RC Poll: Virginians' opinions of real estate market fall, buyers cautious in Central Virginia
Salem, VA - Virginians weighed in on their opinions of the real estate market for the second time this year. The Roanoke College Poll interviewed 608 Virginians about their opinions of the current market and their expectations for 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, compared to those who feel pessimistic about the housing market. This is the second survey from IPOR on the Virginia real estate market. The report will be released each quarter after the Consumer Sentiment and Price Expectations report. The next report is scheduled for release in February 2014.
Overall sentiment up, buyers cautious about the coming year
Although sentiment has waned since August, all measures of the real estate market in Virginia are above the point where equal shares of respondents feel optimistic and pessimistic. Figure 1 shows the real estate indexes for the Commonwealth. Overall sentiment is down since August, although still quite strong. More than 57 percent of Virginians believe that the condition of the real estate market has improved since last year, while 49 percent believe that conditions will improve in the next year.
Figure 1. Real Estate Index, Virginia (black line = thriving)
Sale prices and other real estate market outcomes depend upon a variety of factors influencing buyers and sellers. Several positive reports are likely playing a role. The Virginia labor market is considerably stronger than the nation as a whole. The October seasonally adjusted unemployment rate in the Commonwealth was unchanged since September at 5.6 percent, which is well below the national rate of 7.3 percent. Overall prices for goods and services have remained low since the recent economic recession. Housing inventories have risen in recent months in most areas of the Commonwealth.
The Commonwealth's real estate market is also facing push back. Mortgage rates are rising across the Commonwealth, and are almost 100 basis points higher than a year ago. Figure 2 shows 30-year mortgage rates in Virginia and the United States for borrowers with at least a 20 percent down payment and a credit score of 740. Credit markets remain tight. The implementation of the Biggert-Waters Flood Insurance Reform Act of 2012 is driving up the cost of flood insurance. Without a legislative delay, rates will continue to rise to actuarial rates over the coming years. Higher rates increase the cost of buying and owning a home. In 2014, property owners previously not required to buy flood insurance may find their properties inside newly redrawn flood zones. Uncertainty about future health insurance rates are likely raising questions about the affordability of homeownership.
Figure 2. 30-year mortgage rates, Virginia (downloaded from zillow.com 11/24/2013)
Figure 1 shows sentiments of Virginia buyers and sellers in August and November. Sellers describe growing optimism, while buyers report declining sentiment. Forty-four percent of respondents believe it is a better time to sell today than a year ago. This share falls to 41.5 percent of respondents when asked about selling a year from now. On the other side of the real estate market, 44 percent of buyers believe that today is a better time to buy residential property, compared to a year ago, although only 32.5 percent of buyers consider this to be true in the coming year.
Sellers confident in Northern Virginia, pessimistic in Southwestern Virginia
Dramatic 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. These differences are largely influenced by varying economic conditions. Northern Virginia sellers of real estate property are extremely positive about current and future conditions. Sixty-three percent of respondents in Northern Virginia report that today is a better time to sell than a year ago, but this falls to 43 percent when asked about selling in the coming year. The optimism in Northern Virginia is in sharp contrast to the pessimism in Southwestern Virginia, where only 26 percent of respondents believe that selling conditions are better today compared to a year ago. When considering selling conditions a year from now, respondents in Southwestern Virginia are slightly more positive as 28 percent report improving conditions.
Figure 3. Current Conditions by Region (black line = thriving)
Figure 4. Future Conditions by Region (black line = thriving)
Residential buyers are significantly more optimistic about conditions today and the coming year in most regions. Southside (51%) and Shenandoah Valley (53%) respondents are particularly confident about buying conditions today compared to a year ago. Still, optimism in these two regions does not persist, falling to 31 and 28 percent, respectively, over the coming year.
The coming changes in flood zones and flood insurance rates will be of particular interest in the coming year, particularly in the Tidewater region. The next Real Estate Index is scheduled for February 2014, after an iteration of the Biggert-Waters Act rate increases and new zoning maps.
Interviewing for The Roanoke College Poll was conducted by The Institute for Policy and Opinion Research at Roanoke College in Salem, Va., November 11-14, 2013. The sample consisted of 608 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 608 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.
- Dr. Alice Louise Kassens, IPOR senior analyst
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