Roanoke Housing Market (Winchester, Herndon: short sales, real estate, 2009)

[jcinva]

Hi, I am wondering if I can get someone's opinion/insight into the Roanoke market. We have been looking under 200,000 price range for the past 1.5 years and the prices seem to have come down some. Within the past couple of months houses have been selling at or a little lower than tax assesment, where as a year ago, they were selling 10000-20000 over tax assestment. This is just my observation in looking at active listings constantly and closed property in the Roanoke Times.

It seems to me that the falling prices are starting to hit here...do you think we are going to see major decline and it has just started or this is the worst of it?

We moved here from Northern Va in '05 and I am still watching the market there as well. Some of the prices there have dropped 40-60% in the last year to two years!!!!

If housing in NOVA is getting similar to housing here in price, won't the prices here HAVE to come down more to keep people from moving away? I know most jobs pay considerably more there, so won't roanoke's housing prices need to be less to justify less pay here? Just wanted to get everyone's thought. Also seems like ALOT of layoffs around here lately...

[seanpecor]

I think we'll see prices soften a bit more in the $250K and higher, but I'm reasonably sure we're at or very close to the bottom of the sub-$200K market.

NoVA home prices will remain much higher than Roanoke prices. The pricing disparity might shrink a little but that would hardly create a calculable exodus from Roanoke into NoVA. Keep in mind that NoVA prices had gotten so out of hand in 2005 that homes that would sell for $225K in Roanoke were selling in Winchester - a 75 minute one-way commute to D.C. - for $400K. Fast forward to 2009, and the same Roanoke house is selling for $200K, and the same Winchester house is selling for $260K.

If you were going to buy, I'd buy sooner rather than later. Mortgage rates are ridiculously low. When you were looking for that $200K house 18 months ago, interest rates were 6.68%. Now, they're 5.16%. So let's have some fun with mortgage math. If you bought a $200K house with 0% down 18 months ago, your mortgage payment would be +/- $1,290/mo. But if you buy the same house today at 5.16%, your mortgage payment would be +/- $1,090/mo. That's already a 15% reduction on your debt service, without factoring in the recent reduction of asking prices. Presuming the house that would have sold for $200K 18 months ago would now realistically have an asking price of $176K (12% reduction), then buying that house in today's market with the current historically low mortgage interest rate would drop your mortgage payments to +/- $960/mo, a full $330 less than buying 18 months ago, or a 25% drop in monthly debt service. After 30 years, you'd have saved yourself $80K in interest payments!

What I'm getting at is, pay close attention to how low mortgage rates are right now and where they are trending. If you wait until, for example, October 2009, to purchase your home, and between now and then, February's $175K example house is now selling for $170K, then great, you saved yourself $5K. But if mortgage rates in October have risen from 5.16% to 6.00%, then you actually have lost alot of money. Because a $170K 6.0% mortgage implies a +/- $1,019/mo payment and a $175K 5.16% mortgage implies only +/- $956/mo. So even though you saved $5,000 on the purchase, you are spending $756 more each year on debt service, and after 30 years you'll have saved $5K on the purchase price but spent $18,000 MORE on that cheaper house due to the increased interest.

Sean

[jcinva]

Apparently Nova's real estate is getting close to roanoke prices. My sister went to look at a house in Herndon today. It is listed at $225k. It is in a VERY nice neighborhood, with clubhouse and community pool, on a culdesac, HOA, etc. It is a colonial, 4bdrm 3FB, 2300 finished SQFT plus basement built in 2002. From what I have seen in Roanoke, this would have been a good buy here, but probably went for quite a bit more...and I am not sure Nova has hit their bottom...

