Virginians show increasing concern about future markets
Virginian sentiment about real estate markets backed away from the second quarter numbers, although current conditions are trending upwards. The August Current Real Estate Index is 38, meaning that thirty-eight percentage-point more Virginians are optimistic about the real estate market today, compared to a year ago, than are pessimistic. The value is four and a half points above the historic average. When looking ahead to the coming year, Virginians are expressing concerns. The August Future Real Estate Index is 25, down almost 9 points since last quarter and five points below the historical average. Compared to a year ago, the future measure is seven-points lower today. Figure 1 shows the current and future index values for the past five years.
Figure 1. Overall current and future real estate indexes
The real estate indexes are sensitive to market prices. Nationally, the real estate market had a strong spring. Over the past year (July 2018 to July 2019), national median home value per square foot and median sale price rose 5 percent. For-sale inventories rose by 1.3 percent.
In the Commonwealth, for-sale inventories fell by over 11 percent, while the median home value per square foot increased by 4 percent over the past year. Reduced inventories restrict supply and potentially generate a shortage which increases price.
Respondents who believe that now is a good time to sell a home cite rising incomes, prices, and lower inventories. Fifty-eight percent of Virginians believe that today is a better time to sell than a year ago. Thirty-six percent of respondents believe the coming year will be a better time to sell than now.
A few respondents specifically cited Amazon coming to Virginia as a reason for seller optimism in the greater-Amazon area. 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. Optimism remains positive although the future is considerably less bright than the present.
Figure 2. Virginia Real Estate Index, Sell Current and Future
Figure 3 provides the same analysis for buyers. Buyers are less optimistic than sellers. Forty-five percent of respondents say that now is a better time to buy a home compared to a year ago, while 29 percent see the next year as a good time to buy a home. These disparate sentiments between buyers and sellers are primarily driven by one factor: Price. Until inventories rise, prices will not fall. The arrival of Amazon is adding to buyer concerns in Northern Virginia as respondents anticipate added home price effects.
Figure 3. Virginia Real Estate Index, Buy Current and Future
Interviewing for The Roanoke College Poll was conducted by The Institute for Policy and Opinion Research at Roanoke College in Salem, Va. between August 11 and August 19, 2019.
A copy of the questions and all toplines may be found on the IPOR website.