The Washington Post reported on Friday that 243,000 jobs were added in January, a stark contrast to the 155,000 jobs that economists predicted. On top of that good news, the unemployment rate dropped to 8.3%, which is the lowest unemployment rate in three years.

While politicians continue to argue over what caused the dramatic shift in hiring, we at Kline May Realty prefer to look at this from a consumer and housing aspect. This positive news will drive consumer confidence up and help in the effort to keep our local housing market on the rise (home sales were up 3.3% in Harrisonburg and Rockingham County in 2011). As consumer confidence increases, we anticipate home sales will also increase. As home sales increase, mortgage rates will come off of their all-time lows. Because of this, we feel that this spring will be one of the best times to buy a home in the Harrisonburg and Rockingham County area.

It seems there is no shortage of opinions as to where home prices are headed in 2012. From Clear Capital’s expectation that prices will show a ‘slight uptick’ this year to Fitch’s projection that prices ‘will fall another 13 percent’, there is no consensus as to where real estate values are headed. How can there be such a disparity of opinion among industry experts? Well...prices are determined by the relationship between supply and demand and there are many unanswered questions regarding both of these components.

Questions about Demand

Will this be the year that the 5.9 million adults between the ages of 25 and 34 that are still living with their parents decide to purchase a home of their own?

With mortgage payments lower than rent payments in the majority of the country, will first time buyers finally decide it makes more financial sense to buy rather than rent?

Will the baby boomers take advantage of the great deals available and start purchasing vacation and retirement homes?

Will investors continue to purchase large quantities of distressed properties?

Will hedge funds negotiate a deal with the banks for bulk purchases of foreclosures?

Questions about Supply

Will 2012 be the year that builders again increase inventories of newly constructed homes?

Will baby boomers put their primary residences up for sale and relocate to their retirement destinations?

Will 2012 be the year that the shadow inventory of foreclosures finally makes its way to market?

If prices depreciate, it will force more homes into a negative equity situation. Will this create another surge in short sales and foreclosures?

Will the government put together a plan to convert large numbers of foreclosures into rental properties?

Bottom Line

With so many unanswered questions regarding both the demand for housing and supply of properties, it is very difficult to determine where prices will be at the end of the year. We believe the Harrisonburg area market will continue to see home prices soften through the first half of the year, possibly flattening out this summer.  From there we are hoping to see a slow, but steady return to "normal" price appreciation of 2% - 3% per year.   Beyond being a just "local" issue (as opposed to relying on national trends), your home price is heavily influenced by comparable homes sales in your neighborhood.  Talk with a Kline May Realty agent to get the facts on what's going on in your part of the City or County!  

Click here to download Market Update charts for 2011.



Something happened in the local real estate market in 2011 that had not happened since 2005 - more homes sold than in the previous year.  While the increase in activity is fairly small at 1.86%, the fact that there was an increase at all after 5 consecutive years of declining sales is very significant.  Further, the year to which we are comparing 2011 sales (2010) was  a year in which sales were artificially enhanced by the Homebuyer's Tax Credit, making the seemingly small increase in 2011 look a bit more impressive.

On a monthly basis, residential sales reported by the Harrisonburg-Rockingham Association of REALTORS Multiple Listing Service increased to 104 units in December, up from 82 units in November and 84 in October.

  Interestingly, December sales have been very consistent over the past 5 years, generally falling between 90 and 100 units no matter what the pace of sales throughout the year had been!

Pricing continued to soften in December leaving the average and median prices of homes sold in 2011 at $186,577 and $165,000 respectively.  During the year we briefly saw prices stabilize and even bump up a small amount as summertime activity increased, but the long term trend continues downward.  We expect this to continue at least through the early part of 2012 as more distressed properties, previously bottlenecked by administrative issues with the larger banks, are released to the market.  The one and three year changes in sold prices are:   

Three year change:    Average Price down -13.80%, Median Price down -13.11%
One year change:       Average Price down -6.56%,   Median Price down -6.16%

The continued bright spot for Sellers in our market is the decline in inventory.  Throughout all of 2011 inventory levels were lower than comparable months in 2010 and December's average inventory levels were the lowest monthly averages in several years.  The increase in sales has accounted for some of the inventory reduction and has been combined with current and potential Sellers choosing not to sell (or maybe to lease their home instead) due to the market conditions.   

