Published by the Charlottesville Area Association of REALTORS®
Where Are We Now?
Home sales, compared to 2008, continued to show improvement in the second half of 2009. At mid-year, sales were down 28%, but by year-end sales were only 8.7% below the 2008 levels. In the 4th quarter of 2009, sales (696) were up 34.1% from the same period in 2008 (519). This is the first year-over-year increase in sales we have seen in several quarters in the Charlottesville area. While it is certainly exciting to see such a significant increase in sales, it is important to remember that the 4th quarter of 2008 was the height of the economic and housing crisis. As predicted, the 4th quarter of 2008 (and the 1st quarter of 2009) appear to be the bottom of the housing downturn in the Charlottesville area.
As reported for the past two quarterly reports, significantly lower home prices (down 20% or more) are driving the pick-up in sales. In addition, the $8,000 tax credit for first time buyers supercharged the sale of starter homes (below $300,000) in 2009. 67.5% of home sales for the year were in this starter home category, which is approximately a 10% increase in this category.
Home Sales for 2009
There were 2,730 homes sold in the Charlottesville area in 2009, which was down 8.7% (-261 sales) from 2008. Albemarle (+5.7) and Greene (+11.7) showed an increase in sales for the year. All other ares were down from last year: Charlottesville -19.9%, Fluvanna -15.4%, Louisa -15.8%, Nelson -12%, and Orange -20%.
Sales in the Central Valley region were generated from the Greater Augusta MLS, which has more complete data on the Valley market than the CAAR MLS. Sales were down in the Valley by 14.9 % compared to last year.
Residential Sales
County
2005
2006
2007
2008
2009
Albemarle
1973
1680
1440
993
1050
Charlottesville
555
764
644
562
450
Fluvanna
639
523
423
318
269
Greene
309
291
203
171
191
Louisa
241
217
208
209
176
Nelson
399
259
194
158
139
Orange
133
128
122
85
68
Area Total*
4677
4412
3768
2991
2730
Central Valley**
1063
905
*includes sales outside the counties listed
**numbers courtesy of the Greater Augusta MLS
Home Prices Have Dropped
Based on the data from the CAAR MLS, we believe that the numbers clearly show a significant decrease in home prices during 2009. The median prices listed below are the middle of the market of properties that sold. Simply put, this is an indication of what buyers were willing/able to pay and is not a true reflection of individual home prices. It is probably safe to assume that a steady, year-to-year decrease in the median price is a good indication that prices are going down, but it is not an exact measurement.
We believe the numbers displayed below provide compelling evidence that our local real estate market has experienced a noteworthy drop in home prices. The CAAR market reports have been discussing this trend since the Fall of 2007, and this report shows further evidence of the decline. The one caveat that we need to make is that part of this median price decline is a reflection of an increase in home sales in the lower price ranges. Of the 2730 homes that sold this year, 1565 were sold for $300,000 or less. This surge in the lower end of the market will naturally pull the median price down.
Overall, the median home price (including attached homes) declined $20,823 (-7.8%) compared to last year. The median price in 2009 fell just below what we reported as the year-end median price in 2004. All areas covered in this report showed a decline as follows: Albemarle (-10.9%), Charlottesville (-7.1%), Fluvanna (-17%), Greene (-5.8%), Louisa (-15.7%), Nelson (-7.2%), Orange (-25.6%) and the Valley (-5.6%).
Median Prices
County
2005
2006
2007
2008
2009
Albemarle
$289,000
$320,000
$307,000
$320,000
$285,000
Charlottesville
$249,000
$240,000
$280,000
$265,509
$246,750
Fluvanna
$234,000
$244,900
$260,000
$243,250
$201,978
Greene
$234,900
$267,000
$285,000
$260,000
$245,000
Louisa
$205,900
$231,900
$265,000
$249,000
$209,900
Nelson
$300,000
$325,000
$310,000
$300,000
$278,500
Orange
$215,000
$259,750
$277,500
$215,000
$160,000
Area Median*
$256,741
$270,000
$279,000
$266,180
$245,357
Central Valley**
$201,211
$189,929
*includes sales outside the counties listed
**numbers courtesy of the Greater Augusta MLS (note: these are average prices, not median)
Price Per Square Foot (Finished)
Another indicator that allows us to see the decline in home prices is a major drop in the price per square foot numbers. The average price per square foot of finished space in homes is not a scientific number, but a downward trend over the years clearly indicates a decrease in prices (and vice versa). According to the chart below, prices peaked in 2006 and have declined for the past three years. There has been a $28 per square foot drop since the peak in 2006. The current $143 per square foot is the lowest number since 2004.
