Virginians weighed in on their opinions of the real estate market for the second time this year. The Roanoke College Poll interviewed 604 Virginians about their opinions of the current market and their expectations of the future. Additionally, respondents indicated their willingness to buy and sell property today and in the coming year.
Optimism in the real estate market continues to rise, sellers more so than buyers.
Overall sentiments about the condition of the real estate market have changed little since February 2014, with close to 30 percent of respondents feeling more optimistic than pessimistic about the market today and over the course of the coming year. Close to 60 percent of Virginians believe that the condition of the real estate market has improved since last year, a 3 point reduction since February 2014. Fifty-five percent believe that conditions will improve over the next year, a 3 point increase since February.
Sale prices and other real estate market outcomes depend upon a variety of factors influencing buyers and sellers. Several positive items are likely playing a role. The Virginia labor market is considerably stronger than the nation as a whole. The April 2014 seasonally adjusted unemployment rate in the Commonwealth is 5.2 percent, which is well below the national rate of 6.3 percent.
Overall, prices for goods and services have remained low since the recent economic recession. Housing inventories, while still low, are beginning to increase in many areas of the Commonwealth, including Northern and Central Virginia, likely due to fears of future rate hikes. Low inventories are a boon to sellers and drive real estate prices up as buyers compete for few available listings.
The Commonwealth’s real estate market is facing potential push backs. Mortgage rates are trending upward year-over-year in the Commonwealth, although they have fallen in recent months.
On June 20, zillow.com reported an average mortgage rate of 4.04 percent in the Commonwealth for a 30-year fixed rate mortgage with at least 20 percent down and a credit score of 740. Credit markets remain tight, deterring borrowing and buyers.
On March 21, President Barack Obama signed the Homeowner Flood Insurance Affordability Act of 2014 into law. The law delays, reduces, and repeals some rate increases mandated in the Biggert-Waters Flood Insurance Reform Act of 2012. The future of the National Flood Insurance Program is uncertain, which could continue to caution potential home buyers in affected areas. Higher insurance rates increase the cost of buying and owning a home.
Both buyers and sellers report growing optimism. Forty-seven percent of respondents believe it is a better time to sell today than a year ago. This figure falls to 43 percent of respondents when asked about selling a year from now. Low mortgage rates, inventories and higher prices are the top reasons given by respondents for selling optimism. Other reasons include an improving economy and consumer sentiment.
On the other side of the real estate market, 43 percent of buyers believe that today is a better time to buy than a year ago, although only 33 percent of buyers consider this to be true over the coming year. The leading sources of optimism among buyers include low interest rates, prices and an improving economy. A considerable share of buyers are concerned about the coming year and cite fears of higher housing prices.
Sellers optimistic in Northern Virginia, Buyers in Central, Tidewater, Southside regions.
Considerable differences exist across the Commonwealth. Northern Virginia sellers are extremely positive about current and future conditions. Eighty-one percent of respondents in that region believe that the housing market improved over the last year. Additionally, 68 percent of respondents in Northern Virginia report that today is a better time to sell than a year ago, an increase of 7 percentage points since February. Fifty-nine percent are positive about selling in the coming year, a 10 percentage point increase from February. Sentiments, which are growing nationally, could be driven by rising sale prices in the Northern Virginia region.
Optimism in Northern Virginia is in contrast to pessimism in Southwestern Virginia and the Shenandoah Valley. More respondents in these regions were pessimistic about current selling conditions than were optimistic. Thirty four and 39 percent of respondents in Southwestern Virginia and Shenandoah Valley, respectively, believe that today is a worse time to sell than a year ago, both up from February.
Buyers are the most optimistic about current conditions in the Tidewater region, likely due to the passage of the Homeowner Flood Insurance Affordability Act of 2014. Buyers are largely pessimistic about the coming year in Northern Virginia, potentially due to fears of rising prices, the same force that is driving optimism among sellers in the region. A continued increase in inventories could mitigate the price increases.
Interviewing for The Roanoke College Poll was conducted by The Institute for Policy and Opinion Research at Roanoke College in Salem from May 12-15, 2014. The sample consisted of 604 residents of Virginia. A copy of the questions and all frequencies may be found at http://roanoke.edu/News_and_Events/News_Archive/June2014_Real_Estate_Index.htm