Housing Market Report: 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. Buyers, sellers, and investors need market knowledge that is as recent and close to their area of interest to make the best decisions. 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 2/26/19 with stats available from Jan 2019
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 44.46%, 44% of the homes currently on the market are selling. Listings (supply) spiked up 12% from this time last year, which is ahead of the typical seasonal rise in Feb (with peak in March to May). Sales (demand) were down by 1.2% from this month last year, which has continued a decline since July of last year with a seasonal uptick in October. This tells us that despite more inventory, buyers weren't buying. That might lead a buyer to make a low offer or seller to reduce their price. BUT....Stop the Presses! When we look a little closer at the Pending Sales (under contract without contingency) figures--there was a massive spike by 23%! This was right in midst of the Government Shutdown! In that case, the current spike in inventory will not sustain the current demand. Our dialogue of "low inventory" continues in 2019!
A reflection of the reduction in closed sales, the absorption rate rose across the board in Southside Hampton Roads cities, with the exception of a nominal decrease in Chesapeake. In Virginia Beach, the absorption rate is 3 months. Median sales prices dropped in all cities except for Portsmouth. VB median sales price dropped to $245,400. Should you be in the market as a buyer or seller now? You bet! There are many reasons why you can benefit. You should be fully prepared AND fully, professionally represented by a career Realtor! Examining the market conditions, consistently, 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.
Other Market Factors
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 are down to 4.63% which is an improvement on the end of 2018. 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 (what we experienced over the past year) 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 on a $200K loan.
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 rate has been enjoyable to watch The US rate rose a tad to 4, VA is down to 2.8 (dec), and in VB, we see 3.0 (dec). On the horizon, the loss of Norfolk Southern in my opinion will be minimized by the addition of high tech (Fiber Optic cables in Southern VB) and medical jobs (throughout HR). Wegmans and Ikea are soon to open. Wages have been increasing. Another industry 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 $14.9 billion in ship-building contracts, have been approved by Congress, the area won the contract to repair the USS Ford, and the ports are expanding to accommodate larger vessels. Experts project 2.4% economic growth in Hampton Roads for 2019 and a 2% appreciation in home prices. A positive note is that Distressed Sales (short sales and foreclosures) have seen their lowest levels in years and are down below 20 %. 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. 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 entering another healthy year in the housing market. The availability of good condition, updated homes is still very limited. 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 who heard "it's a sellers market!" from salespeople might be experiencing some frustration and might need to consider some improvements to their home or marketing. For Sale By Owners are at their lowest volume since data started to be measured in 1981. The benefits of professional marketing and advice are valued now more than ever. And consumers have become wise to the inconsistent information that is provided by Zillow and choosing an experienced local agent to counsel them. With unemployment down, wages improving, interest rates down, distressed homes are down, and vacancy rates are down, we remain in a very healthy market. Yet, sales are slowed down by a lack of inventory and price increases not being sustainable. 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!