So what does 2012 hold?  In general we feel Buyer activity will continue to increase at a modest pace, prices will continue to soften at least through the Spring and bank owned properties will have a slightly stronger influence on the local market than in 2011.  Interest rates will likely stay relatively low, contributing to unprecedented affordability for Buyers.  For Sellers it will be another challenging year, but for Buyers the time has never been better! 

Click here to view or download our Market Activity Charts for 2011.

Click here to download November's Market Update charts.



November, 2011 was similar to October in many ways for our local real estate market. For the month, the Harrisonburg-Rockingham Association of Realtors Multiple Listing Service (HRAR MLS) reported 82 closed residential transactions, just slightly behind October's 84 closings. Through the first 11 months of the year, total residential sales are 8 units ahead of the 2010 total at November 30. This is encouraging and gives us some hope that 2011 will be the first year since 2005 in which the HRAR MLS records more residential sales than in the previous year.

While the slowish but steady sales activity is a positive sign, prices continue to fall at an increasing rate. The average sales price of homes sold in the past 12 months dropped $1,274 in November to $187,147 and the median

sales price for those homes fell $2,000 to $165,000. Of the 14% decline in average sales price over the past 3 years, a 6.37% drop (45% of the total 3 year loss) has occurred in the past 12 months:

Three year change:    Average Price down -14.00%, Median Price down -13.16%
One year change:       Average Price down -6.37%,   Median Price down -5.74%

Residential inventory has declined in both the City and County, a good sign for sellers. The drop in homes available for sale was particularly large in Rockingham County with 39 fewer homes for sale (on average) during November than October, a 7.5% reduction.

Based upon the consistent buyer activity through November (118 contracts vs. 120 in October) it appears 2011 will finish at a pace which is similar to what we have experienced for the past couple of months. Conditions for buyers remain fantastic but until buyers begin to see interest rates and/or prices increasing and develop a greater sense of urgency, we believe the real estate market will continue at its current pace. Industry predictions indicate many more distressed properties will be released to the market over the next 12 – 18 months, and government influence in the financial markets will keep interest rates from rising so....it appears the current market pace is with us for awhile.

Click here to view or download our Market Activity Charts for November, 2011.

Click here to download October's Market Update charts.



Despite a drop in sales during the month of October as compared to the summer and early fall months, the local real estate market is doing better than it was at this point in 2010, as recorded by the Harrisonburg-Rockingham Association of Realtors Multiple Listing Service. The total residential sales of 84 units was a significant drop from the 100+ unit monthly totals from June – September. However, these 84 units easily surpassed October, 2010's anemic 68 units.

As we said last month, the most significant chart in this report is the Year Over Year Change in Residential Units Sold. The chart shows sales this year are 23 units ahead of last year's sales through the end of October.

If the current outpacing of last year's sales continues through December, it will reverse the trend of declining sales in each of the past five years (2005 – 2010). The cumulative effects of this trend are astounding – the year to date total of 942 units is 896 units fewer than the first ten month's sales in 2004, a 49% drop! The reversal of this continually declining trend is a key indicator our market is stabilizing, and gives some hope of a recovery in the next year or two is possible.

One important trend which has not yet reversed is the average and median prices of homes sold in the past 12 months. The average and median figures continue to decline slowly, dropping to $188,421 and $167,000 respectively. As of the end of October, the one and three year changes in sales prices for residential units in the HRAR MLS are:

Three year change:    Average Price down -13.94%, Median Price down -13.07%
One year change:       Average Price down -5.23%,   Median Price down -4.51%

Days on market for homes sold in the past 12 months actually dropped by one day in October to 215. Since inventory has remained lower than last year and the pace of sales is a bit better, it could be possible for us to see the DOM begin to go down, but most likely this change is temporary.

Our market appears to be stabilizing in terms of the pace of sales, but prices aren't quite there yet. As sales increase, upward pressure will be placed on pricing until we finally see the sales prices being to rise, hopefully by next summer.

Click here to view or download our Market Activity Charts for October, 2011.

The Wall Street Journal reported earlier today that Standard & Poor's Ratings Services has "raised its ratings on Harrisonburg, Va.'s general obligation debt one notch, pointing to the stability of the city's economy and maintenance of its solid finances and reserves. The credit rater, which raised its rating one notch to double-A, said the move reflects Harrisonburg's role as a regional economic center and its growth of a diverse property tax base, among other things. The rating is two notches below triple-A, and the outlook is stable."

