CONTENTS

1.      The Here and Now

2.      Jefferson and Berkeley County Market News

3.      Eastern Panhandle Boom Continues

4.      “You Want To List Your House With Me, Great … Here’s $500!”

5.      Developer’s Corner

6.      Lender News

7.      Upcoming Events

HARDING REPORT – NOVEMBER 2005

1. The Here and Now

The leaves are turning. The trees are bracing themselves for the winter, and so should we. For the change in the Real Estate Market is upon us (see below). We have all been talking about it. For months it seems. But finally it is here. The market is making one of its cyclical turns. This time in a southerly direction.

Is this a problem? Not necessarily. The prices have been rising at an unsustainable price. An increasing number of people are finding that they cannot afford to purchase a house as the prices are beyond their means. This is only going to get worse as interest rates rise. So now, it’s time for a reality check. And then there are the people who bought their homes at the top of the market. And if prices fall, they may owe the bank more than the house is worth. Where I come from this is called ‘negative equity’ and it indentured a large swath of middle income England in the early 1990s.

How about realtors? Realtors love a frothy market. And then after a while, they don’t. At first it is great. Everyone is buying or selling. Life is good. Then they realtors realize that this cannot last forever and they fret about the market freezing up. And with the icy winds, they worry about how they are going to feed their families.

It could be a frigid winter. The Almanac is predicting a long freeze. But the frost hasn’t come yet. It maybe time to get the snow-boots out of the closet. But don’t put them on just yet.

 

2. Jefferson County Real Estate News

Last month I talked about the average house price and days on market. Both figures indicated that the market continued to be strong. But such figures tend to be two or three months behind today’s market. How about other indicators?

 

The two most important ‘predictive’ indicators are number of houses that have sold, also known as ‘solds’, and the number of properties that are available for sell, also known as ‘inventory’.

 

Here is the data for the past two years.

 

 

Graphs: Jefferson County “Solds” and “Active Listings” 2003-2005

 

 

[source data, MRIS]

 

The “Units Sold” graph shows that residential property sales rose steeply in 2005 – which comes as no surprise – and then started to drop by Fall.

 

The “Active Listings” graph shows a large increase in the past few months in the number of homes available for sale.

Taken together, these graphs say one simple thing, SLOW DOWN.

Why is this? Basic economics. The Supply is outstripping the Demand.  Or put another way, there are more people selling homes than there are buyers who want to purchase them.

This will have three immediate consequences:

 

• First houses are going to take longer to sell.

 

• Second, houses will sell for less than the list price.

 

• Price appreciation will slow down, and may even fall.

 

We have already seen some evidence of a slowing down market in my office. In the past few weeks we have seen an increasing number of contracts where buyers have tied the contract to the sale of their own home, also known as “home sale contingencies”.  Last Spring buyers were falling over themselves to cut out contingencies from their contracts. Buyers were going so far as dropping home inspections and appraisals to make their offers more competitive. The fact that we are getting contracts today with home-sale contingencies is a sign that buyers believe that the market is turning in their favor. Or to put it another way - we are moving towards a Buyer’s Market.

 

And yet. And yet. It is early days. And the market data that I have been talking about could be a seasonal slow down. It could be due to temporary factors such as the increase in gas prices at the end of the summer. As always, we will need to keep one eye on the data and the other eye on the experience of the practitioners working in the field. There are no certainties in this business.

 

3. Eastern Panhandle Boom Continues

Economic growth in the Eastern Panhandle will contine to outpace the rest of the state over the next five years with job gains expected in all sectors, a West Virginia University study released said.

“The Eastern Panhandle has been adding jobs and residents at rates far exceeding both West Virginia and the nation during the past four years,” said Geore Hammond, one of the study’s authors and a research associated at the WVU Bureau of Business and Economic Research.

“In fact without the nearly 19,000 residents added to the Eastern Panhandle since 2000, West Virginia as a whole would have registered a population decline” he said.

The forecast for the next five years calls for the region to continue to add jobs and residents at a very strong rate with job gains expected across all sectors.

[MJ Nov 4 2005]

 

4. “You want to list your house with me, great … here’s $500!”

For the first time in West Virginia history, realtors will now be able to incentivize clients in their real estate transactions.

At the State Real Estate Conference, held at the Clarion Hotel in Shepherdstown this month, the Executive Director of the West Virginia Real Estate Commission Richard Strader announced that the Commission will no longer be enforcing the anti-incentive rules that have been historically been in place.

Mr Strader explained that the Commission had taken the action as a result of Department of Justice pressure to drop the rule because they said it was ‘anti-competitive. http://www.wvrec.org/September%2021.htm

This means that the future of providing incentives in real estate in WV looks very rosy. Possibilities include gifts to buyers and sellers (such as use of a realtor’s beach house for a week), the use of the word ‘free’ in promotional literature (as in ‘free home valuation’) as well as financial discounts provided to seller at settlements.

Mr Strader cautioned that though there may be much use of incentives in the first few months, it will probably soon drop off. “I have spoken to other States where this has taken place.” he said “After the initial activity, things pretty much get back to normal.”

