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 11/2 with stats available from Sept 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 is buyer or a seller's market, which will help us develop our pricing or offering strategy. Statistics are available mid-month for the previous month, so you will not the date I report is for last month. At an absorption ratio for Southside Hampton Roads of 64% almost 2/3rds of the homes on the market are selling. This is super strong!! Listings (supply) are down slightly 0.02% as compared to last year at this time. Sales (demand) are up 3.72% from this month last year (but also down from the level last year). Pending Sales, which I examine on a month/month comparison to have the closest snapshot of current trends, are down 8% from last month. Pending Sales are an interesting factor to review. Our local MLS reports a 30% higher pending sales report over this month last year. Why? Last year, in August and Sept, sales were down by 7% due the corresponding drop in available new listings. Buyers are making choices this year, when they held out for "something better to come along" last year. In all of the SSHR cities, the median sales price went up and the time on the market went down. Sellers should know that in Virginia Beach, a median priced home listed at $275000 should take 2.93 months to sell.
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 stable at 3.75% . The Fed has just dropped the target for its benchmark rate by a quarter percentage point, affecting Adjustable Rates and other short term rates, not 30 year mortgages. 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. What this means for a person considering buying a home, do it now!
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 is holding steady at 3.7, VA reported 2.9, and in VB, we see 3.2 according to the Bureau of Labor Stats. 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 opened this year. Wages have been increasing and companies have been creative with their benefits packages. 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.
Distressed sales (foreclosures and short sales) account for only 5.41% of all residential home listings and sales, the lowest point since tracking began in 2009. 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 enjoying a healthy third quarter in the housing market. The availability of good condition, updated homes is still very limited and that is what our buyers want. 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 now a day delay feed of information) 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 factors each month, I am able to provide my clients with the information they need to make intelligent choices in their real estate activities. Contact me for an analysis of your neighborhood so you will have the competitive advantage!