"We believe management will likely maintain, what we consider, its sound finances, supported by very strong reserves and formal fiscal policies," credit analyst Danielle Leonardis said. "For these reasons, we do not think the rating will change within the stable outlook's two-year period."

"Meanwhile, S&P said it believes what it considers the city's below-average income, mitigated by the presence of a large number of university students, somewhat offsets the strengths."

When you are in the market for a new home, there are a lot of determining factors involved with where you would like to live versus what your needs are. If you want peace and quiet and want to live in the countryside, you may not have access to certain services or as high of a quality of services. In today's world, that means broadband or high speed internet. For many people who have to be connected to work or have online streaming services such as Netflix and Hulu, moving to a home that has broadband capabilities is a high priority.

The state of Virginia has a new broadband map that they released this summer which allows you to check specific addresses for what type of broadband is available in the immediate area of the homes you are looking at. If you are one of the many people who relies on broadband in their daily life and you are currently looking at purchasing a new home, it would be time well spent to check out this new map that Virginia has developed. You can access the map here:

http://mapping.vita.virginia.gov/broadband

You can enter specific addresses and see what type of broadband services are available. Also, developers can use the "identify" function to see where specific lines and nodes are located and whose they are.

Click here to download September's Market Update charts.



September was a very good month for residential sales in our area, with 121 units sold through the Harrisonburg-Rockingham Association of Realtors Multiple Listing Service (HRAR MLS).  This total was the highest for any single month so far in 2011. In fact, since September sales typically decline compared to the summer market each year, the 121 homes sold in September represents the best September total since 2006 when 135 units were sold!  Does this mean the market is back to normal? No, but it is encouraging.

Also encouraging are the annual sales figures through the end of September as compared to sales in the first nine months of prior years. Our first chart, "Year Over Year Change in Residential Units Sold", shows this comparison quite dramatically.

The chart illustrates how through the first nine months of this year we are virtually even with last year's totals (1 unit less). Since the 2010 market was heavily influenced by the Homebuyer Tax Credit, keeping pace this year is a good sign. We can also see 2010 was virtually even with 2009 (3 units more). These two years stand in stark contrast to the four prior years in which sales totals for the first nine months of 2009 were 238 units worse than 2008...which had been 258 units worse than 2007...which had been 206 units worse than 2006...which had been 68 units worse than 2005! This probably tells us a couple of things; first, the tax credit helped to slow the steady slide in sales, and second, some things have happened in our market this year (lower inventory, lower prices, lower interest rates) which have enabled it to hold steady with last year's pace without any outside intervention.

Unfortunately for sellers, the average and median prices of homes sold in the past 12 months continues to decline slowly, standing at $189,062 and $168,750 respectively. As of the end of September, the one and three year changes in sales prices for residential units in the HRAR MLS are:

Three year change:    Average Price down -13.65%, Median Price down -12.43%
One year change:       Average Price down -4.57%,   Median Price down -2.45%

While inventory levels are still considerably lower than last year, the average days on market for homes sold in the past 12 months has climbed to 216.

All in all, we believe there is reason to be cautiously optimistic about the overall condition of our real estate market. While still slow compared to prior years, we appear to have been through the worst of it and the prospects of a slow recovery seem realistic. The next few months will be slower than the past few due to seasonal changes in the market, but we feel annual sales totals for 2011 will exceed those from 2010.

Click here to view or download our Market Activity Charts for September, 2011.

Kline May Company, holding company for Kline May Realty and Cottonwood Commercial Realty, has passed $100 Million in sales volume for 2011 as measured by the Harrisonburg-Rockingham Association of Realtors (HRAR). Kline May Company has reached this milestone 72 days ahead of their 2010 sales volume pace, a positive sign for both the company and our local real estate market. Keith May, owner of Kline May Company, commented "We have over 70 agents and staff who are committed to helping our residential and commercial clients by providing the best service possible. We focus on each client, and at the end of the transaction we allow every customer to evaluate us. Based on these evaluations, we have over a 98.9% client satisfaction rate for both buyers and sellers. Our success has been based upon the focus our agents give every single transaction."