Charlottesville Real Estate Blog

Charlottesville Boasts 4^th Best Sales Year Ever

In our five county region, just over 1 billion dollars in real estate was sold in 2007. Last year will go down as the 4^th best year for real estate sales in our area. Despite all the negative media, Charlottesville was able to perform. First, we will look at the number of sales in 2007 compares to the last five years.

Number of Sales

There were 3,560 homes sold in 2007, down 835 from 2006. From this data, 2007 has returned to just above the level set in 2003. At the time, 2003 was a banner year in this market; now 2003 is the 5^th best year in our market.

Median Sales Prices

Next, we will look at Median Sales Prices. The median is the middle number in a given sequence of numbers. Simply put, this is the middle of what buyers were willing to pay each year. Overall, the median price rose $6,950 (+2.6%). Albemarle (-3.1%) and Nelson (-4.6%) were down slightly, but all other areas were up for the year. Other area increases were modest – Fluvanna (+3.4%), Greene (+6.7%), and Louisa (+6.5%). Since 2002, the Median Sales Price has risen over time.

Average Home Sale Prices

Finally we will look at the Average Home Sale Prices in our area. Overall the Average Sale Price rose. Albemarle (-3.9%), Louisa (-4.7%) and Nelson (-2.1%) fell slightly, but the other areas were up for 2007. Surprisingly, Charlottesville (+11.8%) rose significantly while Fluvanna (+1.5%) and Greene (+.76%) rose slightly.

Conclusion

Based on the numbers we have looked at today, the average homeowner has had the ability to make a significant amount of money over the last 5 years, even if the 2007 market has struggled a little bit to maintain with 2004, 2005, and 2006. For example, the median price of a home in Albemarle County in 2002 was $226,000 and the average price was also $226,000. Because real estate appreciates, that same home could have been sold for a considerable profit in 2007 with the median price at $310,000 and the average price at $407,441. That's almost a $200,000 dollar increase in average price in 5 years just for owning a home. There is more good news for sellers; homes that were priced correctly in 2007 sold in less than 63 days. For buyers, interest rates are staying low, and based on the numbers we looked at today, are in a great position to increase their standard of living over time by buying a home.

Should You Wait to Buy in a Down Market of Falling Home Prices?

I know the Real Estate Market looks bleak right now. Sellers are thinking: “I will never be able to sell my home” and buyers are thinking: “I will never be able to get a loan in this market”. In this case, it could be perception is your reality. Everybody wants to know how to best time the market when buying a home. It's just natural - especially if you're thinking about buying in a down market where home prices are declining. You wonder how low they will go and whether you should wait, right?

Some Home Buyers Should Buy Immediately

You're probably thinking: "Of course, he would say that. He's a Realtor, and agents always say 'Now is the best time to buy'." Well, here is why:

· If you are a seller who wants to move up to a more expensive home in a down market, now could be the best time. The longer you wait to sell, the lower the price of your home could fall.

· If you can arrange for alternate housing, a smart strategy is selling now, waiting a few months, then buying your new home.

· If you sell and buy simultaneously, you'll still be ahead of the game because the price reduction on the purchase is greater than the loss on the sale.

Consider the "Loss" on Selling Your Present Home

For example, say your present house is worth $300,000, but because of high inventory and few buyers, you must price it right and reduce your price by 10%. So, instead of receiving $300,000, you would get $270,000 and "lose" $30,000.

Consider Your Real Profit

Now, consider this. Say you bought this home 10 years ago and paid $100,000. You're still ahead $170,000, less costs of sale, aren't you? (This ignores monthly payments, but you would make those if you were renting, too.)

Consider the "Savings" on Buying Your New Home

If you are planning to move up to a $500,000 house, which is located in the same distressed market, you could probably buy that house at that same 10% discount or $450,000. This would mean you had saved $50,000.

Review of Selling and Buying Numbers

1. So you "lost" $30,000 on the sale of your home

2. But you "made" $50,000 on the purchase of your new home

3. Doesn't that put you $20,000 ahead?

Don't Forget the Impact of Interest Rates

Which way are interest rates moving? Are they moving up or moving down? If interest rates are near an all-time low and beginning to inch upwards, waiting could cost you more than you would think. You might not be able to afford to buy a home at any price.

? FACT: Each 1/2 point increase in your interest rate gives you $25,000 less in purchasing power.

? FACT: Each 1 point increase in your interest rate gives you $50,000 less in purchasing power.

? FACT: Each 2 point increase in your interest rate gives you $100,000 less in purchasing power.

Look at the Differences Among Purchase Prices versus Interest Rates

If you put down 20% and qualify for an 80% loan, here are your principal and interest payments on the following purchase prices:

· $425,000 sales price, at 8.25% interest, your payment is $2,554.

· $450,000 sales price, at 7.75% interest, your payment is $2,579.

· $475,000 sales price, at 7.25% interest, your payment is $2,592.

· $500,000 sales price, at 6.75% interest, your payment is $2,594.

· $525,000 sales price, at 6.25% interest, your payment is $2,586.

The payments are almost identical. However, the home you can afford to buy at 8.25% is $100,000 less than the home you can afford to buy at 6.25%. If you wait for prices to further decline, the perceived value could be lost due to higher rates.

Sellers

Despite the constant barrage of negative Real Estate news, keep your head up. Look at it in a more positive light. The thought that homes aren’t selling is just not true. You need to understand that you have to price it right. You CAN NOT say “let’s put it on the market for XYZ and if we don’t get a lot of interest, we can lower the price”. That is the kiss of death.

Like most Realtors, I want to list your home! That’s what I’m here for and that’s how I get paid. BUT, I have had to turn down a listing or two because the sellers had unreal expectations. Make sure you find a Realtor who will tell it to you straight, lumps and all. Anyone can be a “yes” man and that is robbing you of precious time and money!

Buyers

YES, you can get financed. Just because lenders have tightened their belts on loans doesn’t mean you can’t get one! Like I mentioned before, mortgage applications are up and the rates have been slashed. Now is the time to buy a home! Sellers are competing for your business. You no longer have to settle.

Regardless of all the negative information floating around, there is always a silver lining. In this case, sellers can sell and buyers can buy. A good strategy is to weigh all the pros and cons of real estate ownership before making the decision to buy or sell. Don't panic over newspaper headlines, make an informed decision, run your own numbers – then do what feels right to you.