Low inventory, high interest rates strap Va. housing market

Homebuyers in Virginia are continuing to feel the strain of low inventory and high interest rates.

The number of active listings on the market is shrinking, and fewer new listings are coming on the market. Despite a brief uptick in inventory at the beginning the year, about 67% of the state’s counties and cities had fewer active listings on the market at the end of July compared with a year ago, with Northern Virginia continuing to have the largest reduction in supply, according to a Virginia Realtors report released Aug. 22.

There were 16,508 active listings across the state in July, 3,881 fewer listings than the same month in 2022, a 19% drop. A total 10,948 new listings came onto the market last month, about 2,800 fewer new listings than the same period in 2022, a 20.3% decrease.

“Inventory conditions are worsening in most local markets in Virginia,” Virginia Realtors President Katrina M. Smith said in a statement. “With mortgage rates at a 20-year high and a low supply of homes on the market to move into, some would-be sellers are choosing not to list their homes. However, it is a seller’s market, and most who do sell their homes are receiving multiple offers.”

A total 8,985 homes sold in Virginia in July, a 20.8% decrease from July 2022, with 2,361 fewer sales. However, low inventory and strong demand have continued to drive up the price for homes; the statewide median sales price rose $15,000 from July 2022 to $400,000 in July 2023, an increase of nearly 4%. The median home price in Virginia is now more than $100,000 higher than it was at this time five years ago.

In a statement, Virginia Realtors Chief Economist Ryan Price called the state’s housing market “slow but competitive.”  Sellers are averaging more than three offers for their listings, which signals the market remains competitive, he said.

“These competitive conditions are driving up home prices and will likely continue to be a factor into the fall market and beyond,” Price said.

NORTHERN VIRGINIA

Meanwhile, Northern Virginia continues to feel the slump when compared to the national market. While national home sales dropped 16.6% in July compared to the previous year, Northern Virginia sales fell 20%, and were down 23.5% compared to June. At the same time, prices increased 1.9% nationally while Northern Virginia prices surged 6.3%, an increase from the previous year but a drop from the prior month, according to the Northern Virginia Association of Realtors.

Mortgage rates topping 7% contributed to the tight supply of housing while pushing prices higher, according to NVAR. Nationally, the median home price in July was $406,700, an increase of 1.9% from July 2022. In Northern Virginia, the median sold price for a home in July 2023 was $691,000, a 6.3% increase from July 2022. However, NVAR said, homebuyers “got a break” from June 2023 as prices declined 3.8% from that period.

Across the country, unsold inventory sits at a 3.3 month supply, up from 3.1 months in June and 3.2 months in July 2022. In Northern Virginia, supply was at one month, down from 1.1 months in June and 1.23 months in July 2022., though it still remained close to the five-year average of 1.2 months of supply. The average days on the market in July 2023 was 15 days, no change from July 2022, and two days longer than June 2023.

“Our region’s sales dropped more than the country as a whole, but we continue to experience higher price escalation than the overall market since our area has very low inventory,” NVAR CEO Ryan McLaughlin said in a statement. “Factors for both are continued low inventory and high mortgage rates, which are affecting first time homebuyers in particular since they are competing with repeat homebuyers who have the advantage of utilizing their equity gains.”

Cash payments, propelled by high interest rates and buyers tapping into proceeds from selling their current properties, remained a popular way to buy a home. Nationally, all-cash sales accounted for 26% of transactions in July, up from 24% in July 2022. In Northern Virginia, cash sales accounted for 19% of all sales in July, up from 15% in July 2022.

NVAR reports on home sales for Fairfax and Arlington counties as well as the cities of Alexandria, Fairfax and Falls Church and the towns of Vienna, Herndon and Clifton.

According to an Aug. 11 report from NVAR: