Western Albemarle Second Quarter Real Estate Report
by David Ferrall
When I was writing this column a year ago, the politicians in Washington where quibbling over the debt ceiling. The worry was that not only would important government functions go unfunded and shut down, but also that without an increase in the debt ceiling, interest rates would rise. In typical D.C. fashion the issue was resolved with a whimper, both parties claimed victory, and life went on.
One of the important results was that not only have interest rates not risen, they have fallen. Current rates are now between 15-20 percent lower than they were a year ago. A typical 30-year mortgage can now be obtained by a qualified borrower for around 3.60 percent, the lowest rate since long term financing was introduced in the 1950s. In fact there are adjustable rate mortgages that dip darn close to 1 percent! This fact remains the brightest beacon in the real estate market today, and provides incredible opportunity for qualified customers to purchase properties and to refinance current homes.
But the good news does not stop there. Within the Charlottesville metropolitan area and our local MLS, sales are up and inventory is down. And Crozet is leading the pack. In the second quarter of 2012 there were 80 total sales in Crozet, an increase of 31 percent over the same time last year! The average sale price was up slightly to $367,000, and the price per square foot was up a solid 6.5 percent. And while inventory is down only slightly, effective inventory is down around 18 percent due to the increased number of sales in the period. In fact at the end of June there was 6 months of inventory in Crozet, the lowest monthly figure since June of 2006 (an interesting side note being that there was 52 months of inventory in Crozet in January of 2009)!
Of the 80 sales, 30 percent were attached homes, up slightly from the 25 percent of 2011. These sales were spread pretty evenly across Old Trail (10), Wickham Pond (8), and the Highlands (5). Fourteen of these sales were new construction. The majority of the resales were in the Highlands. Square foot costs were up 3 percent for these attached properties, but the average price jumped 19 percent from $238,000 in 2011 to $284,000 in 2012. These increases are in some part the result of price increases by local homebuilders. This is an important fact to note, since in past quarters decreasing costs of new construction negatively affected resale prices. And perhaps for a first in Crozet, there were three attached home sales for over $500,000, one of the three selling for over $700,000! These “golf villas” are on the Fairway at Old Trail.
Crozet experienced an increase price in the square footage cost for detached homes as well. Finished square foot cost rose 8 percent, though the average price for a detached home remained the same at about $402,000. Of the 56 sales in the period, 42 were on an acre or less. Of these, slightly more than half were new construction, the majority being in Old Trail. The new construction in Old Trail is concentrated among several local builders, while new construction in Wickham Pond and Westhall continues at a good clip by a large national builder. Said national builder had been experiencing a large price advantage over the past several quarters that seems to be diminishing. This is good news also for supporting home prices. Thirteen of the detached home sales were for over $500,000, the same as last year, the high being a property in Batesville selling for $1.9m.
The big question of course is “where do we go from here?” The chief economist for the National Association of Realtors, Lawrence Yun thinks (not surprisingly) we are on the brink of a 10 percent price appreciation over the next 12 months. The Federal Housing Finance Agency, Clear Capital and others think we have turned a corner as well. At the same time, Morgan Stanley sees another 5-10 percent drop in housing prices. So what is in store for us? It’s hard to say, but the graph shown below (provided courtesy of Nest Realty) of the Charlottesville MSA (metropolitan statistical area) shows five-year sales activity trending upwards. Except for the anomalous second quarter of 2010, which was heavily influenced by federal incentives, area sales are steadily building quarter by quarter. With interest rates remaining low and inflation staying in check, this trend should continue.
Back in Washington the bickering and posturing is picking up again. How the national election will affect the real estate market remains to be seen. But barring a governmental derecho, it looks like pretty smooth sailing here in Crozet for the coming months.