[jcinva]

But, good point on the mortgage rates/ house prices! That helps, so long as there is not much more price reductions

[seanpecor]

Is that Herndon house listed in the MLS? I just searched Herndon and I could find nothing but fugly condos and tired split levels until the $275,000 price point and even there the houses were small and/or in need of remodeling and/or were right beside Dulles airport. Of course you'll find the very rare exception (distressed short sale, auction, etc). But in general those $200K Herndon houses I was seeing at Realtor.com would barely sell for $125K in Roanoke. Maybe I'm not looking in the right place online, though.

Zillow's home value index for Herndon has it pegged at an average of $401,000 which is just about twice the national average. Herndon prices have dropped in the index by $71,000 in 12 months, so definitely their prices are still adjusting. But they'd need to drop another $150K to average out to match Roanoke.

Sean

[Blue Moon Athena]

Originally Posted by jcinva

Hi, I am wondering if I can get someone's opinion/insight into the Roanoke market. We have been looking under 200,000 price range for the past 1.5 years and the prices seem to have come down some. Within the past couple of months houses have been selling at or a little lower than tax assesment, where as a year ago, they were selling 10000-20000 over tax assestment. This is just my observation in looking at active listings constantly and closed property in the Roanoke Times.

It seems to me that the falling prices are starting to hit here...do you think we are going to see major decline and it has just started or this is the worst of it?

We moved here from Northern Va in '05 and I am still watching the market there as well. Some of the prices there have dropped 40-60% in the last year to two years!!!!

If housing in NOVA is getting similar to housing here in price, won't the prices here HAVE to come down more to keep people from moving away? I know most jobs pay considerably more there, so won't roanoke's housing prices need to be less to justify less pay here? Just wanted to get everyone's thought. Also seems like ALOT of layoffs around here lately...

While decreases may not mirror what has occurred/is occurring in NoVA, I believe that prices are nowhere near the bottom in Roanoke and surrounding areas. More so for homes currently priced in the $200K and up range. But even sub-$200K homes will be priced lower 3 and 6 months from now. As higher priced homes remain unsold their prices will be reduced to stimulate sales. The effect is cascading. As more of these previously-higher-priced homes become lower priced, it will put pressure on lower priced homes to be priced even lower to compete for buyers who now have more choices as homes previously out of their price range, are now in that range.

The inventory of unsold homes and new homes coming on the market will far outpace the shrinking pool of potential buyers in coming months. Fear of the economy and job security along with tightened standards to obtain a mortgage will become abundantly clear in the form of drastically reduced sales numbers during this upcoming spring/summer, which are traditionally the strongest times of the year for home sales. This will act to enhance the downward spiral which, as you mentioned, appears to have only recently started. I agree with that observation.

It takes time for these factors to play through and make their way to asking/selling prices of homes. This area appears to be only in the beginning stages, so it would not be unreasonable to expect lower prices in upcoming months.

[Diamond Dave]

I don't think housing prices in NOVA have any bearing on people moving to or from Roanoke whatsoever.

[jcinva]

Th house in Herndon has a contract, but still waiting on bank approval so it was taken off of realtor.com...
Check franklymls.com because it was still listed there (he keeps the listings up until closing because you can still offer on it until bank approval) http://franklymls.com/FX6915451 is the actual house link. Also don't think that short sales are the exception there, because there is vast number that is growing daily. Each one of those and foreclosures bring the average house price down. The house that I was talking about sells for 206k, then when the neighbor with a similar house tries to sell for 400k, the comps will not justify that price. Their foreclosure are happening at unreal rates as are the short sales. Check out franklymls.com and you will get the picture b/c he lists the current saleing, what it sold for previously, what the tax assessment is for, etc. It's a really cool site! My sister's tax assessment on her house in Ashburn was almost 1 million for '08. The house two doors down (almost exact same house menus a finished basement) sold in '05 for 1.2 million and went into foreclosure and is now under contract for 608k ( http://franklymls.com/LO6950960 ) Do you really think anybody would buy my sister's house for anything close to 1.2 million now??? But, like I said that is NOVA and I am not sure that will have any bearing on Roanoke's prices.