2016 is in the books and it pretty much ended as we had projected it would a year ago. Once again, the Central Virginia housing market had another nice increase in the number of home sales (3580) rose 8% from last year and the total volume ($1,216,336,883) was up 12% as well. Average sales price continued to rise ($339,759) as did the median price ($223,500) of homes sold. Both represent 4% increases compared to 2015. Townhomes, villas, duplexes and condos led the way in the type of home that sold last year. New construction sales (532) increased by 9% from 488 last year representing 15% of the total sales in the area. One interesting fact is although the average price of a new home is $462,648 the median price is the same as sales of existing homes showing that attached home sales led the way in new construction as well. Land sales were also up overall with 394 parcels sold in comparison to a year ago when there were 372. Interestingly enough, the average and median prices of land dropped significantly (10 and 12% respectively). Hopefully the increase of sales represents that land prices have bottomed out and will be to increase moving forward. Every area around Charlottesville showed increases in sales and home prices except Nelson which was down 4%. Louisa led the way with an 18% increase in homes sold with the City of Charlottesville showing an increase of 15%.
As we move ahead in 2017, we can expect new construction throughout Charlottesville and the surrounding Central Virginia area to be strong. Look for higher prices 1) because of the demand and 2) because of higher construction costs both in materials and in labor. The increase in new home sales will continue to put pressure on the existing home for sales market especially about $500,000. The numbers show more sales in the $500-600K range and above $1,000,000 but the wet blanket in those numbers is sellers have had to reduce their price to entice a buyer to purchase.
Rising interest rates will be a concern in 2017 as the days of rates being lower than 4% have come and gone. Perspective is the key here. David H Stevens, CEO of the Mortgage Bankers Association shares that “While rates are rising from their lows, they will remain at the very low end when compared to a decades long historical look at 30 fixed rate mortgages. Click here for the complete blog post from Mr. Stevens https://davidhstevensblog.wordpress.com/2016/12/21/looking-at-2017-perspectives-on-housing/. To highlight this, take a look at this historical perspective of Freddie Mac’s 30 year fixed rates going back to the 1970’s as tracked by the St Louis Federal Reserve. As you will see below, rates in the 4%-5% range still pose great opportunity for home buying when you compare to any historical perspective. In fact, looking at history, one could argue that rates have more risk of rising than declining, especially in this growing economy. My assumption – borrowing now is still a bargain and will remain so for this next year. FHA will help keep borrowers monthly costs down by lowering their monthly mortgage insurance to .6% from .85% on January 27th. On a $200,000 mortgage that would be a reduction of approximately $41 a month. Hopefully this will help remove the roadblocks of first and second time home buyers as FHA offers borrowers the opportunity to get a loan with only 3.5% down.
Buyers and Sellers should anticipate home price appreciation to increase by another 3-5% on average in this coming year. With mortgage interest rates rising in the short term even with FHA’s reduction in mortgage insurance, CoreLogic believes price appreciation will be around 4.7%.
Listen to this podcast for more insights on what we can expect in 2017. http://wina.com/podcasts/michaels-thoughts-on-2017/