2012 Year End Report



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.



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.


Decade of New Construction

Better to Buy or Build?

This question comes about in almost every new client conversation I have. There are those diehards that refuse to live in a new house, and there are those who want a maintenance free home from the start. (no such thing by the way – but new homes are certainly less). Personal tastes aside, there is always a financial question regarding which is better. It is the goal of every seller, whether builder or homeowner, to maximize their price at the sale of a home. There may be some other factors on the table regarding timing, but it all comes down to the final net price to seller. Always.

So, prices tend to go up and down in tandem for resale and new construction. Sometimes, one lags the other, but in general, when prices are rising, they are going up for both types of sellers. For that reason, the percentage of sales that are new construction tend to be pretty flat in good times and bad. I’m not saying that new homes keep selling, I’m saying that as a percentage of total sales, they remain fairly constant.

When we look at the last decade, this is certainly what we see. From 2003 to 2011, the percentage of total sales that were new construction (Albemarle and Charlottesville only) remained between 16.7% and 18.0%, and in 7 of those years, it was even tighter, between 16.6% and 17.1%. Not a lot of variance.

But in 2012, we saw a major shift. In Oct of 2011, builders began getting advance warning from their suppliers that prices were going up. Drywall, lumber, you name it… Prices went up. And we’re not talking 2% here. In 2012, prices on drywall went up roughly 30%. And in January of this year, prices went up another 20%+. 2012 saw lumber prices up 44%. And that drives new home prices up. Nationally, the average new home contains roughly 45% of it’s cost in materials. And when they go up as significantly as they have, there is little way to protect the profit without ratcheting prices up.

But good news may be on the horizon. Lumber commodity future point to as much as a 25% decline in prices from mills as China demand decreases and output from Canada increases.

So, here is the interesting thing. 2012, saw the first major drop in new construction. Builders may not have even noticed. The actual number of new homes sold in 2012 (266) was the highest in any year since 2007 (376 – so we are still a long way off the bubble path). But while there was a 4.7% increase in new construction sales in Charlottesville and Albemarle, that paled in comparison to the 15.7% increase in total sales. End result is that the percentage of homes sold in Charlottesville and Albemarle that were new construction went from 16.7% to 15.1%. (Explanation of the Graph: Blue and Green columns represent the total number of homes sold and total number of new construction homes each year. The yellow line is the ratio of new construction to total market.)

NewConstructionWhat brings this back? Two things are possible, likely a combination of the two will play out.

The first is that material prices come back down. As the lumber news points, there should be some relief from manufacturers as output increases. This won’t bring it back to par, but it will allow some relaxing of prices.

The second option is that resale homes will see a price increase. (It has been many years since I said that and it feels pretty good.) As long as resale prices remain depressed, the builder market will have a tough time competing. My bet is that 2013 sees better numbers than 2012 for new construction, but not back to the 2011 16.7%.

3rd Quarter Nest Report

Each quarter, as I hunker down with numbers, I get a little more ambitious. At the end of the process, I think, “I hope I didn’t include too much.”

This quarter is certainly no exception. The report expanded by over 100%. I have included far more information on condos, attached houses, and general macroeconomic conditions. The same information as in the past is available for the detached homes. All in all, I’d say it is the most comprehensive analysis available. Of course, I have a bias.

For those who wish to read the report, click here to grab a pdf version. I will be pulling out some items over the next few weeks to publish some more in depth items. Hope you enjoy.

Click here for the report.

School Districts – Where’s Hot?

Everyone wants to know what school district is the best. Of course, this baits the question, “What does ‘Best’ mean?” Some folks look at test scores, some look for diversity, others look for excellence in the sciences, and yet others look for excellence in the arts. “Best” is a fully subjective word that can apply to any and all schools in some way. It all depends on what the resident is looking for in a school.

I wanted to look at what school districts have homes that are selling the best, and so I looked not at price drops, but at the ratio of homes listed to homes sold. Seemed simple enough. And the results were not quite what I expected. I have buyers who ask for specific school districts all the time, and that request is based typically on a desire to stay in a district or it is driven by school test scores, or proximity to work, the interstate, or some recreation in which the family regularly partakes.

I’ll talk about the City first, as I found the results really interesting. (Click on the below graphs to expand.)

What I have done is created a graph of all sales in the city by elementary school district. Having only 6 schools makes this very easy to visually see what is happening here. The second pie chart shows all the active listings in the city as of today. By comparing these two charts, we can see if there are districts that contribute to more sales than they should based on the number of properties listed, or vice-versa. The first thing to note is the green section, which relates to Clark. This includes all of Belmont. While 25% of the current listings in the city are in Clark, only 19% of the sales are from this area. It follows logic to say that perhaps Belmont had its run-up during the Bubble, and is now retreating more than other areas of the city.

The flip side of that coin are Greenbrier and Jackson-Via which had 4% and 14% of the city listings respectively and yet have contributed 8% and 20% of the sales in the city thus far this year. Both of these areas are relatively affordable, with Jackson-Via’s median being only 1.5% above the median for the city. Greenbrier is priced higher (18% above the median), but still 8.5% below the pricy Venable district. Given that 71% of the houses sold this year in the city were sold for less than $325,000, this demographic seems right on target for the year.

City Sales by Elementary School

The county was equally interesting. However, with 16 elementary schools, the graphs get a little harder to read. There is however, one clear winner district this year, and one or two districts that have struggled.

On the high side, Cale Elementary is showing a lopsided number of sales compared to its listings. Again, with a median sales price below $300,000, this puts it squarely in the target for 2009 buyers. Additionally, as we have pointed out over the last year or so, homes in the urban ring have fared better than far out in the county. Cale is located on the city border to the South, and is convenient to The University as well as downtown. Neighborhoods such as Lake Reynovia and Mill Creek have managed price declines with some resistance and it appears that location, location, location may simply be playing out here.

The downside districts in Albemarle include Stone Robinson, which is home to Glenmore and the parts of the Keswick area. With the third highest median price in the county, these high end properties just aren’t having a banner year. Homes between $600,000 and a million dollars represent only 14% of the homes sold this year. Stone Robinson had 16% of the active listings. They just can’t keep up with the market. The demand is simply not there for the larger, new homes in 2009.

Albemarle County Sales by Elem School

In the wine world, we talk a lot about wines with a good QPR or Quality to Price Ratio. In 2009, we are seeing a similar flight in sales. Lower priced homes that offer convenient locations are ruling the roost. If energy prices soar again (which they certainly look like they could) this directive could become even more pronounced.

As always, I welcome comments and thoughts as well as requests for future studies. These are always interesting looking into.

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