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Tag: residential real estate

Va. real estate industry weighs in on $418M Realtors settlement

UPDATED MARCH 21, 2 P.M.

A landmark, $418 million proposed court settlement from the National Association of Realtors over allegations of a conspiracy to boost agent commissions could have seismic implications for the residential real estate industry, with some national experts going so far as to call it one of the biggest changes to the U.S housing market in 100 years.

But in Virginia at least, industry experts are taking a more measured — if not sanguine — response to the news.

“If the court approves the settlement — a process that could take several months — we do anticipate it will lead to changes in the real estate industry, but adapting to change is a strength of Realtors,” says Richmond Association of Realtors CEO Laura Lafayette, who also oversees the Central Virginia Regional Multiple Listing Service.

“As an association, we are doing our due diligence to ensure that our members will be educated and able to comply with the terms and spirit of the settlement agreement,” Tom Campbell, 2024 president of Virginia Realtors, the state’s largest trade association, said in a statement.

In a news release, Virginia Realtors CEO Terrie Suit pointed out that Virginia has already had in place one of the major changes coming as a result of the court case — requiring buyers and their agents to enter into a written brokerage agreement — for almost 30 years. “Virginia was the first state to formalize buyer agency at the behest of our association, because we believe it is in the best interest of buyers to be represented in what will likely be the largest financial decision of their lives,” Suit said in a statement. “We have and will continue to advocate updates to the law to ensure that the needs of consumers are being met.”

Over the course of a 21-year career, Sean Rooney, co-founder and president of Norfolk-based OWN Realty, said that he’s watched the industry weather several storms — including the 2008 Great Recession and the COVID-19 pandemic, both of which were predicted to decimate business — and that this will be no different. “We all were fearful of the big changes that might come,” he said, but “as an industry, we’re pretty resilient and we learned how to navigate it.”

On March 15, NAR proposed the settlement, which would end the industry’s longtime practice of allowing sellers to set commission rates for buyers’ agents as soon as mid-July. In October 2023, a Kansas City, Missouri, jury awarded $1.8 billion to Missouri home sellers against the NAR and large brokerages in an antitrust lawsuit alleging that the Realtors association and real estate brokerages had conspired to keep commissions high, and the NAR faced similar legal actions in other states. In a Chicago antitrust case that appeared to be heading for trial, possible damages could have climbed as high as $40 billion, according to The Wall Street Journal.

Under the traditional system, brokers representing the buyer and seller of a home split a commission of 5% to 6% that was baked into the price of the home. This practice, critics have complained, encouraged brokers to push clients toward more expensive homes and made it so that buyers were unable to negotiate fees, resulting in inflated commissions that are higher than in other nations. NAR would pay out the $418 million in damages over four years to about 50 million recent home sellers.

Whether or not federal courts agree to the settlement, the NAR has agreed to put in place rule changes that will radically change how homes are bought and sold, potentially resulting in buyers contracting directly with buyers’ agents, who could change fee structures to models such as hourly or flat fees that would cost less than current commissions. Experts say the changes could result in significant savings for both sellers and buyers.

Some national experts have predicted that the settlement agreement and potentially lower compensation could result in as many as half of Realtors quitting the workforce and the rise of artificial intelligence bots handling real estate agent duties.

“I do not believe we will see a 50% reduction in agent count,” said Rooney, who oversees 160 agents at OWN Realty. “You see people commenting about reductions in commissions. There may [be, or] there may not be, but we will figure out how to help our clients as best as we can and move forward from there.”

Jonathan Everett, assistant professor of practice at Virginia Tech’s Blackwood Department of Real Estate, stressed that commissions have always been negotiable. What would change under the settlement is that the commission the seller will provide for the buyer’s agent will no longer be posted on the MLS.

“Arguably debunking the age-old assumption that the seller will shoulder full burden of commissions, this change may also … allow buyers and sellers more control and flexibility in determining who paid what commissions as an additional lever in their negotiating tactics,” Everett said.

