The Virginia Real Estate Indexes fell sharply over the fourth quarter, although remain strong. The index for current real estate conditions dropped almost 15 points from the record high set last quarter but remain in strong territory particularly for the slow winter months. Buyers appear frustrated by costs, which will only be exasperated by Federal Reserve policy actions and rising mortgage rates.
Prices rise, sellers temper their enthusiasm
Virginian sentiment about real estate markets dropped significantly over the fourth quarter. Figure 1 shows the current and future index values for the past five years. The November Current Real Estate Index is 31, meaning that thirty-one percentage-point more Virginians are optimistic about the real estate market today, compared to a year ago, than are pessimistic, and two points off the historic average. When looking ahead to the coming year, Virginians are less optimistic than is typical. The May Future Real Estate Index is 25, down seven points since last quarter and five points below the historical average.
Figure 1. Overall current and future real estate indexes
The real estate indexes are sensitive to market prices. Over the past year (October 2017 to October 2018), seasonally adjusted sales rose by 1% and for-sale inventories fell by over 7% in the Commonwealth. Reduced inventories restrict supply and potentially generate a shortage which increases price. The median sale price is up 2 percent over the past year. The median home list price per square foot in September 2018 was $158, ranking Virginia 24nd in the nation. One Virginia neighbor, Washington D.C. leads the nation at $543 while another, West Virginia takes the second-to-last slot with $93 (Zillow.com).
Respondents who believe that now is a good time to sell a home cite rising incomes, prices, and lower inventories. Forty-five percent of Virginians believe that today is a better time to sell than a year ago. 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 considered less bright than the present. Sellers significantly reigned in their optimism about current markets. The winter months are a slow period in real estate markets, and the current fourth-quarter index values are in keeping with prior values.
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. Thirty-three percent of respondents say that now is a better time to buy a home compared to a year ago, while 25% see the next year as a good time to buy a home. These disparate sentiments between buyers and sellers are driven by one factor: price. Until inventories rise, prices will not fall. Federal Reserve actions and rising interest rates will also add to the total cost of buying a home in the future.
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 November 11 and November 19, 2018. A total of 602 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 602 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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