5. Developer’s Corner

·        The Berkeley County Planning Commission erred in granting an approval for 100 acre housing project near Whitings Neck according to a ruling issued late last month in county circuit court. In an 11 page decision filed Oct 31 in Berkeley County Circuit Court Judge Christopher Wilkes reversed the planning commissions June 6 Final Plat approval of the 44 lot Greensburg Estates residential subdivision, which is being developed by George Van Wagner and Maryland based PVW Enterprises, LLC. Wilkes said the commission should never have granted approval of the project ahead of a review of the developer’s proposed sanitary sewage disposal system by the WV Bureau of Health, Environmental Engineering Division. [MJ Nov 10 05]

 

·        A Comprehensive Plan accepted by town leaders here four years ago and required to be updated on a periodical basis by state law was never put into effect, Mayor Peter Wilson said. Wilson quoted a resolution signed August 12 2001 by former Mayor Jim Auxer that apparently states that the comprehensive plan would be put into effect and enforceable only after planning and zoning ordinances are revised and made consistent. “That never happened, therefore we don’t have a comprehensive plan” Wilson said when asked about upcoming public workshops to be held this month to make overdue changes to municipal code. [MJ Nov 5 2005]

 

·        Jefferson County Commission increased county school impact fees to 100% of the recommended level, effective December 1 2005. The fees collected now are 85% of the recommended level. The fee on a single family home will increase from $7,279 to $8,562, for townhouses from $5,585 to $6,686 and for multi-units from $4,129 to $4,858. When the increase takes effect, the county’s impact fees, including schools, fire and EMS, Parks and Recreation, and law enforcement for a new single family home will total $9,880. [MJ Oct 21]

 

·        A large partisan crowd gathered here in support of creating a Shepherdstown Battlefield Park, was told by the leader of the preservation effort that an offer to buy the ‘hallowed ground’ in question was rejected hours earlier. About 122 acres of the battlefield site have been proposed for residential development. A zoning appeals board decision against the development was appealed to Jefferson Circuit Court last month. “I think the message is very clear” said County Commissioner Morgan, before noting that the battlefield issue would be revisited at the next commissioner’s meeting. “We may entertain a resolution at that time”. After the sound of hearty sustained applause, Morgan clarified that the commission’s business may entail a discussion of supporting the Shepherdstown Battlefield site’s inclusion into the National Park Service’s management plan, which must be finalized by November 15^th. [MJ Nov 10] Heeding concerns about property rights expressed during the meeting, Jefferson County Commissioners voted to send a resolution reflecting those concerns to state and local leaders. “I heard echoes that no one wanted a taking. They wanted to recognize individual landowner’s rights.” Said Commissioner Dale Manuel during the meeting. At the meeting the commissioners did not go a far as taking a position on the battlefield. [MJ Nov 11]

 

6. Lending: Real estate rates hit 2-year high

 

Mortgage rates rose for the ninth consecutive week as a large increase in hourly wages fueled inflation fears, according to surveys conducted this week by Freddie Mac and Bankrate.com.

In Freddie Mac's survey, the 30-year fixed-rate mortgage averaged 6.36 percent for the week ended today, up from last week's average of 6.31 percent. The average for the 15-year fixed-rate mortgage is 5.89 percent, up from last week when it averaged 5.85 percent. Points on the 30-year averaged 0.5, while those on the 15-year averaged 0.6.

The five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 5.81 percent this week, with an average 0.6 point, up from last week when it averaged 5.76 percent. The one-year Treasury-indexed ARM averaged 5.12 percent, with an average 0.6 point, up from last week when it averaged 5.09 percent.

"News that wages grew faster than had been expected in October reinforced fears of inflation in the financial markets, and that bumped up interest rates again this week," said Frank Nothaft, vice president and chief economist. "Consumer Price Index and Producer Price Index figures due out next week will help to confirm or deny whether market concerns are warranted.

"According to our most recent economic outlook, we expect rates to continue to rise gradually over the next 12 or so months. Because the housing sector is so sensitive to fluctuations in interest rates, this will have the effect of returning the housing sector to a more normal pace of activity, by historical standards."

[Inman News]

 

7.      Upcoming Events

November

• November 12-13, Over the Mountain Studio Tour. For more information call 800-624-0577 and 304-267-5468.
• November 25-27, Dec 3-4, Christmas in Shepherdstown For information call (304) 876-0910.

December

·        December 1, 2, 3, 4, 8, 9, 10, 11 “Miracle On 34th Street” Old Opera House, Charles Town. For information or tickets call (304) 725-4420 or (888) 900-SHOW.

·        December 2-3 11th Annual Arts,Crafts & Olde Tyme Christmas Craft Show, 9am-4pm
Hilltop House Hotel, Harpers Ferry,WV

·        December 2-4, 9-11, Christmas in Historic Charles Town.

·        December 2-4, 9-11, Old Tyme Christmas in Harpers Ferry. For more information call (304) 725-8019 or (304) 535-9909.

·        December 3, Christmas Parade, Shepherdstown 11:00 a.m.

·        December 3, Christmas Parade, Charles Town, 2:00 p.m.

·        December 11, Parade of Horses, Charles Town, 2:00 p.m. For more information call (304) 728-7455.

 [www.jeffersoncounty.com/calendar.html]

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