The Virginia Real Estate Indexes indicate a strong and robust real estate market in the Commonwealth. The index for current real estate conditions increased significantly to the highest value on record, driven primarily by sellers who see increased prices for their property due to low inventories. Buyers appear frustrated by costs, frustrations which will only be exasperated by rising mortgage rates.
Prices rise, sellers exuberant
Virginian sentiment about real estate markets rose to record levels in the third quarter. Figure 1 shows the current and future index values for the past five years. The August Current Real Estate Index is 46, meaning that forty-six percentage-point more Virginians are optimistic about the real estate market today, compared to a year ago, than are pessimistic, which is the highest value ever and thirteen points above the historical average. When looking ahead to the coming year, Virginians are also more optimistic than usual. The August Future Real Estate Index is 32, up slightly since last quarter and two points above the historical average.
The real estate indexes are sensitive to market prices. Over the past year (July 2017 to July 2018), for-sale inventories fell by over 8% in the Commonwealth. Reduced inventories restrict supply and potentially generate a shortage. The median home value per square foot in July 2018 was $148, ranking Virginia 22nd in the nation. One Virginia neighbor, Washington D.C. leads the nation at $508 while another, West Virginia takes the last slot with $69 (Zillow.com).
Respondents who believe that now is a good time to sell a home cite rising incomes, prices, and lower inventories. Fifty-nine 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 both the current (black) and future (red) real estate markets, although the future is considered less bright than the present.
Figure 3 provides the same analysis for buyers. Contrasted to sellers, buyers are concerned about the real estate market both today and in the future. Thirty-four percent of respondents say that now is a better time to buy a home compared to a year ago, while 26 percent 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. Rising interest rates will also add to the total cost of buying a home in the future.
Methodology
Interviewing for The Roanoke College Poll was conducted by The Institute for Policy and Opinion Research at Roanoke College in Salem, Va. between August 12 and August 19, 2018. A total of 604 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 32 percent of the completed interviews.
A copy of the questions and all toplines may be found on our website.
