Rosy fall? Recent reports suggest happy trend
New reports, released just a few weeks ago, indicate that the Charlottesville-Albemarle real estate market is showing signs of recovery. For instance, the third quarter report from Nest Realty cites declining inventory and decreasing prices as key factors affecting recovery on a local level; and with current housing inventory figures lower now than they’ve been in the past seven years, there appears to be valid cause for optimism.
The decline in inventory extends to distressed properties as well, according to the report prepared by the Charlottesville Area Association of Realtors (CAAR). Foreclosures are down nearly 41 percent, and short sales are down 32 percent, year-over-year. However, the report suggests that the so-called "shadow inventory"– that backlog of foreclosed homes the banks haven’t yet released to market– still looms, with an uncertain effect on the future.
Unlike inventory and median asking prices, area home sales have gone up about 11 percent, and the inverse correlation between these factors has been borne out over the past two years across numerous market sectors, says the Nest report.
"It feels like it will continue," says Nest's Jim Duncan on the recent sales upswing. But he's not sporting his rose colored glasses just yet.
"The greatest challenge is that there's not quality inventory out there," says Duncan. "Many buyers don't want new construction in new neighborhoods with no trees– not that there's anything wrong with that. Buyers want something differentiated."
According to a recent article in The Hook, however, two of the biggest and newest neighborhoods, Belvedere and Old Trail, have seen increases in new construction sales, perhaps due in part to the fact that some buyers can’t find the sort of quality listings to which Duncan alludes. But rising costs associated with construction materials are cutting into the profits seen by some contractors and may begin to affect new construction sales, which have accounted for approximately 14 percent of overall sales in the local market so far this year.
While no one can predict whether the upswing will continue, positive indications are strong on a national level too. The online real estate database Zillow posted a brief indicating that the national housing market is showing consistent improvement with the Home Valuation Index (essentially the median price) on the rise. While this is seen as a harbinger of a return to market health, it may also be due to inventory shortages caused by a combination of reduced numbers of distressed sales and sellers who are still locked into negative equity situations.
Nest's Duncan agrees that these principles are at play in our area, too.
“The people who own homes that buyers would like to buy can't afford to sell them,” he says.
The same inventory shortages that are strengthening prices caused a slight dip in the Realtors Confidence Index, a tool used by the National Association of Realtors to measure the strength of the housing market based on survey responses from over 50,000 realtors.
Despite the decrease, many of the respondents reported multiple-bid situations and a higher number of cash purchases, possibly due in part to increased investor activity. Like declining inventory and increasing sales, investor activity is also seen as a good omen, but investors aren’t the only ones active in the local market these days, and that’s one of the biggest reasons Jim Duncan is feeling optimistic.
"Buyers are finally making the decision that now is the right time to buy," says Duncan, noting as possible reasons that buyers are starting to see value again in the real estate market, and making more informed decisions.
“Buyers are more cognizant and more long-term,” Duncan says. “They're having the conversation of where am I going to live for the next seven years? They know if they buy today, they can't sell within two to three years without losing money, so there's a return to buying homes rather than making investments."