Price Per Finished Square Foot
County
2005
2006
2007
2008
2009
Albemarle
165
178
175
169
152
Charlottesville
171
201
197
185
171
Fluvanna
130
142
141
134
120
Greene
140
155
152
143
128
Louisa
132
147
151
135
114
Nelson
206
212
209
192
171
Orange
137
164
166
129
117
Area Average*
158
171
168
158
143
Central Valley**
134
119
*includes sales outside the counties listed
**based on CAAR MLS data
Inventory of Homes for Sale
The inventory of homes for sale in the Charlottesville has continued to decline very slowly. As we have reported for the past several quarters, the excess of inventory is causing many of the problems with our local housing market. The decline in inventory is very encouraging, but we will still have too many homes on the market for the current demand. This could change very quickly going into the busy spring market.
Currently, we have 2,877 homes on the market, compared to 3,086 at this time last year. This is the largest year-over-year decrease in several years, but we are still a little bit above a balanced inventory level in the 2,000 to 2,500 range. The median price of homes currently for sale is $289,900, which is $10,000 less than last year. The average DOM (days on market) of these homes is 182 days, which is ten days less than last year and 42 days more than homes that have sold. The most telling statistic related to homes currently on the market is that the average price per square foot is $208 compared to $143 for homes that sold in 2009.
Housing affordability is the positive aspect of this market. There are 786 homes for sale $200,000 or less with an average DOM of 164 and an average price per square foot of $146. There are 232 homes currently on the market priced at a million dollars or more with an average DOM of 270.
Days on Market (DOM)
In this market, the average days (DOM) a property stays on the market is less important than it would be in a more balanced market. There are many variables in the marketplace – excess inventory, foreclosures, short sale, and financing issues – that affect the length of time a property is on the market. The local area DOM stabilized in the second half of 2009 which, combined with the decrease in inventory, may indicate a change in the market. We are still in a buyer’s market, which means the best way to shorten the days your property is on the market is to price it correctly.
Average Days on Market
County
2005
2006
2007
2008
2009
Albemarle
53
69
91
114
107
Charlottesville
51
57
79
111
116
Fluvanna
60
75
88
118
123
Greene
59
79
93
108
98
Louisa
85
91
126
108
134
Nelson
71
86
111
149
159
Orange
72
72
110
154
135
Area Average*
62
75
94
119
120
Central Valley**
142
150
*includes sales outside the counties listed
**numbers courtesy of the Greater Augusta MLS
New Construction Still Slow
It is important to note that many “new” homes are not included in CAAR MLS statistics. It is very common for a buyer to contact a builder directly to custom build a home. With that said, the historical perspective of the pace of new home sales gives us a reasonably good picture of the market for new construction. As the chart below shows, new home sales are still struggling and until the inventory of re-sale homes for sale declines more, new construction will lag.
Condos and Townhomes (Attached Homes)
The sale of attached homes is only reported in Charlottesville and Albemarle because very few properties in this category are located in other counties, except Nelson. Since the condos in Nelson are primarily in the Wintergreen Resort market, we have decided not to include them in this report. One of the more interesting numbers in this report is the 26% increase in the sale of attached homes in Albemarle in 2009. Charlottesville attached home sales, on the other hand, are down 28.6%. Inventory levels of attached homes dropped during 2009 due to reasonably strong sales and little new inventory being created. The average DOM of the 333 attached homes currently on the market is 232, and the median price of an attached home currently on the market is $206,000. The median price for an attached home sold in 2009 was $221,500 with a DOM of 102.
Conclusions and Predictions
Hindsight is always helpful in seeing the overall market twists and turns. Now that we can look back on 2009, it is easy to see that the local real estate market shifted in 2009. Based on the sales figures for the past 2 years, the market was at its lowest point between July 2008 and June 2009. The obvious conclusion is that the market has hit bottom and that we are on our way to better times in local real estate. CAAR is cautiously optimistic that we are looking at a bright future, but there are a lot of unknowns in front of us. What will happen when the home buyer tax credit expires in April? Will interest rates increase dramatically? Will the overall economy and the job market continue to improve?
With the benefit of hindsight, we will look forward to answering these questions when we publish the 2010 year-end report.
For now, we will continue to watch the inventory of homes for sale and the number of foreclosures that happen in our local market. If we see inventory levels continue to decline and the pace of foreclosures stays steady, we can expect prices to start creeping up. If inventory climbs again and the overall economy and home financing see further troubles, 2010 may end up being a repeat of 2009.
This Quarterly Market Report is produced by the Charlottesville Area Association of REALTORS® using data from the CAAR MLS and the Greater Augusta MLS where noted.
Bringing the Dream of Homeownership Within Reach
As part of its plan to stimulate the U.S. housing market and address the economic challenges facing our nation, Congress has passed new legislation that:
Extends the First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010.
