The Virginia housing market seems to be entering a period of adjustment. While buyers may benefit from a slight increase in inventory, affordability concerns cast a long shadow. Whether the market settles into a new equilibrium or experiences a more significant cooldown will depend on how interest rates and housing prices evolve in the coming months. Here are the latest trends in the Virginia housing market.
Virginia Housing Market Trends 2024
Virginia's housing market, which surged at the start of 2024, appears to be experiencing a course correction. The latest Virginia Home Sales Report released by Virginia REALTORS® paints a picture of a market where sales activity is cooling despite stubbornly high home prices. This shift presents a unique set of challenges and opportunities for both buyers and sellers.
Sales Slowdown After Early-Year Momentum
March saw a statewide decline of 7.3% in home sales compared to the same month last year. This translates to 634 fewer homes finding new owners, marking a significant departure from the positive trend observed in the early months of 2024. Regions like Lynchburg, Northern Virginia, and the Richmond Metro Area witnessed the steepest drops in sales activity.
Persistent Price Growth Despite Lower Sales Volume
The slowdown in sales hasn't dented the upward trajectory of home prices in Virginia. The median sales price across the state reached $397,000 in March, a 7.3% increase from last year. This translates to a jump of $27,000, highlighting the persistent upward pressure on prices. The culprit? The limited availability of homes in the state. Roughly 65% of Virginia's counties and cities saw a rise in median sales prices compared to March 2023, indicating a seller's market that's still very much in play.
Inventory on the Rise, But Buyer Caution Emerges
There's a glimmer of hope for buyers, though it comes with a caveat. While there was an 18% increase in new listings in March compared to February, this is a smaller rise than the typical 30-50% jump expected during this period. Experts suggest this slowdown in new listings could be due to seller hesitation caused by rising interest rates, which have climbed above the 7% mark for the first time since late 2023. This rise in borrowing costs has likely caused some sellers to pause and recalibrate their pricing strategies in light of a potentially more cost-conscious buyer pool.
The overall number of active listings has also grown, with a 10.3% increase compared to last year at the end of March. This marks the fourth consecutive month with an expanding inventory, offering buyers more options to consider. However, the affordability challenge remains.
Affordability Concerns Cast a Shadow
The combined effect of rising interest rates and home prices has pushed affordability to the forefront of concerns for many potential buyers in Virginia. This double whammy could price out a significant segment of the market, particularly first-time homebuyers. Experts predict that if these trends continue, the spring market will likely be slower than last year, which itself was the slowest spring season in a decade.
Navigating the New Market Landscape
The Virginia housing market seems to be entering a period of adjustment. While buyers may benefit from a slight increase in inventory, affordability concerns cast a long shadow. Whether the market settles into a new equilibrium or experiences a more significant cooldown will depend on how interest rates and housing prices evolve in the coming months. Sellers who are realistic about pricing and patient buyers who are well-prepared financially will likely be the ones who navigate this changing market landscape most successfully.
Virginia Housing Market Forecast for 2024
As we look ahead to the year 2024, the Virginia housing market is poised for an interesting and potentially challenging journey. The Virginia REALTORS® association has released its 2024 Economic & Housing Market Forecast, shedding light on what we can expect in the coming year.
Key Projections
1. Home Sales
After a sharp decline in sales in 2023, the forecast anticipates a rebound in 2024. The projection is for an 11.4% increase in home sales compared to the previous year. This improvement is a positive sign for the market, indicating that the impact of rising mortgage rates might stabilize, allowing for increased sales activity. However, it's important to note that while this is an improvement over 2023, it remains lower than the market's performance in much of the past decade.
2. Home Prices
The median home price in Virginia is expected to see a modest increase of 1.2% in 2024 compared to 2023. While home prices may continue their upward trajectory in many regions across the state, the forecast suggests that the pace of growth will continue to ease in the coming year. This indicates that the aggressive price growth observed in recent years may slow down, potentially offering some relief to buyers.
3. New Housing Permits
The demand for additional housing supply remains a critical concern, particularly for newly constructed homes. The forecast predicts a 7.1% increase in new housing starts in Virginia during 2024. This increase in housing permits is an essential step in addressing the ongoing issue of low housing inventory, which has constrained the market's activity. It suggests a positive trend toward providing more options for potential buyers.
4. Mortgage Rates
In 2023, mortgage rates hit a 20-year high, contributing to the challenges in the housing market. The 2024 forecast indicates that 30-year fixed-rate mortgage rates are likely to remain volatile but are expected to gradually trend downward. By the end of the year, the forecast suggests a potential decrease to around 6.15%. This shift in mortgage rates may provide some relief for buyers and potentially encourage more activity in the market.
While the Virginia housing market faced significant hurdles in 2023, the 2024 forecast offers a glimpse of hope. With an expected increase in home sales, a modest rise in home prices, a boost in new housing permits, and a potential decline in mortgage rates, the market is poised for a year of change and adaptation.
However, the challenges of low housing inventory and affordability constraints are expected to persist. Buyers and sellers will continue to navigate a competitive market. The Virginia housing market in 2024 is a dynamic landscape, and staying informed about these projections will be crucial for those looking to participate in this evolving market.
Will the Virginia Housing Market Crash?
The Virginia housing market, like many across the nation, is at a crossroads. While home values have continued to climb, the pace of that growth is expected to slow down in 2024. Let's delve into the data and see what experts predict for Virginia's housing market.
Looking Back: A Seller's Market
Zillow data shows the average Virginia home value reached $385,780 by March 2024, reflecting a healthy 5.8% increase year-over-year. This trend aligns with the past few years, where low inventory and high demand created a seller's market. This is further evidenced by the brisk sales cycle, with homes going pending in an average of just 12 days.