In a statement, Chris Kelly, executive vice president at HomeServices of America, parent company of Fairfax-based Long & Foster, one of the nation’s largest real estate companies, said that, in addition to the court needing to approve the settlement, there will also be “a subsequent objection period by class members, as well as potential interest by the Department of Justice. It is too early to determine the impact that these amended business practices will have on the compensation arrangements with consumers and those available via the myriad of brokerage business models that already exist in today’s market — from full-service brokerages to discount brokerages offering basic services.”

Going forward, Everett said, it will be important for buyers and sellers to approach commissions with pragmatism.

“While buyers and sellers can and certainly should negotiate,” he said, “it is important to remember that buyers and sellers are essentially making a job offer to the broker. The broker does not have to accept the offer, especially if it’s not representative of the services and expertise the broker brings to the transaction.”

Virginia Business Editor Richard Foster contributed to this story.

Editor’s note: This story was updated to include statements from Virginia Realtors, the state trade association.

Home sales, prices up in NoVa, Hampton Roads, Central Va.

The Northern Virginia, Hampton Roads and Central Virginia housing markets showed positive trends last month, with month-over-month and year-over-year increases in home sales and median sales prices.

Northern Virginia

Northern Virginia home sales in February grew 2.2% from February 2023, marking the first year-over-year growth in the market’s home sales since November 2021, according to data the Northern Virginia Association of Realtors released Tuesday.

Northern Virginia had 1,020 home sales in February, up year-over-year and up from 771 units sold in January. Total sold volume in February also rose from last year, increasing 16.3% to $841.159 million. Before February, NVAR’s last recorded month with year-over-year growth in home sales was November 2021, when 2,124 homes sold in the region, an 11% increase from November 2020.

“Spring is always strong for the Northern Virginia real estate market, but this one is looking particularly positive as we are seeing more listings coming on the market as compared to a year ago, and those who are buying are willing to spend a little more,” David Raffinengo with KW Metro Center, an NVAR board member, said in a statement. “People are getting over the mortgage rate sticker shock, and with the potential for rates easing more, I believe we will see even more sellers willing to put their houses on the market.”

Homes sold faster than last year, staying on the market an average of 22 days — down 31.3% from February 2023 and down from January’s 29-day average.

Regional supply remained tight in February but grew slightly. The month’s supply of inventory (MSI) — a measure of how many months there would be homes on the market if no new inventory were added — stood at 0.9 months, up from the January MSI of 0.74 and the February 2023 MSI of 0.8.

Northern Virginia had 1,153 active listings last month, down 6.56% compared with February 2023. New pending sales in February totaled 1,177, down 2% from a year ago.

High demand continued to push prices up, according to NVAR. The median sold price for a home in February was $687,250, up 11.8% from a year ago and up from January’s median sales price of $650,000.

One local market had a 68.5% increase in its median sales price from February 2023. According to multiple listing service Bright MLS, only five homes sold in Falls Church last month, and the median sold price of those was $1.115 million.

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

The Bright MLS February housing market report on the Washington, D.C., metro includes a market outlook: “Buyers in the Washington, D.C., metro area have been frustrated by a lack of inventory, but it looks like there may be some relief on the way. In February, the number of new listings coming onto the market was 7.2% higher than a year ago; however, the market is still going to be very competitive across most of the region this spring,” according to the report.

Hampton Roads

The Hampton Roads market also had positive data points last month. The numbers of active listings, pending sales and settled sales increased month-over-month and year-over-year, according to the Real Estate Information Network (REIN).

February 2024 statistics for the Hampton Roads housing market. Image courtesy Real Estate Information Network
February 2024 statistics for the Hampton Roads housing market. Image courtesy Real Estate Information Network

In February, active residential listings in the region totaled 3,568, up from 3,538 in January and up 13.9% from the 3,130 listings reported in February 2023.

