The summer of 2022 was an odd time in the Virginia housing market, as the market cooled down considerably, but prices continued to climb. The effects of the Covid-19 pandemic may be waning, as Virginians are slowing down on their need to move about the state.
Interest rates have been moderately hiked, which may be contributing to the slowdown of homebuying; interest rate hikes could also affect housing pricing in the state and all over the country. For July, only 13,745 new listings were made, which is down a staggering 23.4% year to year. All active listings were also down 3.4%, totaling 20,389.
The Housing Market is Cooling
All throughout summer, the rate of housing purchases declined sharply. The housing market is rapidly cooling, as the fervent desire to buy a new home is slowing down considerably- in Virginia and elsewhere. In June of 2022, only 13,324 home sales in Virginia, which is down 19.4% year to year. This is the sharpest year-to-year decline in more than two years.
The pattern also held for July; only 11,346 homes were sold, down 25.8% year to year for July. This decrease was the largest year-to-year drop in seven years. Total sales activity also dropped 14.8% between June and July, suggesting a firm cooling pattern. There are several explanations for this slow down, chief among them are the soaring prices and consumer doubt in the state of the economy.
Prices are Rising
Despite the cooling of the market, home prices are on the rise. This rise in prices could be due to many factors, such as interest from corporate groups, foreign investments, and a slight hike in interest rates. In June, the average selling price for a home was $397,315, which is up 6.6% percent year to year.
In July the average price of a home dropped to $385,000, but this still represents a year-to-year climb of 6.9%. This rate of increase is showing no signs of decline, which may contribute to the cooling of the market; Virginians may be apprehensive to buy homes that are only increasing in price. These prices may not fall throughout the year as interest rates could be increased again.
Virginia residents are mirroring the sentiment of the housing market and believe prices will drop eventually to match the falling rate of home sales. In the latest Virginia REALTORS Confidence Survey, only 13% of buyers rated the degree of buying activity as “high” or “very high.” In comparison, 36% of buyers rated buyer activity as “low” or “very low.”
The percentage of new homebuyers dropped one percent year to year, from 29% to 28%. Additionally, seller activity declined in August. Only 7% of respondents thought selling activity was “high” or “very high,” while a significant 49% of respondents thought the activity was “low to very low.”
State of the Housing Market Today
The Virginia housing market is rapidly cooling, but prices continue to rise for various reasons. Because of this continued cooling, 49% of Virginia residents expect housing prices to fall next year.
The Virginia market represents a microcosm of the national market; many purchases spurred on by the coronavirus pandemic have slowed down and those who did not participate are hesitant to pay current prices while the market seems to be cooling perpetually. Only time will tell if prices continue to cool along with the rate of purchasing.