The data from February provides even deeper insights. The median sale price of $340,608 fell slightly short of the median list price of $370,000, suggesting some room for negotiation. However, a significant portion (33.2%) of homes still sold above list price, indicating continued strong buyer interest.
Shifting Tides: Inventory Rise and Interest Rate Impact
While the market has favored sellers, a shift is underway. As of March 2024, the for-sale inventory has grown to 16,078, with new listings increasing (7,172). This indicates a potential rise in available homes, which could put some brakes on the rapid price escalation.
Another significant factor is rising mortgage interest rates. Though not reflected in the data provided, historically high rates may cool buyer demand, impacting home values. Experts predict a slower, more stable growth pattern for the remainder of 2024.
Forecast: Stability and Moderation
The Virginia housing market is likely to transition from a seller's market to a more balanced one. Increased inventory and potentially fewer buyers due to interest rates may lead to a moderation in home value growth. Don't expect a price plunge – Virginia's strong fundamentals suggest values will likely hold steady or experience a slower, more sustainable increase.
It's important to remember that the Virginia housing market encompasses diverse regions. While the trends mentioned above provide a general outlook, specific areas within Virginia may experience different scenarios. Local market reports and consulting a realtor familiar with your desired area are crucial for a more precise forecast.
Is Virginia a Buyer's or Seller's Market?
The Virginia housing market is currently transitioning from a seller's market to a more balanced one. The factors mentioned earlier, like rising inventory and potentially fewer buyers due to interest rates, are tipping the scales. This means buyers may have more negotiating power and a wider selection of homes compared to the past few years.
However, it's not quite a full-blown buyer's market yet. Inventory remains lower than pre-pandemic levels, and homes are still selling relatively quickly. So, while buyers may have more breathing room, sellers shouldn't expect a drastic shift in their favor either.
Are Home Prices Dropping in Virginia?
No, home prices in Virginia are not dropping – at least not significantly. The data shows a continued increase, albeit at a slower pace than the previous year. Experts predict a moderation in growth rather than a decline.
Will This Housing Market Crash?
A housing market crash, similar to the one experienced in the late 2000s, is highly unlikely in Virginia. Here's why:
- Sturdy Fundamentals: Virginia's economy is generally strong, with low unemployment and steady job growth. This creates a solid foundation for the housing market.
- Stricter Lending Standards: Compared to the loose lending practices that contributed to the previous crash, today's mortgage qualification process is much stricter. This reduces the risk of widespread defaults, a key factor in a housing market collapse.
- Inventory Imbalance: While rising, inventory levels haven't reached a point where there's a glut of houses on the market. This helps maintain some price stability.
Regional Housing Market Forecast
Market Trends
- Danville, VA: The Danville MSA is projected to experience steady growth in housing prices, with an increase from 1.1% in April 2024 to 4.5% by March 2025. This substantial rise indicates a robust demand for housing in the region, potentially driven by factors such as job growth and economic stability.
- Bluefield, WV: Despite being located partially in West Virginia, the Bluefield MSA in Virginia is also expected to see significant appreciation in housing values. From 0.8% in April 2024, the growth is projected to reach 3.1% by March 2025, signaling a favorable market for both buyers and sellers.
- Roanoke, VA: Roanoke's housing market demonstrates resilience, with a gradual increase from 0.7% in April 2024 to 3% by March 2025. This upward trend suggests sustained demand for housing in the area, likely influenced by its amenities, quality of life, and affordability compared to larger metropolitan areas.
- Lynchburg, VA: Lynchburg follows a similar trajectory, with housing prices expected to rise from 0.6% to 2.6% over the same period. The city's appeal as a regional economic hub and its diverse employment opportunities contribute to its attractiveness to homebuyers, supporting steady market growth.
- Martinsville, VA: Martinsville's housing market forecasts indicate a notable increase, with growth projected from 0.7% in April 2024 to 2.5% by March 2025. This suggests a resurgence in interest in the region, potentially driven by affordability and a favorable cost of living.
- Richmond, VA: Richmond, as one of the major MSAs in Virginia, continues to show stability and growth in its housing market. From 0.6% in April 2024, the forecasted growth climbs to 2.2% by March 2025, indicating sustained demand and confidence in the region's real estate sector.
- Blacksburg, VA: The Blacksburg MSA is projected to experience modest yet steady growth in housing prices, with an increase from 0.6% in April 2024 to 1.4% by March 2025. This gradual appreciation suggests a stable market with sustained demand from buyers.
- Winchester, VA: Winchester's housing market is also expected to see a steady rise, with forecasted growth from 0.5% to 1.3% over the same period. The region's proximity to major metropolitan areas and its appeal as a commuter-friendly location contribute to its attractiveness to homebuyers.
- Harrisonburg, VA: Harrisonburg demonstrates resilience in its housing market, with growth projected from 0.5% to 1.3%. The city's vibrant economy, anchored by its university and diverse industries, supports consistent demand for housing
- Virginia Beach, VA: Virginia Beach, as a coastal destination, maintains steady growth in its housing market, with an increase from 0.6% to 1.2%. The city's allure as a tourist destination, coupled with a strong local economy, contributes to its stability and attractiveness to both residents and investors.
- Staunton, VA: Staunton's housing market reflects steady growth, with forecasted appreciation from 0.6% to 1.2% over the specified period. The region's scenic beauty, historic charm, and favorable cost of living make it an appealing choice for homebuyers seeking a relaxed lifestyle.
Sources:
- https://fred.stlouisfed.org/series/VASTHPI#
- https://www.zillow.com/va/home-values/
- https://www.neighborhoodscout.com/va/real-estate
- https://fred.stlouisfed.org/series/ACTLISCOUVA#
- https://www.redfin.com/state/Virginia/housing-market
- https://virginiarealtors.org/research/reports/home-sales-reports/