Pending sales totaled 2,138, up from 1,837 in January and up from 2,058 a year ago. The region had 1,709 settled sales, up from 1,470 sales in January and 1,684 sales in February 2023.

“These are some encouraging signs as we approach the spring season,” REIN Board President Gary Lundholm, with The Real Estate Group, said in a statement. “Of course, things can change quickly in real estate, but the median number of days properties are on the market also declined from January, which is good news for home sellers.”

Hampton Roads houses were on the market for a median of 22 days last month, down 10 days from January but up two days from February 2023.

In February, the median sales price for Hampton Roads homes also increased year-over-year and month-over-month, standing at $327,500. In January, the median sales price was $320,500, and in February 2023, the MSP was $313,650.

The month’s supply of inventory was 1.73, a slight increase from the January MSI of 1.72 and up from 1.24 a year ago.

Founded in 1969, REIN is a regional multiple listing service that covers an area stretching from Williamsburg east to Virginia Beach and south across the North Carolina border.

Central Virginia 

In Central Virginia, February residential property sales totaled 1,134, up 0.1% from last year, according to data from the Central Virginia Regional Multiple Listing Service (CVR MLS). In January, the market had 862 closed sales.

Pending sales were also up, at 1,311 in February, up 3.9% from February 2023 and up from 1,284 in January. New listings on the CVR MLS totaled 1,516, up 7.7% from a year ago and up from 1,418 in January.

Homes stayed on the market slightly longer, averaging 33 days, up one day from February 2023 and up from 28 days in January. The month’s supply of inventory stood steady at 1.4, the same as January and up from 1.2 last year.

The median sales price of homes sold in February in the region was $377,140, up 6.2% from the MSP of $355,000 reported last year and from January’s MSP of $367,500.

In the Richmond metro area — Richmond city and the counties of Chesterfield, Hanover and Henrico — the median sales price was $390,000, up 7.7% from February 2023’s MSP of $362,000. The metro area had 914 closed sales last month, up 6.3% from the 860 sales recorded in February 2023.

The CVR MLS monthly indicators report covers residential real estate activity, including single-family homes and townhomes/condos, in the counties of Amelia, Charles City, Chesterfield, Dinwiddie, Goochland, Hanover, Henrico, King William, King and Queen, New Kent, Powhatan and Prince George and the cities of Colonial Heights, Hopewell, Petersburg and Richmond.

Va. housing market off to slow start in 2024

The housing market in Virginia had a relatively slow start in 2024, according to January data released Feb. 23 by Virginia Realtors.

In January, 5,640 homes sold in the state, only 31 more sales than January 2023. Overall in 2023, Virginia home sales dropped 20% compared with 2022 and were the lowest the market had seen since 2014.

Inventory remains tight, according to Virginia Realtors. At the end of January, Virginia had 15,229 active listings, up 362 listings — 2.4% — from a year ago. Although active listings have increased, the numbers reflect homes staying on the market longer, not necessarily more sellers listing homes, according to Virginia Realtors.

In January, the Virginia market saw 8,034 new listings, down 122 new listings from a year ago, a decrease of 1.5%.

“Many homeowners looking to buy another home remain reluctant to lose the low mortgage rates they are currently locked into,” Ryan Price, Virginia Realtors’ chief economist, said in a statement. “Because of this, many would-be sellers are choosing to pause their plans and not list their home for sale.”

For the week that ended Jan. 11, the national average 30-year fixed-rate mortgage was 6.66%, according to Freddie Mac data. In the week ending Jan. 18, the average 30-year fixed-rate mortgage was 6.6%, and in the week ending Jan. 25, that rate was 6.69%.

The situation could change, though, if mortgage rates fall as the year continues, Virginia Realtors CEO Terrie Suit said in a statement: “More move-up buyers could be enticed to enter the market, and this could provide some much-needed inventory supply across the commonwealth.”

