Real estate sales in Crozet were off a mere three transactions (3%) from the same time last year, with a total of 90 sales. Total sales for the year are off 2022’s pace by only 6%. And while these drops may seem meager, they are continuing of the sharp downward trend that started in the second half of 2021.
Looking ahead, it will be all about mortgage rates and the resulting impacts on inventory and affordability. In the first 10 months of 2022, mortgage rates rose 123% to 6.94% for a standard 30-year mortgage. And recently Mortgage News Daily reported that their rate index hit 8%, the highest rate in over 23 years. As rates continue to climb, and resale home prices don’t drop, homeowners with current mortgage rates of 3-4% can’t afford to move, or don’t want to take on a higher monthly payment. This is causing a growing shortage in inventory. As long as inflation continues to be above Federal Reserve target levels, interest rates will remain elevated. And real estate inventory will remain tight.
The 6% quarterly sales decline in Crozet was quite a bit smaller than the 20% decline overall in Albemarle County. Of the 90 sales in the quarter, 50 were for detached homes, and 40 were for attached townhomes/villas (four of the sales were for over $1.25m and will be excluded for statistical purposes). Forty-four of the sales were for new construction, a 70% jump from the 26 total new sales at the same time last year. Glenbrook was the sales leader for detached and attached home types. Seven of the sales were for homes on an acre or more, representing about 8% of the total sales. Not many years ago this figure was consistently around 20%, which reflects the growing number of newer homes being sold on smaller lots. There were nine land sales in the quarter, up from six at the same time last year. And there was only one short/distressed sale in the quarter. Hopefully this figure stays low, though in current market conditions many home buyers are spending a greater share of their take-home income on housing than in the past, leaving some potentially vulnerable if negative economic conditions arise.
The average price for a detached home in Crozet rose 6% to $650,000, while the price per sqft stayed relatively unchanged. Of the 46 detached home sales, 18 were for new construction. The price of these new construction homes actually dropped slightly to $701,000. The size of these homes remained roughly the same, but the cost dropped 3% to $258/sqft. The price of a re-sale homes rose 11% in the quarter to $639,000. These homes sold fast, in a median time of seven days. Of these sales, 57% were for the listing price or higher. Limited re-sale inventory continues to be an issue as high mortgage rates and high prices hand-tie would-be sellers.
There were 40 attached sales in the quarter, up 48% from the 27 sales during the same period last year. Twenty-six of these sales were for new construction, with Glenbrook and Pleasant Green being the sales-leading neighborhoods. The average price of these new homes dropped 23% to $499,000, reflecting the fact that the sales in the same period last year were dominated by more expensive villas in Old Trail. Many buyers are turning to new townhomes for affordability reasons. Waiting/hoping for a re-sale opportunity most certainly will be a losing proposition in this market. There were 14 resales in the period, pretty much unchanged in average price at $381,000. They sold quickly in a median 14 days, and 11 of the 14 sold for the list price or more.
All eyes are on the Federal Reserve and on the 10-year Treasury note, which serves as the benchmark for mortgage rates. The rate on this note just touched 5% for the first time since 2006, back when Taylor Swift was singing country. And since inflation has yet to be significantly tamed, the new buzz phrase seems to be “higher for longer”—meaning economists feel inflation is sticking around longer than previously thought, as will higher rates. Kelly Miskunas, senior capital markets director at Better opined, “…we may see mortgage rates continue to drift higher through the early part of 2024.” If you are thinking of buying a home, make sure your lender is involved early. And if she/he confidently states that they know the direction of mortgage rates, maybe shop for a new lender as well.