Twelve Straight

February 1. Our January stats are far from being updated. We likely won’t have complete numbers for at least another week. But I had to peak anyway. And the numbers are remarkably positive so far. Keeping in mind that in the first week after a month, sales continue to be entered, and thus numbers only improve, we still have good and happy graphs to push out there.

Jan_2013_S_and_InvAbove are the sales and inventory numbers for Feb 2011 through Jan 2013. What this marks is the first time in a long time that we have seen 12 straight months of increased year-over-year sales growth and inventory reduction. While the January chart may look like sales are slightly down, that is a graphical anomaly I blame on shading. As of today, we have one more sale in detached homes in Jan 2013 than in Jan 2012. (Small, yes… but still growth.)

Over the last twelve months, the increase in sales reflects a more than 20% increase for City and Albemarle. A shift from 1002 to 1214 sales.

Compared that with the attached home market, where the twelve months ending yesterday look promising with a total increase in sales in the City and Albemarle of  roughly 9.7%. But that doesn’t really tell the whole story. When you look at month by month movement for the last 12 months, you find only 8 periods of year-over-year growth. In general, the overall trend is positive, but the trajectory is not nearly as clear. Additionally, the attached home inventory is 5% higher than it was at this time last year, and that brought the months of inventory up by a month and a half to 13.9 months.

The condo market moved similarly to the attached home market. Total sales over the year were up 14.9%, but that reflected only 8 months of year-over-year growth. (The condo market, however, is very small and thus new projects, lower prices on existing projects, etc… can sway the numbers months to month greatly.)

As a final quick note, Contract Written. In Jan 2011, we saw 71 contracts written on detached homes. In 2012, that number jumped to 102. This past month, we have records of 98 thus far. This is a big jump. The reason for this is that the way in which our MLS keeps records, many properties are Contingent for more than 2 weeks before they are moved to the Pending status. It is not until that time that they get a Contract Written Date that we can track. If you figure the average closing is 45 days, and 15 of those days are not accounted for, that is as much as 30% of deals. So, it is possibile that our 98 may go up to 120-130 before all is said an done. Of course it could go up to only 110… we can’t know. There are currently 126 properties under contract that do not have Contract Written dates. Not all from January to be sure.

No matter how you look at it, our numbers are still looking very strong, and the anecdotal evidence seen by real estate professionals supports that this is not likely to change in the short run.

Vacant Showings

I went out yesterday and showed 5 properties to buyer clients. Nothing odd about that. Except that, for the first time in my recent memory, all the properties were vacant, and none were new construction.

VacantHome

The houses I showed yesterday were all in the $300-400,000 range. These are not homes where owners regularly pay cash, nor are they owned by folks for whom owning “an extra home” is not a problem. And so I have to wonder, “What is going on here.”Hmmm. My partner Jim Duncan has written about this phenomenon in the past, and I have certainly commented on it. But, frankly, I’m surprised that I’m still writing about it.

Currently, we have a very small inventory. Across the city and Albemarle County and all product types, there are only 903 properties for sale. Take out those that are “proposed” (meaning not yet started pre-sell new construction) and that number drops to 715 properties. And within that group, there are currently 206 homes that are listed as Vacant for showing instructions or 28.8%. This is certainly down from several years ago when the bubble burst, but not as much as I thought it would be.

There are several reasons for a home being left vacant. 1) The owner has taken a job in another town. 2) The owner purchased another home and has moved out. 3) House was originally a rental property and the owner has ceased renting pending a sale. Or 4) The owners have moved to a retirement facility or passed away. I’m sure there are other reasons that I’m not mentioning here, but these are the big causes.

In case 1, occasionally a new company will be paying expenses during the move, so the vacancy is less painful. But in all the other cases, this is a real expense eating away at cash flow and wealth. Even if you pay cash for a home there is still a cost of capital to the investment costs, plus taxes, utilities, maintenance, and heaven forbid repairs if something should go wrong such as a water leak. There is a reason many home insurance companies drop vacant homes from their rolls, or significantly increase the premium.

During the run-up to the bubble, when people thought houses were guaranteed to sell in 7 days, a vacant house was not necessarily a bad plan, but today, homes need to show their best. And vacant home rarely show as well as furnished homes. One of the homes I went to yesterday had filthy carpets, sticky countertops, and the only blinds that remained with the house were those that were broken. My client instantly knew the property had not been cared for. The price expectation went down a solid 10% upon seeing the condition. (If this is what I see, what do I not see?)

There is not doubt that there will always be some vacant homes on the market, but if you need to leave your home vacant: Maintain it like you live there. Keep it fresh and clean. Run water in all the sinks and tubs once a week to keep the gasses from come through the pipes. Furnish it as best you can. If it looks great when it is vacant, buyers will know you cared about the home when you lived there.