In February, however, mortgage rates rose. This week, mortgage rates increased for the fourth consecutive week, reaching a two-month high and nearing 7% again, according to a Freddie Mac summary. As of Feb. 29, the average 30-year fixed-rate mortgage was 6.94%, and the four-week average was 6.81%, according to Freddie Mac data.

Despite relatively flat sales, upward pressure on home prices continues, according to Virginia Realtors. The statewide median average sales price in January was $371,889, nearly $22,000 higher than in January 2023, a 6.3% increase. Of the state’s local markets, 67% had a higher median sales price this January than in the same month last year.

“The accelerated price growth has been driven by the low supply of homes for sale,” Tom Campbell, Virginia Realtors 2024 president, said in a statement. “We predict this trend will continue into the spring unless more listings come on the market.”

Real Estate and Construction: Hot properties

It was a rough year for prospective homebuyers, especially those seeking houses in Northern Virginia and the Richmond area.

Home sales in Virginia were the lowest the market has seen since 2014, dropping 20% from 2022 to 2023, according to data released in January by Virginia Realtors. Hampton Roads and Shenandoah Valley home sales also dropped precipitously. Across the state, 98,464 residences sold last year, down from 123,244 in 2022. And with fewer listings, prices went up too, with the median sale price at $390,000, up 4% from 2022.

High interest rates set by the Federal Reserve to lower inflation meant many borrowers stayed put, waiting for a better moment to make a move. That time may come for some buyers in 2024, as the Fed is expected to lower interest rates three times this year, likely starting in March or May.

Not only are high rates giving homebuyers pause, they’re also impacting Realtors, brokers, lenders and others in the industry. Laura Lafayette, CEO of the Richmond Association of Realtors, said last fall that “golden handcuffs” are keeping homeowners from selling, translating into less work for real estate professionals. “I think most Realtor associations across the state are budgeting for a modest loss in membership.” 

Despite challenges in residential real estate, there was progress in commercial real estate over the past year. In Virginia Beach, the $335 million Atlantic Park project, led by Venture Realty Group and Pharrell Williams, broke ground in March 2023, and the $2.4 billion Diamond District project in Richmond was set to start phase one in early 2024. In February, Caesars Virginia topped off its permanent Danville casino, which is expected to be open by the end of this year.

Meanwhile in Arlington, the first two towers of Amazon.com’s HQ2 East Coast headquarters campus opened in June 2023 — although even the e-tailer is acknowledging the impact of work-from-home and hybrid employment, pausing construction on phase two of the campus.

Next door, in Alexandria, the opening of Virginia Tech’s first Innovation Campus building has been delayed until 2025 due to construction supply chain problems.

Data center growth continued strong in Loudoun, Prince William and Stafford counties, although some residents and elected officials have expressed outright opposition to massive data center campuses taking up rural and historic land.

Meanwhile, construction firms in Virginia and beyond are saying that labor shortages, interest rates and supply chain issues are likely to continue impacting their businesses this year.

Stephen E. Sandherr, CEO of Associated General Contractors of America until March 31, said that 2024 “offers a mixed bag for construction contractors. On one hand, demand for many types of projects should continue to expand. Meanwhile, they face significant challenges when it comes to finding workers, coping with rising costs and weathering the impacts of higher interest rates.”

Data centers, water and sewer infra- structure and roads are all among high- dollar projects contractors expect to compete for in 2024, and business owners and politicians are all pushing for more affordable housing.

“Everyone is struggling with this issue, but we can learn from each other,” notes Tom Barkin, president and CEO of the Federal Reserve Bank of Richmond. Land availability and cost, he notes, are key issues in Virginia, with finished lot costs accounting for nearly 20% of the average sales price of a new single-family home in 2022. 

 

NoVa, Hampton Roads housing markets show positive signs

The Northern Virginia and Hampton Roads housing markets showed encouraging signs in January, despite the seasonal slowdown.

Northern Virginia

In Northern Virginia, January closed home sales dipped 0.9% from January 2023, with 771 units sold last month, according to the Northern Virginia Association of Realtors. Homes sold faster than in January 2023, though, with houses spending an average of 29 days on the market last month, down 19.4% from a year ago but up from 24 days in December 2023.

