RC Poll: Current Real Estate Markets Strong as Inventories Remain Low

The Virginia Real Estate Indexes are mixed.  The index for current real estate conditions fell slightly, driven primarily by the buyers' side of the market who face increasing challenges.  These challenges are likely to persist as the Federal Reserve Bank plans to increase rates.  Rates follow one another, and mortgage rates should also increase, raising the cost of borrowing money and financing a home.  Inventories are currently lower than this point in the previous two years, driving prices up $21,000 since January to an average list-price of $310,000.  Home prices are above their historical average in all major metro areas across the Commonwealth.  

Prices rise, sellers exuberant

The Virginia sentiment about real estate markets fell slightly since last quarter. Figure 1 shows the index values for the past five years. The May Current Real Estate Index is 35, meaning that thirty-five percentage-point more Virginians are optimistic about the real estate market today, compared to a year ago, than are pessimistic, which is down seven points from last quarter but three points above the historical average. When looking ahead to the coming year, Virginians are also optimistic and more so than is typical. The May Future Real Estate Index is 31, up three points since last quarter and half a point below the historical average.   

Figure 1. Overall current and overall future real estate indexes

The real estate indexes are sensitive to market prices. Figure 2 shows the median list price and seasonally adjusted for-sale inventory over the past two years in Virginia. Inventories, after a modest increase over the winter, plateaued and remain below 2016 levels at this point in the year. Reduced inventories restrict supply and potentially generate a shortage. Specifically, inventories fell by 1,662 units (4.1%) over the past year. The median list price in the Commonwealth is $310,000, up over $20,000 since last quarter, indicating the demand is drastically outstripping supply and pushing prices up. 

Figure 2. Median list price (blue line) and for-sale inventory (green bar), Virginia

Note: Data downloaded from http://www.zillow.com 6/11/2018.

Respondents who believe that now is a good time to sell a home cite rising incomes, prices, and lower inventories. Fifty-nine percent believe that today is a better time to sell than a year ago, up nine points since last quarter. Figure 3 shows the Overall, Current, and Future Sellers Real Estate Indexes compared to their historical values. The black dot is the current value while the grey dash is the historical average.  Sellers are more optimistic than average about the current market while buyers are less so for both current and future markets.  In fact, the Current Sellers Real Estate Index is at an all-time high.  Thirty-five percent believe that now is a good time to buy a home relative to a year ago and twenty-five percent report the coming year to be a buyer's market. Rising prices likely contribute to these sentiments.  The Current and Future Buyers Real Estate Indexes hit historical lows.

Figure 3. Virginia Real Estate Indexes 

Note: black dot=current, grey dash=average, red diamond=min, max

Pricy Homes Across the Commonwealth

Figure 4 shows list prices and inventories for various MSAs across the Commonwealth. The red dash is the April 2018 average list price which is significantly greater for all MSAs than is standard. Home ownership contributes significantly to household wealth. As home values rise, so does household wealth and consumer optimism amongst owners.  Falling inventories, rising prices, and strong seller optimism is a consistent theme across the regions of the Commonwealth.

Figure 4. Select city median list price 

Note: Blue dot = median list price last 17 years, red dash = April 2018 average list price, black line = standard deviation average list price; percent change in inventories over prior 12 months shown in parentheses.

Methodology

Interviewing for The Roanoke College Poll was conducted by The Institute for Policy and Opinion Research at Roanoke College in Salem, Va. between May 20 and May 30, 2018. A total of 605 Virginia residents 18 or older were interviewed. Telephone interviews were conducted in English. The random digit dial sample was obtained from Marketing Systems Group and included both Virginia landline and cell phone exchanges so that all cell phone and residential landline telephone numbers, including unlisted numbers from Virginia exchanges, had a known chance of inclusion. Cell phones constituted 28 percent of the completed interviews.

Questions answered by the entire sample of 605 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. Quotas were used to ensure that different regions of the Commonwealth were proportionately represented. The margin of error was not adjusted for design effects due to weighting.

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, Senior Analyst, IPOR
Contact Phone: (540) 375-2428 Office, (540) 816-8830 Cell
Contact Email: kassens@roanoke.edu