The Virginia Real Estate Indexes continued a six-month retreat from their record high of the second quarter, but remain well above the historical average. Inventories are currently lower than this point in the previous two years, keeping home prices up. Home prices are higher than their historical average in all major metro areas across the Commonwealth.
Optimism wanes slightly, indexes remain above average
Virginians remain more optimistic about the current and future real estate markets than usual, but the indexes retreated from the records set last quarter. Figure 1 shows the index values for the past five years. The November Current Real Estate Index is 35, meaning that thirty-five percentage-point more Virginians are optimistic about the real estate market today, compared to a year ago, than are pessimistic, which is down two points from last quarter but above the 31.7 historical average. When looking ahead to the coming year, Virginians are less optimistic, but again, more positive than is typical. The November Future Real Estate Index is 32, up slightly since last quarter and above the historical average of 30.3.
Figure 1. Overall current and overall future real estate indexes, historical (current = black, future = red)
The real estate indexes are sensitive to market prices. Figure 2 shows the median list price and seasonally adjusted for sale inventory over the past two years in Virginia. Inventories continue a two-year decline, restricting supply and potentially generating a shortage. Specifically, inventories fell by 5,866 (12.7%) over the past year. The average list price in the Commonwealth is around $299,000, up over $20,000 since last year, indicating the demand is outstripping supply and pushing prices up.
Figure 2. Median list price (line) and for-sale inventory (bar), Virginia. Data downloaded from www.zillow.com 12/3/2017.
Respondents who believe that now is a good time to sell a home cite rising incomes and lower inventories. Forty-seven percent believe that today is a better time to sell than a year ago. Figure 3 shows the Overall, Current, and Future Sellers Real Estate Indexes compared to their historical values. The black dot is the current value while the grey dash is the historical average. Sellers are more optimistic than average while buyers are less so, particularly today compared to a year ago. Thirty-five percent believe that now is a good time to buy a home relative to a year ago and twenty-eight percent report the coming year to be a buyer's market. Rising prices likely contribute to these sentiments.
Figure 3. Virginia Real Estate Indexes (black dot=current, grey dash=average, red diamond=min, max)
The Roanoke College Poll is funded by Roanoke College as a public service.
Pricy Homes Across the Commonwealth
Figure 4 shows list prices and inventories for various MSAs across the Commonwealth. The red dash is the October 2017 average list price which is significantly greater for all MSAs than is standard. Home ownership contributes significantly to household wealth. As home values rise, so does household wealth and consumer optimism. All MSAs graphed, save Washington, D.C., report falling inventories, rising prices, and strong seller optimism.
Figure 4. Select city median list price (blue dot = median list price last 17 years, red dash = October 2017 average list price, black line = standard deviation average list price; percentage change in inventories over prior 12 months shown in parentheses). Data downloaded from www.zillow.com 12/3/2017
Interviewing for The Roanoke College Poll was conducted by The Institute for Policy and Opinion Research at Roanoke College in Salem, Va. between November 12 and November 20, 2017. A total of 605 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 25 percent of the completed interviews.
Questions answered by the entire sample of 605 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.
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