The month’s supply of inventory (MSI) — a measure of how many months there would be homes on the market if no new inventory were added — stood at 0.74 months, the same as December’s MSI but up 1.5% from January 2023.

“Lower rates and demand for homes this January brought a bit of optimism to the real estate market,” Veronica Seva-Gonzalez with Compass Realty, an NVAR board member, said in a statement. “In good news for buyers, inventory grew slightly, giving them a more a few more choices in the marketplace.”

Northern Virginia had 981 active listings last month, down 18.9% from a year ago. New pending sales in January totaled 1,033, down 9.3% from January 2023.

The median sales price for houses in January was $650,000, up 6.6% from a year ago but down from December’s median of $675,000.

“As predicted, we are seeing sales moderate as people react to lower rates and pent-up demand. I anticipate even more sellers will test the market, and buyers will continue to scoop up houses quickly, paying the higher prices,” NVAR CEO Ryan McLaughlin said in a statement.

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

Hampton Roads

In Hampton Roads, active residential listings last month totaled 3,538, up 1.4% from December 2023 and up 8.33% from the 3,266 listings reported in January 2023, according to the Real Estate Information Network (REIN).

January statistics for the Hampton Roads housing market. Image courtesy Real Estate Information Network
January 2024 statistics for the Hampton Roads housing market. Image courtesy Real Estate Information Network

Pending sales in January totaled 1,837, a 21.7% increase from the 1,509 reported in December 2023, but down from 1,843 in January 2023. The region had 1,470 settled sales last month, down from 1,708 in the preceding month and from 1,501 in January 2023.

The median sales price of homes sold in January was $320,500, which is down from $330,000 in December but up from $303,000 a year ago.

The month’s supply of inventory was 1.72 in January, up from 1.69 in December 2023 and from 1.27 in January 2023.

“For potential home buyers in the Hampton Roads region, the spring market is showing several positive factors,” REIN Board President Gary Lundholm with The Real Estate Group said in a statement. “Active listings are up over both last month and last year; we’re seeing mortgage rates trending down for the most part, and January’s median sales prices were the lowest they’ve been since last April.”

Homes, however, were on the market for a median of 32 days, the highest median days on the market in more than three years.

“The winter months are typically a bit slower in real estate,” Lundholm said in a statement. “And with interest rates being higher than usual and prices also staying level, it’s not surprising to see some properties sitting on the market longer than they normally would. We’ll see improvement though as the weather warms — especially if mortgage rates continue to drop.”

Founded in 1969, REIN is a regional multiple listing service that covers an area stretching from Williamsburg east to Virginia Beach and south across the North Carolina border.

House of cards

Working as a mortgage lender in Roanoke for the past 18 years, Jason Bialek experienced everything from the financial crash of 2008 to the historic spike in home sales during the COVID-19 pandemic.

Following that bonanza in 2020, though, Bialek and others in the residential real estate industry will probably look back at this period as one of the most challenging times in their careers. Mortgage rates zoomed 5 percentage points over the past three years, and that’s combined with historic low housing inventory in Virginia, which has hurt real estate agents, lenders and current and prospective homeowners.

Bialek survived two significant rounds of layoffs in August 2023 at his company, Guaranteed Rate, the sixth-largest nonbank mortgage lender in the nation. Although he kept his job as a branch manager and vice president of mortgage lending, which he’s held since 2017, thousands of other employees were terminated. (The company declined to disclose an exact figure.)

The layoffs came after an influx of hiring at Guaranteed Rate during 2020 and 2021, right as the housing market peaked with the most home sales since 2006. In response, the company “probably” overstaffed, John Palmiotto, who resigned as the company’s chief of retail production, told the Chicago Tribune last summer. Palmiotto estimated the company’s layoffs were in the thousands nationally.

