Charlottesville / Central Virginia Region Q3 2012

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The March Continues

We knew the road to real estate recovery would be a long one and the market would not turn around overnight. But for the 3rd straight quarter, we are seeing positive trends across the board. At this point, it seems like were definitely in the recovery process...and things feel pretty good right now. In order for a recovery to happen, weve been saying a few things needed to happen: 1) Inventory levels needed to come down. 2) Prices needed to come down. 3) The overall economy and consumer confidence needed to bounce. 4) Interest rates needed to stay reasonable. At this point in time, there are hints that each of those is happening. Since #3 and #4 are national indicators, we wont spend time addressing those here. Instead, well focus on whats specifically happening with homes and home sales in the Charlottesville MSA. First of all, inventory levels have come down. And in some cases, inventory has come down fairly dramatically. Take the City of Charlottesville, for example. There were 237 homes for sale at the end of Q3 in the City. Thats the lowest level in any month since October 2005. September inventory levels in Albemarle are the lowest September levels since 2005. Single family home inventory for the entire MSA is at its lowest September level since 2005 also. The list goes on. One of the causes of the most recent real estate bubble was because prices rose too high, too fast. Because of this overextension of pricing, buyers stopped seeing value in the market...and eventually stopped buying. In order for the market to recover, prices had to retract to a point where buyers once again saw value and could afford the home they wanted. One of the first signs that value returned to the Charlottesville real estate market was when investors started to jump back in. While theres no way to quantify exactly how many properties have been purchased as investments, investors began to trickle back into the market in late 2011/early 2012. Shortly thereafter, consumer confidence began to gain some steam and home sales began to pick up. Even though total sales have been increasing, median prices have continued to fall. But thats actually OK. In fact, weve seen a direct correlation over the past 24 months thats pretty amazing: almost without fail, when the median prices within a market segment fall, sales numbers go up. This held true in Q3 2012 with almost every major category we track: Single family homes and attached/condos in the entire MSA, single family homes and attached/condos in Albemarle, single family homes in Charlottesville, etc. On the flip side, when median prices increase, sales almost undoubtedly decrease. Why is this? When buyers see value, they buy. When they dont see value, they sit on the sidelines and rent. While there are quite a few positive regional trends, challenges remain. Shadow inventory of homes (defined as properties owned and held by banks) remains a major unknown. Though there are various estimates as to the amount of shadow inventory and exactly when that inventory will be released to the marketplace, no one really knows. The pure uncertainty of the shadow inventory can cause a bit of uneasiness in the market. Another concern moving forward is the cost of housing. Over the last three quarters, the cost of building materials has been increasing and, based on the information we are receiving, core building material costs are continuing to rise. According to a local homebuilder, lumber is up 50%, drywall is up 30%, asphalt shingles are up 20%, steel is up 18%, aluminum is up 12% since last year...the list goes on. New home construction has been a major piece of the sales market over the last several years. If building materials continue to creep upwards, it could negatively affect the demand for new housing. That being said, new construction in 2012 has comprised just 14.24% of the overall sales market year-to-date. Thats the lowest percentage in 6 years. Last point: distressed sales - which we define as short sales and bank owned sales - continue to affect values. In Q3, distressed sales made up approximately 16% of all sales in the Charlottesville MSA. Fluvanna County had the highest percentage of distressed sales (33%), followed by Louisa (28%), Greene (26%), Nelson (15%), Albemarle (11%), and Charlottesville (10%). These distressed sales can not only negatively affect property values, but can also lead to lower buyer confidence levels. In addition, the amount of homes underwater may also be contributing to the lower inventory levels: many potential sellers may not have the ability to sell, even if they want to. Even with the potential concerns, the march towards recovery in the Charlottesville area real estate market continues. The leading indicators look positive: sales are up and inventory levels are down. Thats what we were hoping for four years ago and thats what were getting now. If you have any further questions or if you would like further analysis, please be sure to reach out to a Nest Associate.

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Central Virginia/Charlottesville MSA Real Estate Market Snapshot

The overall sales trend for the Charlottesville MSA continues to trend in a positive direction. For the 5th straight quarter, total year-over-year sales were up. Q3 2012 sales were up 10.6% from Q3 2011 (from 608 to 673). Single family homes in the Charlottesville MSA continue to perform well with an 11.9% increase from Q3 2011. Attached and condo sales were up a respectable 5.1%. Days on market levels were mixed. For single family homes, days on market for sold homes jumped 12.6% to 107 days. For condos/attached, days on market fell by 12.3% to 100 days.

