Current State and Future Forecast of Virginia's Housing Market

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Nov 5

The Virginia Housing Market: Current Status and Future Forecast
The Virginia housing market is facing significant challenges, with falling sales and tightening inventory posing concerns for both buyers and sellers. Affordability issues are also mounting, leaving many potential buyers hesitant or unable to enter the market. Nevertheless, there is some hope, as Virginia REALTORS® Chief Economist Ryan Price notes that while prices are still rising, the rate of growth is slowing. This trend may continue as buyers adjust to higher mortgage rates, potentially leading to softer price growth in certain areas.

The September 2023 Virginia Home Sales Report, released by Virginia REALTORS®, provides a more detailed look at how these challenges are affecting the state's housing market. Here are some key points:

Significant Drop in Sales: In September 2023, just over 8,000 homes were sold in Virginia, representing a drop of more than 21% compared to the previous year. This decline in sales is the most significant September market slowdown in over a decade.

Tightening Inventory: The number of active listings in Virginia has been decreasing, with 18,188 active listings at the end of September. This is a decrease of 8.1% or 1,605 fewer listings than the previous year. Northern Virginia and specific regions in the Richmond metro area have seen the sharpest reductions in listings.

Regional Variances: While many areas in Virginia are witnessing a decline in inventory, some regions, such as the Shenandoah Valley and New River Valley in western Virginia, have seen an increase in the number of listings. However, due to the size of these markets, their impact on the overall state inventory remains limited.

Competitive Market: Despite the slowdown in transactions, the Virginia housing market remains competitive. Home prices continue to rise, and sellers often receive offers above the asking price. The statewide median sales price in September reached $380,000, representing a 4% growth and a $15,000 increase from the previous year.

While some regions are experiencing growth, others are facing a significant slowdown. Whether this slowdown leads to a crash remains uncertain, but it is crucial for both buyers and sellers to monitor the market's evolving dynamics.

Looking forward to the year 2024, the Virginia housing market is poised for an interesting and potentially challenging journey. The Virginia REALTORS® Association has released its 2024 Economic & Housing Market Forecast, providing insight into what we can expect in the coming year. Here are some key projections:

Home Sales: After a sharp decline in sales in 2023, the forecast anticipates an 11.4% increase in home sales in 2024 compared to the previous year. This improvement is a positive sign for the market, indicating that the impact of rising mortgage rates might stabilize, allowing for increased sales activity.

Home Prices: The median home price in Virginia is expected to see a modest increase of 1.2% in 2024 compared to 2023. While home prices may continue their upward trajectory in many regions across the state, the forecast suggests that the pace of growth will continue to ease in the coming year.

New Housing Permits: The forecast predicts a 7.1% increase in new housing starts in Virginia during 2024. This increase in housing permits is an essential step in addressing the ongoing issue of low housing inventory, which has constrained the market's activity. It suggests a positive trend toward providing more options for potential buyers.

Mortgage Rates: The 2024 forecast indicates that 30-year fixed-rate mortgage rates are likely to remain volatile but are expected to gradually trend downward. By the end of the year, the forecast suggests a potential decrease to around 6.15%.

According to Zillow, the average home value in Virginia stands at $373,854, reflecting a 4.0% increase over the past year. Additionally, homes in Virginia are going to pending status in approximately 10 days, indicating the speed at which properties are being sold.

Bottom line, the Virginia housing market remains at a critical juncture, with challenges and opportunities ahead. While the forecast anticipates some improvement in 2024, low housing inventory and affordability constraints will continue to be a challenge.