Current Real Estate Markets Strong as Inventories Remain Low

The Virginia Real Estate Indexes are mixed.  The index for current real estate conditions rebounded from a six-month drop and finished close to its historical record from May 2017, while the index for the future real estate conditions remained strong, but fell from last quarter. 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.

Virginians high on real estate markets, sellers particularly so

After a six month retreat, Virginia sentiment about current real estate markets neared its historical high notched in May of 2017. Figure 1 shows the index values for the past five years. The February Current Real Estate Index is 42, meaning that 42 percentage-point more Virginians are optimistic about the real estate market today, compared to a year ago, than are pessimistic, which is up seven points from last quarter and 10 points above the historical average. When looking ahead to the coming year, Virginians are less optimistic, but again, more positive than is typical. The February Future Real Estate Index is 28, down four points since last quarter and two points below the historical average.

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, after a modest increase over the winter, plateaued and remain below 2016 levels at this point in the year. Reduced inventories restrict supply and potentially generate a shortage. Specifically, inventories fell by 2,698 units (6.6%) over the past year. The median list price in the Commonwealth is $289,000, up over $20,000 since last year, indicating the demand is outstripping supply and pushing prices up.

Figure 2. Median list price (blue line) and for-sale inventory (green bar), Virginia. Data downloaded from www.zillow.com 3/16/2018.

Respondents who believe that now is a good time to sell a home cite rising incomes and lower inventories. Fifty 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 about the current market while buyers are less so for both current and future markets.  Thirty-eight percent believe that now is a good time to buy a home relative to a year ago and 27 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)

Pricey Homes Across the Commonwealth

Figure 4 shows list prices and inventories for various MSAs across the Commonwealth. The red dash is the January 2018 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 = January 2018 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 3/16/2018

Methodology

Interviewing for The Roanoke College Poll was conducted by The Institute for Policy and Opinion Research at Roanoke College in Salem, Va. between February 19 and February 26, 2017. 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 33 percent of the completed interviews.

Questions answered by the entire sample of 604 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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