2012 Year End Report

NestReportLogo

 

We released our 2012 Year End Report today, and it is a very different report from the past. The format will look familiar but the content seems almost opposite from the past.

Since 2009 when we first formed Nest and started putting out the region’s most complete and authoritative study of the market, we have looked at the Charlottesville area market with cautious optimism at best, and in many cases very clear concern for our future pricing. For the first time, we are very comfortable stating that all of our indicators are positive. Across almost every product type in almost every geographic part of our area, we are seeing growth: Growth in sales, Growth in Median Prices, Drops in Inventory, Drops in Days on Market. You name it, things look good.

We have said since 2009 that we wouldn’t feel comfortable until was saw 18 months of growth. Well, guess what? For 6 straight quarters, we have seen year-over-year growth in sales numbers.

SalesByQtr

 

This graph shows the total number of sales in Charlottesville City and Albemarle County going back to 2002. But the graph is for a full trailing 12 months, not individual quarters. It allows us to see the sales patterns while removing the seasonality of quarter-to-quarter changes. When you look at it on a visual basis, the trend becomes incredibly obvious. Here’s to a great 2013. Follow the link above and check out our whole report.

Screaming Quarter

Much talk has begun about what this year will hold. If the 4th quarter of 2012 is any indication, it should be a monster of a year. With all the data we process, I am getting more and more optimistic about what I see.

The 4th quarter of 2012 was the strongest ending of a year we have seen in Albemarle County since 2006. With 171 single family detached homes closing in the 4th quarter, it is the first time we have seen a sustained “reset” in the market. It brought the whole of 2012 year only 20 sales shy of our 2007 year. Still a far cry from the insane 2004 with 1256 detached sales, but certainly healthy.

The City was a similar story with the 4th quarter being the best 4th since 2005 and the year totals exceeding every year since 2007.

But what is great to see is not just a single month, but rather a sustained uptick in sales. This chart represents the total sales for both Charlottesville and Albemarle (Single Family Detached only) and displayed in a trailing four quarter method.

FourQtrSalesAccording to this trend line, we have seen improved quarters since Q2 of 2011. That certainly is not when we bottomed out in terms of price, but the sales numbers have significantly increased every quarter since then. And happily, we are not back to our Bubble Period numbers, but we are moving along strong. In fact, the sales for 2012 are above the average since the start of 2001, and that includes bubble years.

We will keep the data churning as we process our year end info, so keep checking in.

 

Unemployment Revisited

I first addressed unemployment in April of 2008 as being the best harbinger of a declining market in Charlottesville. At the time, we had local unemployment of 2.5%. The market, especially in the City, was still moving pretty well. Days on market had degraded substantially, but prices were actually up a (now stunning) 7.5% from the year prior while the actual deal volume had increased nearly 10% from the first quarter of 2007. At a time when the market was being called stable by many, I called a coming decline. Fourteen months later, Charlottesville had unemployment of 6.4%.

So, now, as we see definite signs of an improving market in the close of 2012, what other larger macroeconomic indicators can we look to? Well, unemployment would be my first pick.

 

Jan2013UnemploymentThere is no question that purchasing decisions for big ticket items are determined in large part by consumer confidence. There is no large ticket item for which this is true more than homes. Who would buy a home when they don’t feel comfortable that they will have a job in 9 months?

So, where is Charlottesville in all this mix? Our current rate of 4.5% looks pretty good, whether compared to the Virginia rate of 5.6% or the National rate of 7.8%. When you think that the national rate has not been lower since January of 2009, it all looks pretty good.

But go back to April of 2008 and you find Charlottesville at 2.5%. Look at the graph above and notice that Charlottesville is always significantly below the national curve, and most often below the Virginia number as well. Just because we compare well against the National numbers doesn’t give me comfort. Back in 2008, we were frequently in the top 15 cities in the country (#13 at the time of the above cited article.) For Charlottesville to be back at #13 right now, we would need to find 551 jobs for the 5,100 unemployed people in our MSA. That is a TREMENDOUS number. To get us back to 2.5% unemployment, we need businesses to create more than 2,250 jobs. And that needs to be done without bringing a single employee in from out of town to fill those jobs.

The good news is that we don’t need to get to 2.5% to be healthy. In fact, most economists would say that any unemployment rate below 5% is pretty darn healthy. The question is, does having a National unemployment rate hovering over 7.5% bring confidence? I don’t think so. If we see the national number in the 6’s, even the high 6’s, and Charlottesville can stay in the 4’s, we will see a high consumer confidence in our area. At that in turn, should provide some stability.

Right now, the market is moving quickly. City properties are getting sold in very short order in terms of Days on Market. But the question remains, are these buyers looking to take advantage of a perceived bottom of the market curve, or is this a sustained return to the market?

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