Five Year Trend of Sales Activity (Number of Sales)

1,400 1,200 1,000 800 600 400 200 0

5 YEAR TREND

Q4 07

Q1 08

Q2 08

Q3 08

Q4 08

Q1 09

Q2 09

Q3 09

Q4 09

Q1 10

Q2 10

Q3 10

Q4 10

Q1 11

Q2 11

Q3 11

Q4 11

Q1 12

Q2 12

Q3 12

Median prices in Q3 continued to edge downward in the major Charlottesville MSA housing segments. Single family home median prices were down 1.7% to $266,000. Attached/condo median prices fell 3.7% to $180,000. These drops reflect less dramatic reductions than we saw in Q3 2011 when single family homes median prices fell 5.1% and attached/condos were off 11.3% from Q3 2010. Inventory levels continue to come down. Total inventory for single family homes has reduced to 1680 units - thats a 7.1% drop from Q3 2011 and an almost 20% reduction from Q3 2010. Similarly, attached/condo inventory is down to just 395 units - thats 21.2% lower than Q3 2011 and over 27% lower than Q3 2010.

MSA (Albemarle, Charlottesville, Fluvanna, Greene, Louisa, and Nelson)

Average List Price Average Sale Price $345,799 6.2% $325,721 -6.1% $347,000 Median Sale Price $266,000 -1.7% $270,500 -5.1% $285,000 Price per Square Foot $131.00 -2.2% $134.00 -5.6% $142.00 Avg Days on Market 107 12.6% 95 -6.9% 102 Total Sales 507 11.9% 453 1.6% 446 Total Inventory 1680 -7.1% 1809 -9.2% 1992 Months of Inventory 12.44 -15.4% 14.7 -2.6% 15.09

Single Family

Q3 2012 Change Q3 2011 Change Q3 2010

$385,330 12.8% $341,680 -6.5% $365,357

Attached / Condo

Average List Price Q3 2012 Change Q3 2011 Change Q3 2010 $215,566 3.6% $208,171 -16.1% $248,121

Average Sale Price $208,471 4.7% $199,197 -17.6% $241,782

Median Sale Price $180,000 -3.7% $186,900 -11.3% $210,601

Price per Square Foot $138.00 -1.4% $140.00 -10.3% $156.00

Avg Days on Market 100 -12.3% 114 -9.5% 126

Total Sales 165 5.1% 157 6.1% 148

Total Inventory 395 -21.2% 501 -8.2% 546

Months of Inventory 10.67 -12.6% 12.21 7.4% 11.37

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Albemarle County Real Estate Market Snapshot

Q3 home sales were strong in Albemarle County with year-over-year increases in all market segments: single family homes were up 17.6% (182 to 214), attached homes increased 5.6% (71 to 75), and condominiums improved by 12.1% (33 to 37). This marked the 5th consecutive quarter in which Albemarle County homes sales increased (compared to the previous years quarter). While total sales were up by 14.3% in Albemarle, median prices were down for single family (-6.2%), attached (-3.0%), and condominiums (-3.2%). Days on market for sold homes was mixed: single family home days on market increased to 98 days (+11.4%), while condominiums (-6.2% to 76) and attached (-15.6% to 92) both improved.

Five Year Trend of Sales Activity (Total Number of Sales)

600

5 YEAR TREND

500

400

300

200

100

Q4 07

Q1 08

Q2 08

Q3 08

Q4 08

Q1 09

Q2 09

Q3 09

Q4 09

Q1 10

Q2 10

Q3 10

Q4 10

Q1 11

Q2 11

Q3 11

Q4 11

Q1 12

Q2 12

Q3 12

Interestingly, average list prices were up across all segments in Albemarle County. Single family homes (+28.7%), attached (+8.5%), and condos (+13.1%) all saw hefty increases. This is an interesting trend weve been seeing: as the market continues to show signs of improvement, owners of higher priced properties are listing their homes again. Another reason for the increased listing prices: building materials are on the rise and are significantly higher than Q3 2011. On a different note, contracts written in Q3 were up across the board. Single family (+15.8%), attached (+12.7%) and condominiums (+16.7%) are all trending positively with respect to future sales numbers.
Average Average Median Avg Days List Price Sale Price Sale Price on Market Avg $ PSF $144 -4.6% $151 $144 -6.5% $154 Total Sales # 214 -26.7% 292 214 17.6% 182 Average Average Median Avg Days List Price Sale Price Sale Price on Market Q3 2012 250,131 244,390 213,000 92 26.0% 73 92 -15.6% 109 Avg $ PSF $131 0.0% $131 $131 0.0% $131 Total Sales # 75 -22.7% 97 75 5.6% 71

