Real Estate Market Sentiment Rises, Amazon Arrival Influences
The Virginia Real Estate Indexes tell a polar tale. Overall sentiment increased since the end of 2018, but vast differences between buyers and sellers exist. Buyers appear increasingly frustrated by prices which are up 2 percent over the last year in the Commonwealth, currently driven by falling inventories. Conversely, sellers are enthusiastic about the market. Amazon’s arrival is a significant factor in sentiment in Northern Virginia.
Sentiment increases with the temperatures
Virginian sentiment about real estate markets improved as the weather warmed in the second quarter of 2019. Figure 1 shows the current and future index values for the past five years. The May Current Real Estate Index is 41, meaning that forty-one percentage-point more Virginians are optimistic about the real estate market today, compared to a year ago, than are pessimistic. The value is eight points above the historic average. When looking ahead to the coming year, Virginians are cautiously more optimistic than last quarter. The May Future Real Estate Index is 34, up five points since last quarter and four points above the historical average.
Figure 1. Overall current and future real estate indexes
The real estate indexes are sensitive to market prices. Nationally, the real estate market had a strong spring. Over the past year (May 2018 to May 2019), national median home value per square foot and median sale price rose 5 and 3, percent, respectively. For-sale inventories were statistically unchanged. In the Commonwealth, for-sale inventories fell by over 16 percent, while the median home value per square foot and median sale price both increased by 2 percent over the past year. Reduced inventories restrict supply and potentially generate a shortage which increases price.
Respondents who believe that now is a good time to sell a home cite rising incomes, prices, and lower inventories. Fifty-eight percent of Virginians believe that today is a better time to sell than a year ago. A few respondents specifically cited Amazon coming to Virginia as a reason for seller optimism. Thirty-nine percent of respondents believe the coming year will a better time to sell than now. Figure 2 shows the Current (compared to a year ago) and Future (over the next year) Sellers Real Estate Indexes over time. The dark lines and points are actual data, while the dotted lines are three-quarter moving averages. The latter serves to smooth the data and is less sensitive to periodic fluctuations. There is an upward trend in seller optimism about the future (red) real estate market, although the future is considerably less bright than the present.
Figure 2. Virginia Real Estate Index, Sell Current and Future
Figure 3 provides the same analysis for buyers. Buyers continue their concern about the real estate market both today and in the future, although reported higher optimism about buying today versus a year ago than they did in the first quarter of 2019. Thirty-seven percent of respondents say that now is a better time to buy a home compared to a year ago, while 23% see the next year as a good time to buy a home. These disparate sentiments between buyers and sellers are primarily driven by one factor: price. Until inventories rise, prices will not fall. The arrival of Amazon is adding to buyer concerns in Northern Virginia as respondents anticipate added home price effects.
Figure 3. Virginia Real Estate Index, Sell Current and Future
The Roanoke College Poll is funded by Roanoke College as a public service.
Interviewing for The Roanoke College Poll was conducted by The Institute for Policy and Opinion Research at Roanoke College in Salem, Va. between May 13 and May 22, 2019. A total of 608 Virginia residents 18 or older were interviewed. Telephone interviews were conducted in English. The random digit dial sample was obtained from Marketing Systems Group and included both Virginia landline and cell phone exchanges so that all cell phone and residential landline telephone numbers, including unlisted numbers from Virginia exchanges, had a known chance of inclusion. Cell phones constituted close to 30 percent of the completed interviews.
Questions answered by the entire sample of 608 consumers are subject to a sampling error of plus or minus approximately 4 points at the 95 percent level of confidence. This means that in 95 out of 100 samples, like the one used here, the results obtained should be no more than 4 points above or below the figure that would be obtained by interviewing all consumers who have a telephone. Where the results of subgroups are reported, the sampling error is higher. Sampling weights were constructed using Virginia Census 2010 data by age, race and gender groups. Quotas were used to ensure that different regions of the Commonwealth were proportionately represented. The margin of error was not adjusted for design effects due to weighting.
A copy of the questions and all toplines may be found here.
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