Virginia’s real-estate market held firm in July, but an increasing number of would-be purchasers are being priced out as costs increase and competition for homes remains strong.
“As home prices continue to rise and hit record levels in many markets, affordability is the biggest challenge,” said Lisa Sturtevant, chief economist of the Virginia Realtors trade group, in parsing July home-sales data reported by the organization Aug. 18.
“First-time buyers, in particular, are becoming increasingly frustrated and are giving up their home searches,” Sturtevant said.
Statewide, a total of 15,081 properties went to closing in July, up 3.4 percent from a year before. July 2020 marked the beginning of the boom that arrived after the first blush of the COVID crisis has given way to an acceptance it had to be managed, not hidden from.
(In the three July periods immediately preceding the COVID era, sales stood at 12,885 in 2019, 12,654 in 2018 and 11,706 in 2017.)
Median sales prices rose 8.7 percent – slowing but still healthy – to $361,000 statewide, pushing sales volume for the month up 13.6 percent from a year before, to $6.7 billion.
Buyers have continued to benefit from rock-bottom (by historic norms) mortgage-interest rates, but those savings have in many cases been offset by the higher prices. In many cases, whether because they are priced out or don’t want to keep competing for elusive properties, some prospective home-buyers have thrown up their hands.
“The rental market has seen a surge in demand, both from young people starting out on their own as well as older individuals and families who are returning to renting after a discouraging search for a home to buy,” Sturtevant said.
All that said, Sturtevant said the overall sales market was “strong,” and that seasonality appears to be returning. Sales in July were down 8 percent compared to June, the usual occurrence most summers Sales drop-offs were most pronounced in the Harrisonburg and Charlottesville markets.
The average sold-to-list-price ratio in July was a whopping 101.8 percent, suggesting competition is not disappearing. Also proving the point: The average days on the market between listing and ratified sales contract for homes that went to closing in July was 20 days, less than half the time needed in each of the preceding three years. (In many areas of Northern Virginia, the average days on the market was below 10.)
Inventory has been on the rise each of the past five months as some homeowners (at least if they have a place to go) test the market and put their homes up for sale. More inventory suggests the likelihood of a market that is cooling slightly, with home-appreciation values in the second half of the year unlikely to match those in the first.
Despite the rise, the 20,910 properties on the market at the end of July were less than half what had been available to prospective purchasers in 2017 and 2018, and about half of availability in 2019.
Combine the inventory numbers with the sales numbers and you come up with 1.62-months’ worth of supply in July. That’s a strongly pro-seller figure, and compared to 3.83 months in July 2019 and rates of more than four months in 2017 and 2018.
Add it all up? “While the market should remain solidly a sellers’ market over the next few months, buyers should find they have more options, prices may begin to rise less quickly, and homes may stay on the market a little longer,” Sturtevant said.