Virginia Real Estate Index: Robust real estate market, buyers in SW VA particularly positive

Sentiments concerning the Virginia real estate market remain strong, sustaining the strength from last quarter. Respondents are split over the direction of mortgage rates in the coming year, leading to an ambiguous impact on the market. Buyers in Southwest Virginia are particularly positive, potentially due to the anticipated surplus of homes from households leaving the area after the closing of some Norfolk-Southern offices in Roanoke.

Real estate market sentiments remain strong

Overall sentiments about the condition of the Virginia real estate market remain strong. Close to 32 percentage-point more respondents feel optimistic than pessimistic about the market today; over 33 percentage-point more are optimistic over the course of the coming year. Figure 1 shows the real estate indexes for the Commonwealth. Sixty-one percent of Virginians believe that the condition of the real estate market has improved since last year, unchanged since the end of 2014, while 16 percent believe that it has worsened. Additionally, 53 percent believe that conditions will improve over the next year, a 1 point increase since last quarter. Twelve percent believe that the market will decline in the coming year, unchanged since last quarter.

Figure 1. Real Estate Index, Overall, 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 home buyers and sellers. Several positive items are likely playing a role. The Virginia labor market is stronger than the nation as a whole. The April 2015 seasonally adjusted unemployment rate in the Commonwealth is 4.8 percent, which is below the national rate of 5.4 percent. Overall, prices for goods and services remain low since the recent economic recession, and consumer sentiment in the Commonwealth is at its highest levels since late 2011. Housing inventories are increasing in many areas of the Commonwealth, 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 the few available listings.

Real estate markets face potential push backs. Some respondents anticipate rising mortgage rates, an added cost of buying a home. Over 35 percent of sellers who believe that markets will worsen in the coming year cite anticipated rising rates. Mortgage rates are trending upward in the Commonwealth. On June 3, 2015 Zillow.com reported an average mortgage rate of 3.87 percent in the Commonwealth for a 30-year fixed rate mortgage with at least 20 percent down and a credit score of 740-850. Figure 2 shows these rates for the nation and the Commonwealth over the past two years.

Figure 2. 30-year mortgage rates February 2013-February 2015, US (green), Virginia (blue) (downloaded from zillow.com 6/3/2015)

Figure 3 shows index values for sellers in Virginia over the last year. Seller optimism about the coming year is strong and statistically unchanged from last quarter. Twenty-three percentage point more respondents believe that the coming year will be a good time to sell a home than those who don't. Low mortgage rates is the primary reason given for selling optimism, followed by higher housing prices and falling inventories. Seller positivity about 2016 is slightly stronger than today, suggesting that many believe mortgage rates will remain low and housing prices will continue to rise.

Figure 3. Real Estate Index, Sellers, Virginia (black line = thriving); current = compared to last year; future = next year

Figure 4 illustrates index values for home buyers in Virginia over the last year. Current optimism amongst buyers increased throughout 2014 and continues in the first half of 2015. The leading source of optimism amongst buyers is lower mortgage rates; almost 37 percent of those who believe the coming year will be a good time to buy a home attribute their sentiments to lower rates. Other reasons include lower prices (33 percent) and higher incomes (9 percent). Optimism wanes moving into 2016. Close to 40 percent of respondents who report that the coming year will not be a good year to buy a home attribute it to rising prices, while 35 percent cite rising rates.

Figure 4. Real Estate Index, Buyers, Virginia (black line = thriving); current = compared to last year; future = next year

Rising prices in Northern Virginia, Buyers positive in Southwest Virginia

Figures 5 and 6 show current and future conditions, respectively, for home buyers and sellers across the six regions of the Commonwealth. Buyers are optimistic about the current state of the real estate market across all regions of the Commonwealth particularly in Southwest Virginia, Southside, and the Shenandoah Valley. Those in Southwest Virginia may be responding to a surplus of homes from the departure of some Norfolk Southern employees. Buyers are least optimistic in Northern Virginia, where demand is rising in the region, pushing prices higher. Moving into 2016 buyers are less optimistic, particularly in Northern Virginia, suggesting inventories will fall and/or prices/interest rates will continue to rise over the coming year.

Sellers are mixed about the current real estate market compared to the past year. Sellers show concern in several regions, including Southwest Virginia where a surplus of houses on the market as a result of recent job relocations will drive down the price of homes in that price range. Optimism in Northern Virginia and Central Virginia is strong and persists into the coming year suggesting prices will continue to rise.

Figure 5. Current Conditions by Region (black line = thriving)

Figure 6. Future Conditions by Region (black line = thriving)

Methodology

Interviewing for The Roanoke College Poll was conducted by The Institute for Policy and Opinion Research at Roanoke College in Salem, Va., May 11-15, 2015. The sample consisted of 614 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.

The Roanoke College Poll interviewed 614 Virginians about their opinion 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 seventh survey from IPOR on the Virginia real estate market. The next report is scheduled for release in August 2015.

Questions answered by the entire sample of 614 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 toplines may be found here.

For more about the Institute for Public Opinion Research, click here. 

Contact Name: Dr. Alice Louise Kassens
Contact Phone: (540) 375-2428 Office, (540) 816-8830 Cell
Contact Email: kassens@roanoke.edu