In Virginia, the lending industry lost about 12% of its loan officers in 2023, according to the Mortgage Bankers Association, and anecdotally, real estate professionals say they’re seeing many colleagues leave the industry following the Federal Reserve’s multiple interest rate hikes to address inflation, which significantly impacted mortgage rates. The central bank is expected to cut rates several times in 2024, from 5.25% to 5.5% to a possible low of 3.75% to 4%.

That will help borrowers, but rates are just part of the picture. Real estate agents and homebuilders are also preparing for major shifts in their industries’ landscapes, as the number of Realtors is already shrinking in Virginia, a reversal of the field’s growth in 2020 and 2021.

‘Eat what you kill’

A December 2023 report from Virginia Realtors observed a 9.5% year-over-year decrease in home sales across the state in November 2023 — the smallest year-over-year decline in statewide sales activity in about two years. “Some markets could finally be approaching the bottom of what has been a slow 2023,” the report stated, noting that active house listings also appeared to have reached a bottom.

Virginia Realtors President Tom Campbell said he expected to see some improvement in the tightness of the market. At 7.79% in October 2023, the average 30-year fixed mortgage rate was the highest it’s been since 2000, after hitting its lowest point ever — 2.65% — in January 2021.

With fewer people putting their homes on the market during this period of high rates and expensive house prices, real estate agents are leaving the industry after swarming to it starting in 2020.

From 2019 to 2021, 2,626 new Realtors in Virginia registered with Realtor associations, marking a nearly 6% increase across three years, according to the National Association of Realtors. During the past two years, however, more than 1,600 Realtors have left the association, bringing down the total number of registered Virginia Realtors from a peak of 36,445 in 2021 to 34,822 in October 2023.

“I think most Realtor associations across the state are budgeting for a modest loss in membership,” says Laura Lafayette, CEO of the Richmond Association of Realtors.

One of the primary reasons, she says, are the “golden handcuffs” keeping homeowners from selling because they purchased their house with a much lower mortgage rate than the current one. More than 60% of homeowners with a mortgage have a rate that’s lower than 4%, and 82% have a rate under 5%, according to Redfin data.

Increased rates heavily impact buying power, with every percentage point increase adding about $35,000 to the cost of a house, says Ryan McLaughlin, CEO of the Northern Virginia Association of Realtors. For those trying to sell homes and mortgages, that’s a major disincentive for their customers.

“It pushes so many people out of the market when the rates are 7.5% versus 5.5%,” Bialek says. “I mean, you’re talking millions of people that are pushed out of qualifying when the rates change like that.”

At the end of 2023, the national 30-year fixed mortgage rate was 7.45%, a slight decline from last autumn, but still high for many buyers — especially prospective first-time homeowners.

Home sales in Virginia had fallen 12% year-over-year as of October 2023. While lenders are facing a 75% decline in mortgage activity compared with 2021, according to Fannie Mae, Realtors rely on sales commissions for their income, so dropping home sales could reflect a significant drop in revenue.

Lafayette says about a quarter of those who left the Realtor profession at the end of 2022 had fewer than five years of experience, according to data her association has collected.

“I think our larger firms are designed to weather these storms,” she says, adding that she wouldn’t be surprised to see those firms shrink their footprints in response to the downturn. “It tends to be an ‘eat what you kill’ profession, so you’ve got to have some cash reserves.”

Although it hasn’t manifested yet as a major factor in Virginia, a $1.8 billion federal jury verdict in October 2023 against the National Association of Realtors and several large brokerages — holding that they artificially inflated commissions to real estate agents — could alter the national residential real estate landscape, some experts have noted. In addition to the damages awarded, which could rise as high as $5 billion, home sellers would no longer need to pay their buyers’ real estate agents. Although the NAR plans to appeal the verdict, there are similar lawsuits currently wending through other courts, and investment banking firm Keefe, Bruyette & Woods estimated in a November 2023 New York Times report that commissions could decline as much as 30% annually.

