Virginia Real Estate Index: Optimism grows for buyers and sellers
Virginians weighed in on their opinions of the real estate market for the second time this year. The Roanoke College Poll interviewed 604 Virginians about their opinions of the current market and their expectations of the future. Additionally, respondents indicated their willingness to buy and sell property today and in the coming year. The real estate indexes were constructed using the same methodology as the Siena Research Institute. A measure of zero indicates an equal share of respondents feeling optimistic as those who feel pessimistic about the housing market. This is the fourth survey from IPOR on the Virginia real estate market. The report will be released each quarter after the Consumer Sentiment and Price Expectation report. The next report is scheduled for release in August 2014.
Optimism in the real estate market continues to rise, sellers more so than buyers
Overall sentiments about the condition of the real estate market have changed little since February 2014, with close to 30 percent of respondents feeling more optimistic than pessimistic about the market today and over the course of the coming year. Figure 1 shows the real estate indexes for the Commonwealth. Close to 60 percent of Virginians believe that the condition of the real estate market has improved since last year, a 3 point reduction since February 2014. Fifty-five percent believe that conditions will improve over the next year, a 3 point increase since February.
Figure 1. Real Estate Index, Virginia (black line = thriving); current = compared to last year; future = next year
Sale prices and other real estate market outcomes depend upon a variety of factors influencing buyers and sellers. Several positive items are likely playing a role. The Virginia labor market is considerably stronger than the nation as a whole. The April 2014 seasonally adjusted unemployment rate in the Commonwealth is 5.2 percent, which is well below the national rate of 6.3 percent. Overall, prices for goods and services have remained low since the recent economic recession. Housing inventories, while still low, are beginning to increase in many areas of the Commonwealth, including Northern and Central Virginia, likely due to fears of future rate hikes. Low inventories are a boon to sellers and drive real estate prices up as buyers compete for few available listings.
The Commonwealth's real estate market is facing potential push backs. Mortgage rates are trending upward year-over-year in the Commonwealth, although they have fallen in recent months. On June 20, zillow.com reported an average mortgage rate of 4.04 percent in the Commonwealth for a 30-year fixed rate mortgage with at least 20 percent down and a credit score of 740. Figure 2 shows these rates for the nation and the Commonwealth over the past year. Credit markets remain tight, deterring borrowing and buyers. On March 21, President Barack Obama signed the Homeowner Flood Insurance Affordability Act of 2014 into law. The law delays, reduces, and repeals some rate increases mandated in the Biggert-Waters Flood Insurance Reform Act of 2012. The future of the National Flood Insurance Program is uncertain, which could continue to caution potential home buyers in affected areas. Higher insurance rates increase the cost of buying and owning a home.
Figure 2. 30-year mortgage rates June 2013-June 2014, Virginia (downloaded from zillow.com 6/20/2014)
Figure 1 shows sentiments of Virginia buyers and sellers in November and February. Both buyers and sellers report growing optimism. Forty-seven percent of respondents believe it is a better time to sell today than a year ago. This figure falls to 43 percent of respondents when asked about selling a year from now. Low mortgage rates, inventories and higher prices are the top reasons given by respondents for selling optimism. Other reasons include an improving economy and consumer sentiment.
On the other side of the real estate market, 43 percent of buyers believe that today is a better time to buy than a year ago, although only 33 percent of buyers consider this to be true over the coming year. The leading sources of optimism among buyers include low interest rates, prices and an improving economy. A considerable share of buyers are concerned about the coming year and cite fears of higher housing prices.
Sellers optimistic in Northern Virginia, Buyers in Central, Tidewater, Southside regions
Considerable differences exist across the Commonwealth. Figures 3 and 4 show current and future conditions, respectively, for buyers and sellers across the six regions of the Commonwealth. Northern Virginia sellers are extremely positive about current and future conditions. Eighty-one percent of respondents in that region believe that the housing market improved over the last year. Additionally, 68 percent of respondents in Northern Virginia report that today is a better time to sell than a year ago, an increase of 7 percentage points since February. Fifty-nine percent are positive about selling in the coming year, a 10 percentage point increase from February. Sentiments, which are growing nationally, could be driven by rising sale prices in the Northern Virginia region. Optimism in Northern Virginia is in contrast to pessimism in Southwestern Virginia and the Shenandoah Valley. More respondents in these regions were pessimistic about current selling conditions than were optimistic. Thirty four and 39 percent of respondents in Southwestern Virginia and Shenandoah Valley, respectively, believe that today is a worse time to sell than a year ago, both up from February.
Figure 3. Current Conditions by Region (black line = thriving)
Figure 4. Future Conditions by Region (black line = thriving)
Buyers are more optimistic about current conditions, compared to conditions in the coming year in all regions, except Central and Northern Virginia. Buyers are the most optimistic about current conditions in the Tidewater region, likely due to the passage of the Homeowner Flood Insurance Affordability Act of 2014. Buyers are largely pessimistic about the coming year in Northern Virginia, potentially due to fears of rising prices, the same force that is driving optimism among sellers in the region. A continued increase in inventories could mitigate the price increases.
Interviewing for The Roanoke College Poll was conducted by The Institute for Policy and Opinion Research at Roanoke College in Salem, Va., May 12-15, 2014. The sample consisted of 604 residents of Virginia. The sample of phone numbers was prepared by Survey Sampling Inc. of Fairfield, Conn., and was created so that all residential and cell phone numbers, including unlisted numbers, had a known chance of inclusion. Nearly 30 percent of respondents were contacted via cell phone. Questions answered by the entire sample of 604 consumers are subject to a sampling error of plus or minus approximately 4 points at the 95 percent level of confidence. This means that in 95 out of 100 samples, like the one used here, the results obtained should be no more than 4 points above or below the figure that would be obtained by interviewing all consumers who have a telephone. Where the results of subgroups are reported, the sampling error is higher. Sampling weights were constructed using Virginia Census 2010 data by age, race and gender groups. A copy of the questions and all frequencies may be found here.
Released: June 24, 2014
Contact Name: Dr. Alice Louise Kassens
Contact Phone: (540) 375-2428 Office, (540) 816-8830 Cell
Contact Email: email@example.com
About the Institute for Policy and Opinion Research
IPOR conducts monthly surveys in Virginia that benefit the community, state and nation. Regular topics include Virginians' consumer confidence and political candidate polling.