RC Poll: Virginia Real Estate Index - March 2016

Consumer sentiment about the Virginia real estate market is strong currently, but home buyers and sellers fear rising mortgage rates later this year.

Sellers in Northern Virginia are particularly optimistic likely due to rising home prices. Buyers and sellers are cautious, citing concerns about rising mortgage rates.

Market remains strong but facing falling sentiment

Overall sentiments about the condition of the Virginia real estate market remain strong, although continue a year-long decline. Close to 26 percentage-point more respondents feel optimistic than pessimistic about the market today, down one point since last quarter. Figure 1 shows the real estate indexes for the Commonwealth. Fifty-six percent of Virginians believe that the condition of the real estate market has improved since last year, while 20 percent believe that it has worsened. Additionally, 50 percent believe that conditions will improve over the next year, unchanged since November. Sixteen percent believe that the market will decline in the coming year, up one point from 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 buyers and sellers. Several positive items are likely playing a role. The Virginia labor market is stronger than the nation as a whole; the December 2015 seasonally adjusted unemployment rate in the Commonwealth is 3.9 percent, below the national rate of 4.8 percent. Overall prices for goods and services remain low since the recent economic recession and consumer sentiment in the Commonwealth is trending downwards but remains above its historic average. Figure 2 shows for-sale inventories and median list prices in the Virginia real estate market over the past two years. In January statewide inventories were down 1,269 from a year prior and below the 15-year median value; the seasonally adjusted statewide inventories are their lowest levels in two years. In January, the average listing price was almost $10,000 higher than a year prior and $20,000 higher than its nominal 15-year median value.

Figure 2. Median list price and for-sale inventory, Virginia; (data from zillow.com 3/08/2016)

Real estate markets face potential pushbacks. Some respondents anticipate rising mortgage rates, an added cost of buying a home. Almost 30 percent of sellers who believe that markets will worsen in the coming year cite anticipated rising rates, an increase of 9 points since last quarter. Mortgage rates are low, but are trending upward in the Commonwealth. On March 8, zillow.com reports an average mortgage rate of 3.50 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 3 shows these rates for the nation and the Commonwealth over the past two years.

Figure 3. 30-year mortgage rates January 2014-January 2016, US (green), Virginia (blue) (downloaded from zillow.com 3/8/2016)

Figure 4 shows index values for sellers in Virginia over the past year. Seller optimism about the coming year is strong although not as strong as its November 2015 value. Twenty-one percentage point more respondents believe that the coming year will be a good time to sell a home compared to those who don't. Low mortgage rates are the primary reason given for selling optimism, followed by higher housing prices and income and falling inventories.

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

Figure 5 illustrates index values for buyers in Virginia over the last year. Current optimism remains strong. Nineteen percentage point more respondents believe that now is a good time to buy a home, compared to those who believe it is not. The leading source of optimism among home buyers is lower mortgage rates. Twenty-one percent of those who Figure 5. Real Estate Index, Buyers, Virginia (black line = thriving); current = compared to last year; future = next year believe the coming year will be a good time to buy a home attribute their sentiments to lower rates. Other reasons include lower home prices (20 percent) and higher incomes (15 percent). Twenty-one percent of respondents who report that the coming year will not be a good year to buy a home attribute it to rising rates, while 28 percent cite rising prices. Figure 5. Real Estate Index, Buyers, Virginia (black line = thriving); current = compared to last year; future = next year

Figure 5. Real Estate Index, Buyers, Virginia (black line = thriving); current = compared to last year; future = next year

Sellers positive in Northern Virginia

Figures 6 and 7 show current and future conditions, respectively, for 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 the Shenandoah Valley, Tidewater, and Southside regions. Buyers are least optimistic in Northern Virginia.

Figure 8 shows the mean listing price for homes relative to the 15 year nominal median value for select cities across the Commonwealth. Home buyers' concern in Northern Virginia could be due to the higher than normal listing prices in areas including Washington D.C. Looking ahead to the next 12 months, buyers are less optimistic, suggesting prices and interest rates are anticipated to rise over the coming year. Sellers are optimistic about the current real estate market compared to the past year except in the Southside and Southwestern regions. Optimism in Northern Virginia, Shenandoah Valley, and the Tidewater is strong and persists into the coming year reinforcing buyers' concerns that prices will continue to rise.

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

Figure 7. Future Conditions by Region (black line = thriving)

Figure 8. Select city median list price (blue dot = median list price last 15 years, orange dash = January 2016 average list price, black line = standard deviation average list price; percentage change in inventories over prior 12 months shown in parentheses). Data source: zillow.com

Methodology

Interviewing for The Roanoke College Poll was conducted by The Institute for Policy and Opinion Research at Roanoke College in Salem, Va. February 15-21, 2016. A total of 630 Virginia residents 18 or older were interviewed. Telephone interviews were conducted in English and Spanish. The random digit dial sample was obtained from asde Survey Sampler and includes 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. Nearly 30 percent of respondents were contacted via cell phone. Because most surveys undersample younger males, we ask to speak to the youngest male over 18 when we call landlines. If there is no young male in the household or if he is not available, then we conduct the interview with the person who is eligible and available.

Questions answered by the entire sample of 630 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