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July 2012

07/30/12 by David Howell

Opportunity Knocking!

When 2012 comes to a close, we believe we’ll look back on it as a year of tremendous opportunity for home buyers and sellers alike – but for some it will be a missed opportunity.

We are witnessing something for the first time in our memory in Loudoun County real estate: the principal & interest payment for a median-priced home is now less than the median rental price. At the market’s peak in June 2006, the mortgage payment for a median priced home was 41% greater than the median rental price. Today, it’s 12% lower. We know there’s more to the cost of owning a home than the mortgage payment, and we’re certainly not suggesting that everyone should buy a home. But home prices are beginning to rise, and interest rates will almost certainly be higher a year from now – and we think that it will be a long time before we see the total cost of buying a home this low again.

Another indicator we look at is the percentage of homes going under contract in a given month that have been on the market 30 days or less. In times other than a boom or bust in Loudoun County, roughly 55-60% of homes going under contract are on the market for a month or less. In June 2004, during the boom, that climbed to 89% as buyers were snapping up everything in sight. Just two years later in June 2006, it dropped to 29% as buyers were very nervous about market conditions. It’s now at 60%, a sure sign that buyers are willing to buy when they see value. Buyers still remain appropriately cautious – even in multiple offer situations they are rarely waiving home inspections and appraisals, and that’s a good thing.

These unique circumstances also mean there is great opportunity if you’re thinking of selling – inventory is very low and buyers in some areas and price ranges are having a tough time finding what they want. Take a look at the absorption rates tables that follow to see the hottest price ranges and property types. Sellers of townhomes priced less than $300,000 are doing very well, with an absorption rate of almost 60%. The same goes for detached homes priced less than $300,000, with rates around 45%. And in general, those subdivisions near the eastern edge of Loudoun County are faring better that outlying suburbs. Still, your personal circumstances have to be right to consider making a move, but if they are, this is a great time to sell.


ABSORPTION RATE BY PROPERTY TYPE

The following tables track absorption rate by property type, comparing the rates in the just-completed month to the rates in the same month of the previous year. The absorption rate is a measure of the health of the market, and tracks the percentage of homes that were on the market during the given month and in the given price range that went under contract. [The formula is # Contracts/ (# Contracts + # Available).] An example: The absorption rate for detached homes priced between $500,000 and $749,999 in June 2012 was 22.2%, indicating that a little less than one quarter of the homes on the market for this category of homes went under contract in June. That compares to a rate of 20.8% in June 2011, and the increase means the market was better in 2012 for that type of home. If the absorption rate was less in 2012 than in 2011, we have put the more recent absorption rate in red. This month there was improvement for 12 of 14 individual price categories with activity.

ABSORPTION RATES CONDOS AND CO-OPS
CONDOS & CO-OPS

  • The overall absorption rate for condos and co-ops for June 2012 was 28.3%, up from the 26.6% rate in June 2011.
  • Safe to say the market for condos priced more than $500,000 is very, very thin for both listings and sales.



Absorption Rates Attached HomesATTACHED HOMES

  • The overall absorption rate for attached homes for June 2012 was 42.6%, up from June 2011.
  • With an absorption rate of 59.3%, it is a great time to be a seller of a townhome priced less than $300,000!

 



Absorbtion Rates Detached HomesATTACHED HOMES

  • June 2012’s absorption rate for detached homes was 22.7%, an increase from the 19.8% rate from June 2011.
  • And as we have seen in the other property types, the absorption rates are higher for the lower-priced categories.

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