and nationally, slowed dramatically
in mid-2006 and is now finally showing signs of recovery.
Median Sales Price
The
mid-year median price numbers are the best example of a market nearing
balance.
Overall, the median home price for the area increased $4,000. That
is by far the
smallest mid-year jump in prices in the last 6 years, but it does
demonstrate a reversal
of the market from the 9% decline in prices in the first quarter
report.
Only
Albemarle (-$15,000, -4.8 %) and Nelson (-$11,500, -3.8%) showed
a decrease in prices for the first six months. Charlottesville led
the way with a whopping $43,000 (18.1%) increase, but as discussed
earlier in this report, that is a reflection of the spike in condo
sales in 2006. The lower-priced condo sales in the city last year
kept the median price lower than reality. Other areas that showed
an increase included Fluvanna (+$11,398, +4.7%), Greene (+$18,270,
+6.7%), and Louisa (+$3,210, +1.3%).
Days
on Market (DOM)
Another sign that the real estate market is stabilizing
is the slight decrease in the average days a home stays on the market
before it sells. Currently the average DOM is 93 days, which is
down from the first quarter pace of 109 days. Since 90 days is the
benchmark for a balanced market, this is strong evidence that the
market is leveling off. Compared to last year’s hot market,
the 2007 DOM numbers are telling. Clearly the pace of sales in the
Charlottesville area (and across the country) is much slower than
the previous 5 years, but the market is showing signs of improvement.
While 93 days may seem like a long time for a home to sell, it is
not a bad average by historic standards. Properly priced homes are
still selling very quickly in our region. This is reflected by the
median time on the market of just 58 days.
Inventory
of Homes for Sale
The
inventory of homes for sale in the Charlottesville area has been
a key factor in the local market for the past several years. Inventory
levels are generally a good indication of where home prices are
going. In the early part of the decade, we saw extremely low inventory
levels of around 4 or 5 months of supply. This caused home prices
to soar as buyers were forced to make aggressive offers to purchase
the home they wanted. Today, we have slightly over 11 months supply
of homes on the market, which is more than adequate. We are just
entering the peak selling season, so a high inventory is good for
the marketplace. Buyers will have plenty of properties to choose
from and prices should be stable. In other words, we are still in
a “buyers market.” Currently we have just over 3,400
homes on the market and the median price of these homes is $330,000.
The average days on the market of these homes is 116 days. There
are 513 homes for sale under $200,000 with an average DOM of 105.
There are 247 homes currently on the market priced at a million
dollars or more with an average DOM of 146.
Condos
and Townhomes
The
explosion of condominiums and townhomes from 2005 and 2006 appears
to be over. Attached homes are a very important part of the real
estate market and the 2007 numbers show sales close to the historic
averages. Most of these attached homes are in Charlottesville and
Albemarle, so this report covers only those areas. The charts below
show the attached homes sold in the first six months of 2007 compared
to past years. Inventory levels of attached homes for sale are still
high, with 454 listed for sale in Charlottesville and Albemarle.
The 127 average DOM for the attached properties currently on the
market is slightly more than the 115 days for detached homes in
Charlottesville and Albemarle. With several new attached projects
currently under development, the inventory levels and DOM for these
properties are both expected to rise during the second half of the
year.
Price
Per Square Foot (Finished)
Looking
at the average price per square foot of finished space in homes
is interesting,
but should not be relied on as a scientific number. The averages
in this section of the
report include the cost of the land, which varies greatly based
on location and amenities. A lot at Wintergreen with fantastic views
of the valley costs much more than a lot in other parts of Nelson.
With that said, the numbers in this section reflect the softening
of prices we have seen in 2007. Nelson County, thanks to the large
number of resort properties, has consistently led the way in price
per square foot, with Charlottesville generally second. City homes
are higher than other areas simply because they are located more
conveniently to UVA and downtown. As the saying goes, there are
three things that matter in real estate – location, location,
and location.
Conclusions
The
mid-year numbers clearly show that the real estate market is once
again on the upswing. We hit bottom in late 2006 and have started
a period of slow, sustainable growth. While gradual price increases
and modest improvements in sales is not very exciting, it provides
both buyers and sellers with a rational platform on which they can
make wise buying and selling decisions. A more consistent market
is a welcomed relief after the roller coaster over the past few
years.
We
are still in a “buyer’s market” due to the high
inventory of homes for sale, but demand is high and properly priced
homes are selling quickly. With interest rates remaining low and
the overall economy strong, the real estate market should be in
solid shape for the remainder of the year.
For
more information on this report or the real estate market, visit
www.caar.com or contact Dave Phillips, CEO of the Charlottesville
Area Association of REALTORS®, at 434-917-2393 or Dave@caar.com.
2006
Yearly Reports
2005
Yearly Reports
2004
Yearly Report
Peak
Attraction
Second
Homes at Ski Resorts Provide Opportunity for Fun, Investment
By
Daniela Deane
Washington Post Staff Writer
Saturday, February 19, 2005; Page F01
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