As the Charlottesville Market Turns – 2018 Edition

It’s going to be an interesting 2019.

I noted in July of this year, (twice)

Q: Is the Charlottesville Real Estate Market Turning?

A: I don’t know. Yet.

I’ve been saying for months that a turn may be coming, and noted it in the July monthly note. And, I’ve been saying for years that I’ll tell you in 18 months what today’s market is actually doing. Hindsight is key; reading current indicators is critical.

The entirety of the data for the 3rd Quarter Charlottesville real estate market doesn’t quite indicate a slowdown market-wide, but there are a few numbers in the Nest Report (download it here) that give pause, and raise an eyebrow or two. Or three.

• Inventory in the City of Charlottesville is up 43%, and that increase is not driven by new construction.

• Contracts written in Albemarle County are down 14%. Contracts written are among the best indicators of what the next 45-90 days of market activity.
  • Single family home contracts written in Albemarle County are down 21%; I’d argue that this is in part driven by price increases, as attached contracts are down only 4.5%
• Attached contracts in the City of Charlottesville are up 14%.
  • 8 of the 24 attached contracts were new construction; 5 of last year’s 21 were new.

• Interest rates are up. Historically, rates are still crazy low. Our society is one of seemingly solely short term memory; hitting 5% mortgage interest rates is going to have an impact on home affordability, and on buyers’ psychologies.

• Mortgage interest rates. Going up. Fast. 
  • “Before September, traders were feeling at least somewhat skeptical that the economic expansion could not only be maintained, but actually surge into stronger territory. VERY simply put: there’s a price to pay for that surge, and a fairly hefty price at that.This isn’t just another random move higher in rates. This is a relatively gut-wrenching confirmation of what we were hoping not to see. For the first time in years, a large-scale period of indecision and consolidation in rates (marked by the red lines below) has given way to a break HIGHER as opposed to lower.”
  • First off, please be prepared for the possibility that there won’t be much hope–at least not for a while. When markets undergo massive reassessments of reality–which could be what we’re seeing here–it can take months before seeing the rates that were available just before the spike.”

Takeaways, if you’re thinking about buying or selling

• For buyers and sellers – Do your research. Hire the right representation to help interpret the data that matters to you.
• Buyers – you might have more options and time in some market segments, but not all. Get ready. Patience is a good thing.
• Sellers – you might need to be a bit more aggressive and less optimistic with your pricing, depending on your market segment. If you’re competing with new construction, you’re likely going to have be incredibly aggressive. If you have a house in the City of Charlottesville or immediate urban ring, maybe less so.

More of a sign of a market peak, no? https://t.co/zaCtUV84oU

— Jonathan Miller (@jonathanmiller) October 5, 2018

My goodness, what I wrote in 2006 is still relevant.

Houses are not normal, liquid commodities; they are serious investments that require careful analysis of many, many factors prior to purchasing. The market moved away from this state of due diligence and we seem to be in the midst of a return to normalcy. That is a “good thing.”

Questions? Call or email me anytime.