Charlottesville and Albemarle Real Estate Focus: Inventory Levels

I was watching a great video recently featuring real estate guru Steve Harney.  Steve is a mastermind in real estate trends…and even more masterful in taking complicated economic data and simplifying it for everyone to understand (including me, the Uva English major).  I’ve had the fortune to see him speak twice in the last six months at Inman Connect – once in San Francisco and once in New York.  Each time, I’ve taken away useful information that my clients have directly benefitted from. But only recently have I started reading and tracking his blog.

So, back to this video.  There were 5 or 6 ‘aha’ moments for me in this particular video, but I wanted to focus on his analysis of inventory levels. The Charlottesville and Albemarle County real estate market has taken a hit over the past few years…as have most real estate markets nationally.  If any of us could predict the future or had a crystal ball, we probably would be sitting on a beach somewhere.  But one of Steve’s comments about how current housing inventory levels can be a future indicator of pricing/value was particularly poignant.  Here’s the gist of it:

The chart is very simple and is based on historical real estate statistics (nationally).  Basically, it draws a direct correlation to current inventory levels and what prices/values will do over the upcoming 12 month period.  It’s basic supply and demand, but it makes sense.

So, I decided to take a closer look at Charlottesville real estate inventory levels.  It was pretty interesting.

I took a look at Charlottesville single family homes, Charlottesville town homes, Albemarle County single family homes, and Albemarle County town homes. Here’s the quick recap: Charlottesville housing inventory levels are lower than Albemarle County levels, overall (location, location, location).  Single family homes in Charlottesville and Albemarle have higher current levels than attached town town homes in Albemarle. This can be explained purely by price – lower priced home and town homes are selling faster than higher priced homes.  Reason: demand.  There is more demand for homes in lower price points because there are more buyers.

But, overall, you can see current inventory levels ranging from almost 13 months for single family homes in Albemarle…down to just over 6 months for Albemarle County town homes.  So, in reality, those town homes in Albemarle are actually in a balanced market.  Based on the above chart, you could expect attached home prices in Albemarle to stay flat over the next 12 months.  However, detached homes in Albemarle are hovering around the 14 months of inventory levels…and you could predict that those homes could be in for double-digit depreciation in the coming year.

I don’t think it’s that simple, though.  So, I dug a little deeper into the single family homes category.  I looked at the average price for each of the categories (Albemarle single  family homes and Charlottesville single family homes) over the last 4 years.  I then took that number and compared the inventory levels above and below the average price.

I found a significant differences in inventory levels when I compared homes above and below the 4-year average.  The biggest difference was with Albemarle single family homes.  Inventory levels for homes above the average price were almost twice that of inventory levels below the average price.  As expected, Charlottesville homes inventory levels for homes priced higher than the average were more, but not twice as high.

And here’s the chart:

So, to sum up: if you take Steve Harney’s chart to heart, higher priced single family homes in Albemarle County could be hit the hardest over the next 12 months.  With inventory levels above 21 months (almost 2 years), it’s a lot of inventory to absorb.  Hopefully, interest rates can stay steady and buyer affordability doesn’t become more of an issue.

Would love to get your thoughts on the chart and what your predictions are for these sub-segments of the market.