Single Family

Q3 2012 559,969 483,763 340,000 Change 27.1% 15.4% -2.9%

98 -3.9% 102 98 11.4% 88

Attached

Change

2.1%

0.8%

-7.4%

Q2 2012 440,723 419,258 350,000 Q3 2012 559,969 483,763 340,000 Change 28.7% 15.9% -6.2%

Q2 2012 245,055 242,454 230,000 Q3 2012 250,131 244,390 213,000 Change 8.5% 9.3% -3.0%

Q3 2011 435,153 417,330 362,500

Q3 2011 230,487 223,689 219,500

Average Average Median Avg Days List Price Sale Price Sale Price on Market Q3 2012 178,940 169,670 121,000 76 -25.5% 102 76 -6.2% 81

Avg $ PSF $130 8.3% $120 $130 1.6% $128

Total Sales # 37 15.6% 32 37 12.1% 33

Contracts Written
Q3 2011 Single Family Attached Condos 158 79 24 Q3 2012 183 89 28 Change 15.8% 12.7% 16.7%

Condos

Change

11.5%

11.6%

0.0%

Q2 2012 160,496 152,032 121,000 Q3 2012 178,940 169,670 121,000 Change 13.1% 14.5% -3.2%

Q3 2011 158,236 148,143 125,000

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Albemarle County Market Snapshot (Part 2)

Albemarle County Sales by Sub-Area

8%

Albemarle County Sales by Type

14%

11%

18% 14% 23%

9%

3%

66%

16%

18%

29 North Crozet

Rio Ivy

Earlysville Keswick

Southside Barracks

Single Family

Attached

Condos

Sales in Keswick, Southside, 29N, and Crozet once again led the way in Albemarle County. As has been the story for the last 6 quarters, strong new construction sales have helped boost sales in Crozet. However, sales numbers for 29 North, Earlysville, and Rio increased significantly in Q3 2012 causing sales distribution to be a little more spread out in Albemarle County this past quarter. Sales distribution across housing types was fairly consistent. The increase in condominium sales helped condominiums to comprise 11% of the total market (as opposed to 7% in Q2). Single family home sales as a percentage of the overall Albemarle market fell from 70% in Q2 to 66% in Q3.

Albemarle County Percent of Sales by Price Range

Q3 12 43% 40% 10% 3% 5%

Q2 12

36%

46%

14%

3% 2%

Q1 12

55%

31%

8%

4% 2%

Q4 11 0%

43% 25% 50%

39% 75%

12%

3%

3% 100%

0-250K

250K-500K

500K-750K

750-1M

1M+

Home sale price distribution shifted ever-so-slightly in Q3. 43% of the homes sold were under $250,000: this represents an increase from Q2. These homes represented the largest home price market segment in Q3. Homes between $250k - $500k made up 40% of home sales: a drop from Q2. Homes selling for more than $1 million represented 5% of the market. This represents the highest percentage for this category, by far, in the last 12 months. If you look at the above chart, youll notice some large fluctuations from quarter-to-quarter. These fluctuations are a bit out of character for our marketplace and prove that our market is still in a bit of flux.

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Charlottesville City Real Estate Market Snapshot

The Charlottesville City real estate market continues to show strong sales numbers. While the five-year trend line still has a slight downward slope, five of the previous six quarters have shown year-over-year improvements. Theres no doubt that the Charlottesville City real estate market is on the road to improvement. Q3 2012 sales were up ever-so-slightly (+4.9%) in the City: up from 121 in Q3 2011 to 127 in 2012. Single family homes showed a modest increase of 8.2% (from 85 to 92). Attached sales were flat and condominiums saw a slight drop (-4%) from 25 to 24 units sold.

