What Comes Next For Our Housing Market?

Looking To The Past To Get Perspective On Future Trends

Posted: September 25, 2013

When viewed from a long-term perspective, every real estate market has peaks and valleys — some larger than others.

Our local housing market experienced a tremendous peak in 2005-06 with home sales doubling (2000 to 2005), and home prices increasing 66 percent between 2000 and 2006.

The valley that has followed that peak has been a rough ride back down, with home sales falling 55 percent (2005 to 2010) and home prices falling 11 percent (2008 to 2011). During the last several years (2012, 2013), we have finally seen some strength and stability returning to our local housing market, though many still wondering what will come next.

Home Sales

Before the real estate bubble began to inflate, there were around 1,000 homes selling per year in Harrisonburg and Rockingham County (through the HRAR MLS).

The population of Harrisonburg and Rockingham County increased 16 percent between 2000 and 2010, so we might expect that 1,160 home sales per year may be the norm moving forward.  

While there were only 864 home sales in our local market in 2012, this year we seem poised to see around 1,050 home sales, based on the 22 percent year-to-date increase in sales activity.  If we do indeed seen 1,050 home sales this year, we should be encouraged to observe that home sales likely could increase even further in 2014 toward that expected 1,160 to 1,200 range.

Home Prices

Despite seeing a 66 percent increase in home prices from before the bubble (2000) to the peak of the bubble (2006), we have only seen an overall 8 percent decline in prices between that peak (2006) and today (2013 year-to-date).  

Furthermore, 2012 showed a 1 percent improvement in median sales prices, and this year we are seeing a 2 percent improvement in prices.  Thus, it seems likely that the worst is behind us as far as price adjustments related to the housing boom and bust go.  

That said, every neighborhood and price range is a bit different: There are still some price ranges (particularly high-end homes) that are not yet seeing price recovery.

Interest Rates

Arguably, the recent historically low mortgage interest rates have helped to spur on our local housing market over the past several years.  

The average mortgage interest rate for a 30-year mortgage dropped below 5 percent in late 2009, and then down below 4 percent in late 2011.  After hitting an all-time low of 3.32 percent in late 2012, this average mortgage rate has risen to around 4.5 percent.  

Over the next year or two it seems safe to assume that we probably won’t see rates as low as 4 percent, but we also probably won’t see them rise as high as 6 percent. These rising interest rates have encouraged many buyers to go ahead and make a purchase if they have been considering doing so with an open ended time frame.  

Even if interest rates continue to rise to 5 percent, or even a bit beyond that, they will still be offering a great opportunity for buyers to lock in their housing costs at historically low levels.


Thankfully, our local area usually only sees 50 to 100 foreclosures per year based on what we were seeing between 2000 and 2007. After the real estate boom and bust, local foreclosures increased quite a bit, to a high of 270 in 2010.  

We are seeing significantly fewer foreclosures this year (141 year-to-date), which marks a decline from the highs of the last few years, but still a higher than normal level for our local area. A lower number of foreclosures in 2013 will help prices to stabilize in our local market, and with home sales and prices increasing, there are likely to be even fewer foreclosures per year as we move forward.

Our local market is fortunate to have only seen small declines in home values as compared to many other housing markets across the country.  Our diverse local economy has certainly helped to keep our local housing market relatively stable.  

Over the next few years, we are likely to see continued increase in the pace of home sales in our local market, as well as slow and steady increase in home values.

Scott P. Rogers, author of HarrisonburgHousingToday.com, is an associate broker with Funkhouser Real Estate Group in Harrisonburg.

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