Market Matters: Your Beacon in the Real Estate Business
Performing a monthly analysis of key economic indicators allows me to provide the best guidance and advice to my clients. One could subscribe to a general market report, which although useful, doesn't delve deep enough to keep give you the advantage in your specific market. I've seen agents copy and paste data provided by our local MLS to their websites. However, this data encompasses all of Hampton Roads rather than the specific market that you are in. In the below summary, I refer to both national and southside Hampton Roads data. Make sure you are working with an agent that is well-versed in your local market for the best service. All real estate is local, so when you are considering making any decisions about your home or investment properties, contact me for a report specific to your neighborhood. You won't be disappointed in the level of analysis that I will provide for you!
This Report Dated 4/20/18 with stats available from March 2018
Whether you are a buyer, seller, or investor, you must be able to define your marketplace in order to make the best decisions. By collecting data on the Supply and Demand of homes in a neighborhood, I can determine the absorption rate (the number of months it will take to sell existing inventory at the current sales rate) and the absorption ratio (the number of homes sold as compared to those listed). An analysis of this snapshot can give the seller an idea of the time it should take to sell their home if priced appropriately. It also tells us if it's a buyer's market or a seller's market, which will help us develop our sales or offering strategy. Statistics are available mid-month for the previous month, so you will note the data I report is for last month. At an absorption ratio for Southside Hampton Roads of 51.21%, higher than this month last year. Listings are down by 1.98% from this time last year, meaning there is even less inventory to sell. And as a reflection of the limited availability, sales are down one point from last month (which was down two points last month). Pending sales are also down 1 percentage points (from 3 last month). This is specific to Southside Hampton Roads. When analyzing data for all of Hampton Roads, the pending sales margins have risen for 46 consecutive months (since May 2014) but the margins are narrowing. In March 2015, 24.7% increase in pending sales year over year, in March 2016, 20.48%, in March 2017, 14.97% and now we are down to 5.17% increase.
This month we saw a rise in the absorption rate almost across all SSHR cities. In Virginia Beach it rose from 3.27 to 3.42 months. In Chesapeake, it rose to 3.54 and in Suffolk to 4.85. Norfolk and Portsmouth stayed relatively the same. In an appropriate response to the tighter inventory, median sales prices rose in every city except for Suffolk. VB median sales price is $252K. Our experience in the field is that a new listing goes on the market priced right and "show ready", there will be multiple offers in the median sales price range. The agents in the higher price brackets are reporting slower sales in the $700K price point and above. If you are considering marketing your home, ask me for some tips on getting it "show ready", such as home staging. Excellent presentation in person and in marketing are extremely important in a Seller's success today. Given these same factors in their local market, a well-informed seller would be a little more aggressive in their pricing strategy than last month and provide less closing cost assistance (not measured in our available regional data). A service provided to my buyer clients is that I find out what incentives have been provided on the comparable sales in their market so they can make the best offer. Examining the market conditions on this level is important for making strategic decisions. I find it crucial that I consistently watch these statistics so my clients know how to best position themselves.
Mortgage Interest Rates are important in determining the affordability of a home and is a key ingredient to analyzing buying and selling activities. This week mortgage rates held steady around 4.5% and the prevailing expectation is that will continue to increase through the year. The Fed expects to raise the benchmark rates 3 or 4 more times this year and reaching 5%. On a $100K loan, each quarter point increase will cost about $15/month more. Another guideline to know the impact: on a $200,000 purchase, a 1% increase in the interest rate is equivalent to a 10% reduction in the buying power of a purchaser (or $20,000) or $100/month more in payment. If a buyer qualified for a $300K purchase in January, he/she qualified today for $291,600. An 1/8th% increase in the interest rate is approximately the same as a $2,500 price increase.
The Unemployment Rate is a critical factor in forecasting the real estate climate and consumer confidence in buying a home. Overall this year, more jobs have been added and wages have grown. Unemployment is holding steady at 4.1% nationally in Jan. In the VB metropolitan area we have been keeping pace with the federal rates and is at 4.0% this month. VA unemployment is a healthy 3.5%, which is a reflection of more jobs in the Richmond, Charlottesville, & DC metro areas. Both buyers and sellers should be aware of the unemployment rate affecting household income as well as buying power. A factor in our area is port activity. Container traffic in and out of our ports increased 2.5% to a record high, spurring more hiring throughout the maritime industry. New ship-building contracts have been approved by Congress and the ports are expanding to accommodate larger vessels. Also more health care professionals have moved to our area than ever before, an attractive location to raise families, and therefore an incentive for bringing in the best talent. In the field, I have seen a healthy import of doctors in our area. An on-going courtship with the maritime and tourism industry will provide an avenue for maintaining our economy, while encouraging more health and research-oriented jobs will help us continue moving into higher-paying professions.
A positive note is that Distressed Sales (short sales and foreclosures) have seen their lowest levels in four years and are down below 15%. In the Virginia Beach area, the lowest number of foreclosure activities occurred in the 23451 and 23455 zip codes, while 23453 has the highest volume. Some neighborhoods still have a critical overhang of distressed sales and until this rate normalizes, a full recovery to the Hampton Roads housing market cannot be celebrated. Portsmouth foreclosures have recently increased to 1 in 669.
The crystal ball of foreclosures is the Vacancy Rates. This factor is an early indicator of the health of the market. It is a numeric value calculate as the percentage of all vacant housing units. These can forecast upcoming foreclosures and also effect an investor's decision on purchasing in a particular area. Rates are normal at a factor of 1-2. Homeowner vacancy rates in Virginia was 2.2 in the third quarter. Rental vacancies last quarter are up from this time last year to 6.3. An increase would result in lower rent prices. The new tax laws might have the effect of more listings on the market if investors can't deduct expenses.
In summary, in Hampton Roads in general, we are experiencing the continuation of a healthy market, but Buyers are running into multiple offer situations in popular markets. The biggest obstacle is limited inventory which is causing sales volumes to fall. Buyers should be educated early and be ready to act quickly when a right house becomes available! Those who are open to seeing the potential in homes that aren't moving as quickly are often able to benefit with closing cost assistance or other incentives to buy. Sellers are seeing price increases and paying less in closing cost incentives, but they generally must be "show ready!" Unemployment is down, distressed homes are down, and vacancy rates are down. By reviewing thoroughly these various economic indicators each month, I am able to provide my clients with the information they need to make intelligent choices in their real estate activities. Real estate is very much a local industry, so knowing the factors affecting your neighborhood are critical in developing your successful sales or purchasing strategy. Contact me for an analysis of the factors specific to your neighborhood so you will have the competitive advantage!