Five Year Trend of Sales Activity (Total Number of Sales)

350 300 250 200 150 100 50 0

5 YEAR TREND

Q4 07

Q1 08

Q2 08

Q3 08

Q4 08

Q1 09

Q2 09

Q3 09

Q4 09

Q1 10

Q2 10

Q3 10

Q4 10

Q1 11

Q2 11

Q3 11

Q4 11

Q1 12

Q2 12

Q3 12

Median prices for single family homes fell by 3.5% to $260,625. The median prices of attached homes dropped fairly dramatically by 27.4%. However, there were only 11 sales, so the small sample size does not warrant a major concern. The median price of condominiums increased by 24.7%. This is due mainly to the fact that the available inventory at Walker Square was mostly 2 bedroom units...as opposed to 1 bedroom units last year. Expect sales for condominiums to drop dramatically in the coming quarters as there are no more developer-owned units at Walker Square.
Average Average Median Avg Days List Price Sale Price Sale Price on Market Avg $ PSF $157 -7.1% $169 $157 -0.6% $158 Total Sales # 92 Average Average Median Avg Days List Price Sale Price Sale Price on Market Q3 2012 178,117 169,721 174,000 105 22.1% 86 105 5.0% 100 Avg $ PSF $119 -1.7% $121 $119 4.4% $114 Total Sales # 11 10.0% 10 11 0.0% 11

Single Family

Q3 2012 310,986 295,108 260,625 Change -17.0% -16.0% -9.3%

90 -7.2% 97 90 -1.1% 91

Attached

-20.7% 116 92 8.2% 85

Change

-9.4%

-12.3%

-13.4%

Q2 2012 374,550 351,224 287,500 Q3 2012 310,986 295,108 260,625 Change -15.1% -13.5% -3.5%

Q2 2012 196,690 193,485 200,950 Q3 2012 178,117 169,721 174,000 Change -19.2% -19.0% -27.4%

Q3 2011 366,322 341,038 270,000

Q3 2011 220,427 209,507 239,700

Average Average Median Avg Days List Price Sale Price Sale Price on Market Q3 2012 195,300 190,225 180,000 79 8.2% 73 79 8.2% 73

Avg $ PSF $172 97.7% $87 $172 -12.7% $197

Total Sales # 24 -35.1% 37 24 -4.0% 25

Contracts Written
Q3 2011 Single Family Attached Condos 64 8 17 Q3 2012 88 7 9 Change 37.50% -12.50% -47.06%

Condos

Change

-2.6%

-0.5%

4.7%

Q2 2012 200,521 191,148 172,000 Q3 2012 195,300 190,225 180,000 Change -1.2% 1.4% 24.7%

Q3 2011 197,758 187,656 144,400

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Charlottesville City Market Snapshot (Part 2)

Charlottesville City Sales by Elementary School Area

Charlottesville City Sales by Type

15%

22%

19%

9% 31% 7% 11% 14% 72%

Burnley Moran Jackson-Via

Clark Johnson

Greenbrier Venable

Single Family

Attached

Condos

As a percentage of total sales, sales in the Johnson School District jumped dramatically from last quarter. This increase was due to the increase in closings at Walker Square. Burnley Moran and Venable continue to be popular districts. Sales by property type in the City stayed consistent with Q2: more than 7 out of every 10 sales was a single family. Condominiums comprised 19% of the marketplace. There is some new construction beginning over the next few quarters within the City limits - mostly single family and attached. So, expect the percentage of sales for those housing types to grow in 2013.

Charlottesville City Percent of Sales by Price Range

Q3 12 0%

58%

36%

4% 2%

Q2 12

53%

37%

6%

2% 2%

Q1 12

58%

35%

3% 2%1%

Q4 11 0% 25%

57% 50%

36% 75%

3%

3% 1% 100%

0-250K

250K-500K

500K-750K

750-1M

1M+

The sub-$250,000 market in the City picked up again in Q3 after a slow Q2. Representing 58% of the market, sub $250,000 homes continue to be the most popular price segment in the City. $250k - $500k homes stayed relatively steady at 36% of the market. Sales of higher priced homes did drop in Q3. Our opinion is that this is due mainly to the shortage of inventory in this price segment as opposed to a lack of demand. There were only 2 sales in the City above $750,000 in Q3. There were 7 in Q2 2012, 3 in Q1 2012, and 3 in Q4 2011. As more inventory becomes available in the higher price ranges, we expect sales in these higher price brackets to increase.

