With winter fast-approaching, it’s time to see where the Virginia housing market stands at the tail end of what has been a memorable year!
Sales hit a year-over-year plateau
According to the Virginia REALTORS® August 2021 Home Sales Report, sales in August were up 5% year-over-year in August, wrapping up a summer that saw home sales hit new records. According to the September Home Sales Report, September sales were 2% lower year-over-year with 13,079 sales during the month, still well above every September figure from 2016 through 2019. Interestingly, September was the first month since June 2020 that did not increase year-over-year sales.
September saw a typical seasonal slow-down with sales down 9% from August. Some may recall that sales only dropped 3% from August to September in 2020, with the economy rebounding from the initial economic shockwave caused by the COVID-19 pandemic. However, from 2016 through 2019, the August to September decline was at least 14% every year.
October 2021 saw a year-over-year decline in sales of 6%. In both 2019 and 2020, October saw a slight bump in sales versus the prior month; that trend failed to materialize this year.
Buyers are set to regain footing
With the economy and inventory levels stabilizing, we’re starting to see conditions slightly stabilize. With demand starting to taper, there’s hope for buyers to regain some of their foothold against what has recently been a historic double whammy of rising median prices and low supply.
Median home prices, which have at times over the past year and a half increased at a breathtaking pace, saw a decline in August for the second straight month in both the Northern Virginia and Charlottesville areas. Migration toward lower-cost regions, fueled by a growing work-from-home trend, continues to shape the market; from January 2020 to August 2021, the metro areas that saw the largest median home price increases were Staunton MSA at 40% and Richmond MSA at 29%.
With overall job growth continuing steadily, buyers who had previously feared being priced out of the market may now be regaining confidence. While overall supply remains tight, greater flexibility and mobility among the workforce may help to ease the bottleneck.
The Virginia REALTORS® flash survey results conducted over the August to October period reflected the changing market dynamics. Here are some of the highlights:
- In October, homes on the market received an average of 2.4 offers, compared to 3.1 in September, and 3.2 in August.
- In October, 21% of REALTORS® reported that it was “very common” for prospective buyers to put off their home search altogether, down from 28% in March.
- Compared to last spring, home buyers now are less likely to settle for a townhouse or condominium over a single-family detached home.
What will market activity look like this winter?
Heading toward the end of the year and into 2022, a couple of macro-level factors are worth keeping an eye on:
- COVID-19 restrictions, if extended in response to the threat of the delta variant, could have a similar dampening effect as was the case last winter, which saw a larger-than-average decrease from December 2020 to January 2021 and flat sales from January to February 2021.
- Mortgage interests rates were slightly below 3% as of the second week of November. The latest signals from the Federal Reserve indicate a shift away from the policy of keeping rates low in support of the economic recovery. Growing confidence in the ability of the economy to stand on its own will likely lead to rate increases in 2022.