Expands the credit to grant up to $6,500 credit to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010.
Here is more information about how the Extended Home Buyer Tax Credit can help prospective home buyers become part of the American dream. If you have specific questions or need additional information, please contact a tax professional or the Internal Revenue Service at 800-829-1040.
First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010.
Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.
To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.
The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.
How Much Is Available?
The maximum allowable credit for first-time home buyers is $8,000.
The maximum allowable credit for current homeowners is $6,500.
How is a Buyer's Credit Amount Determined?
Each home buyer’s tax credit is determined by two additional factors:
The price of the home.
The buyer's income.
Price
Under the Extended Home Buyer Tax Credit, credit may only be awarded on homes purchased for $800,000 or less.
Buyer Income Under the Extended Home Buyer Tax Credit, which is effective on November 7, 2009, single buyers with incomes up to $125,000 and married couples with incomes up to $225,000—may receive the maximum tax credit.
These income limits have changed from the 2009 First-Time Home Buyer Tax Credit limits. If you or your client purchased a home between January 1, 2009 and November 6, 2009, please see 2009 First-Time Home Buyer Tax Credit.
If the Buyer(s)’ Income Exceeds These Limits, Can He/She Still Get a Credit?
Yes, some buyers may still be eligible for the credit.
The credit decreases for buyers who earn between $125,000 and $145,000 for single buyers and between $225,000 and $245,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit. Home buyers earning more than the maximum qualifying income—over $145,000 for singles and over $245,000 for couples are not eligible for the credit.
Can a Buyer Still Qualify If He/She Closes After April 30, 2010?
Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.
Will the Tax Credit Need to Be Repaid?
No. The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during this three-year period, the full amount credit will be recouped on the sale.
The Basics: Short Sales
Due to current economic conditions, the number of short sale properties on the market is rising. The increasing number of short sales on the market presents challenges for REALTORS®. Below you'll find more information on: short sales and their challenges, the government's efforts to address these challenges, and tools to help you navigate the short sale process.
Home Affordable Foreclosure Alternatives Program (HAFA)
On November 30, 2009, the Treasury Department released guidelines and forms for its new Home Affordable Foreclosure Alternatives Program (HAFA), part of the Home Affordable Modification Program (HAMP).
What is a short sale?
A short sale is a transaction in which the lender, or lenders, agree to accept less than the mortgage amount owed by the current homeowner. In some cases, the difference is forgiven by the lender, and in others the homeowner must make arrangements with the lender to settle the remainder of the debt.
Why is the number of short sales rising?
Due to the recent economic crisis, including rising unemployment, and drops in home prices in communities across the nation, the number of short sales is increasing. Since a short sale generally costs the lender less than a foreclosure, it can be a viable way for a lender to minimize its losses.
A short sale can also be the best option for a homeowners who are “upside down” on mortgages because a short sale may not hurt their credit history as much as a foreclosure. As a result, homeowners may qualify for another mortgage sooner once they get back on their feet financially.
What challenges have short sales presented for REALTORS®?
The rapid increase in the number of short sales, and the short sales process itself present a number of challenges for REALTORS®. Major challenges include:
Limited experience Many REALTORS® are new to the short sales process; a difficulty which is compounded by many lenders' lack of sufficient and experienced staff to process short sales. Even if the REALTORS® are experienced, most servicers are under-staffed and still not adequately trained, making negotiating a short sale particularly difficult.
Absence of a uniform process and application Currently, both short-sales documents and processes are lender-specific, making it very difficult and time-consuming for REALTORS® to become knowledgeable and efficient in facilitating these transactions.
Multiple lenders When more than one lender is involved, the negotiations are much more difficult. Second lien holders often hold up the transaction to exert the largest possible payment, in exchange for releasing their lien, even though in foreclosure they will get nothing.
As a result of these challenges our members have reported difficulties with: unresponsive lenders; lost documents that require multiple submissions, inaccurate or unrealistic home value assessments, and long processing delays, which cause buyers to walk away.
What is being done to address or eliminate these challenges?
On May 14, 2009, the Obama Administration announced its upcoming Foreclosure Alternatives Program. Among other things, the new program:
Establishes financial incentives for servicers, sellers, and second lien holders to encourage the completion of short-sale transactions.
Requires that a timeline, of no fewer than 90 days, be set to allow a homeowner to sell a home, without threat of foreclosure action.
Requires the short sale agreement to specify reasonable and customary real estate commissions and costs to be deducted from the sales prices. (The servicer must agree not to negotiate a lower commission after receiving an offer.)
Will provide standardized documents, including short-sale agreements and offer acceptance letters.