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Fluvanna County

Average List Price

Average Sale Price $187,651 -15.5% $222,176 -5.2% $234,467

Median Sale Price $172,500 -12.7% $197,500 -3.7% $205,000

Avg Days on Market 117 -0.8% 118 40.5% 84

Total Sales # 85 19.7% 71 -5.3% 75

Total Inventory 347 -8.2% 378 3.0% 367

Months of Inventory 18.26 -32.4% 27 76.6% 15.29

Overall

Q3 2012 Change Q3 2011 Change Q3 2010

$197,455 -16.5% $236,523 -0.9% $238,735

Fluvanna continues to be one of the strongest performing geographic segments of the market. While median prices continue to fall, buyers are seeing value and are purchasing homes. Median prices were down 12.7% to $172,500, while total sales increased by 19.7% (from 71 to 85) in Q3. Inventory continues to fall in Fluvanna: another positive sign for the market. Total inventory fell by 8.2% and months of inventory dropped by 32.4%. Contracts written in Q3 were up 41% from Q3 2011. 33% of the total sales in Fluvanna during Q3 were either a short sale or bank-owned properties.

Contracts Written
Q3 2011 Q3 2012 Change

61

86

41.0%

Greene County

Average List Price Q3 2012 $268,178 18.7% $225,989 -11.6% $255,549

Average Sale Price $254,136 12.4% $226,032 -10.5% $252,471

Median Sale Price $246,228 10.4% $223,000 -10.8% $250,000

Avg Days on Market 126 53.7% 82 12.3% 73

Total Sales # 50 -12.3% 57 7.5% 53

Total Inventory 255 17.0% 218 -14.5% 255

Months of Inventory 10.2 -11.1% 11.47 -5.5% 12.14

Overall

Change Q3 2011 Change Q3 2010

After a slow Q2, sales in Greene County continue to drag. With sales off 32% in Q2, total sales were down 12.3% in Q3. Another bad sign for Greene: inventory is on the rise. Total inventory increased from 218 to 255 units, a 17% increase. Days on market jumped dramatically from 82 days in Q3 2011 to 126 days in Q3 2012: a 53.7% jump. Not surprisingly, the average list price, average sales price, and median sales price all increased. After a strong 2011, Greene County does not appear to be offering the value to buyers and sellers did not adjust their prices quickly enough in Q3. As we mentioned last quarter, the slowdown in Greene sales could be tied to the drop in expected NGIC/DIA jobs. On a positive note, contracts written in Greene were up 76.2%. So, things may be looking up for Q4 2012 in Greene.

Contracts Written
Q3 2011 Q3 2012 Change

42

74

76.2%

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Louisa County
Average List Price Q3 2012 $191,696 -19.6% $238,295 -18.3% $291,701 Average Sale Price $188,344 -18.1% $229,832 -14.4% $268,635 Median Sale Price $175,000 -7.5% $189,250 -5.4% $200,000 Avg Days on Market 91 -15.0% 107 -11.6% 121 Total Sales # 39 -18.8% 48 -2.0% 49 Total Inventory 209 -9.5% 231 -4.1% 241 Months of Inventory 26.12 35.7% 19.25 -36.1% 30.12

Overall

Change Q3 2011 Change Q3 2010

Sales in Louisa were down 18.8% to 39 total units in Q3. Average list prices, average sales prices, and median sales prices were also down from Q3 2011. On the positive side, days on market fell by 15% to 91 days and total inventory also saw a healthy drop to 209 total units. This inventory represents a 9.5% decrease from Q3 2011. Buyers may be beginning to see more value in Louisa, as contracts written were up 11.4% in Q3.

Contracts Written
Q3 2011 Q3 2012 Change

35

39

11.4%

Nelson County

Average List Price Q3 2012 $284,240 8.7% $261,523 -24.1% $344,700

Average Sale Price $266,678 12.0% $238,012 -25.4% $319,220

Median Sale Price $250,000 25.0% $200,000 -26.4% $271,750

Avg Days on Market 201 -23.6% 263 43.7% 183

Total Sales # 45 66.7% 27 -48.1% 52

Total Inventory 348 -4.9% 366 -12.0% 416

Months of Inventory 20.47 -44.1% 36.6 58.4% 23.11

Overall

Change Q3 2011 Change Q3 2010

Nelson County real estate is still in a bit of flux from the sale of Wintergreen Resort. Yet sales activity was up dramatically in Q3. Total sales increased by 66.7% to 45 total sales. In addition, median prices increased by 25% to $250,000. Inventory levels in Nelson County continue to fall, which is great for the health of the market. Since Q3 2010, total inventory is down almost 17% to 348 units. Moving forward, sales in Nelson County appear to be on the rise as contracts written were up 34.9% this past quarter.

Contracts Written
Q3 2011 Q3 2012 Change

43

58

34.9%

*Some statistics in this report come courtesy of the Charlottesville Area MLS as of 10/3/12.

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