For Brad Thomas, a Realtor at Vinton-based Mountain View Real Estate who’s been in the business since 2008, the changing headwinds of the market have meant leaning more on commercial sales and his house-flipping business to make up for the downturn in residential sales.

“It definitely is hurting certain people in the short term, but that’s the natural progression of the real estate market,” says Thomas. “Everything goes in cycles.”

To Thomas, these cycles are necessary to keep a healthy market, which he believes was not the case in 2020 and 2021 when consumers were buying houses well over asking prices and sometimes without an inspection.

Now, a house that was getting 10 or 11 offers two years ago is getting just one or two, he says. Yet despite less competition, home prices are still rising.

Inventory battle

Richmond-area builders are facing a tight inventory of buildable lots, says Danna Markland, CEO of the Home Building Association of Richmond. Photo by Matthew R.O. Brown

In addition to rate hikes affecting the national residential real estate market, Virginians particularly have been impacted by low housing stock, which is adding pressure to housing affordability and the amount of supply real estate professionals have to work with.

Nationwide, unsold inventory was at a 3.6-month supply in October, reflecting the estimated number of months it would take for the current homes on the market to sell. Virginia had a 2.2-month supply during the same period.

A six-month supply is associated with moderate home price increases, and anything below that is expected to push prices up rapidly, according to the NAR. In Richmond and Northern Virginia, two of the state’s tightest markets, inventory supply is as low as 1.5 months and 1.05 months respectively, according to reports from those regions’ Realtors associations.

NAR said in December 2023 that the Washington, D.C., region, including Arlington County and Alexandria, ranked No. 10 in its list of markets with the most pent-up housing demand.

And in Richmond, “we’ve had an inventory shortage for a very long time. You’ve got real estate professionals who have less pie on the table to share,” says Lafayette. “It’s created a very challenging environment to work in and a challenging environment for some people to make the income that they would have made just two years ago.”

Low inventory is one of the reasons home prices are still ticking up in Virginia despite decreasing demand, and professionals like Bialek and Lafayette say they’re not optimistic about prices going down.

“A lot of people think they should wait for home prices to come down [before buying],” Bialek says. “That’s not going to happen.”

The effort to replenish housing inventory is under threat as builders have “blown through” their supply of buildable land since 2020, when they were addressing the spike in demand during the early pandemic, says Danna Markland, CEO of the Home Building Association of Richmond.

Lot inventories in Virginia have declined from a 36-month supply in 2012 to a 12-month supply in 2022, according to the Virginia Housing Commission.

“If we don’t address our land inventory, all these builders will not have the land product to be able to deliver a home to the market,” Markland says. “We could see a very different Richmond-region builder dynamic in the next five years.”

Although there’s been a “flurry” of new homebuilding, that spike will likely not be sustained and is really just making up for lost time, Markland says. The rate of housing stock growth in Virginia has been under 2% since the 1960s, according to the VHC, and was less than 1% from 2010 to 2020.

Limited buildable land for new home construction is also compounded with increased in-migration to areas like Richmond, Markland says. In total, the Richmond region added 27,640 people between April 2020 and July 2022, with close to 13,000 new residents moving from Northern Virginia to Richmond in 2021 alone.

At certain points over the past three years, Richmond-area builders reported up to 50% of their sales went to buyers from outside the metropolitan area, Markland says, as white-collar employees working from home had more geographic flexibility.

“There should be a heavy emphasis on increasing housing supply,” says McLaughlin, adding this can be facilitated by easing zoning regulations for developers.

2024 outlook

Virginia Realtors Chief Economist Ryan Price wrote in the organization’s November 2023 report that active listings were down by 0.7% from the previous year, although new listings rose by 0.3%. The median home price statewide was $385,000, up 5.5% from November 2022 — but in Northern Virginia, the median price was $656,500 in November 2023, up 5.72% from the same month in 2022.

Price wrote that the small decline in active inventory — the lowest decrease in the past eight months — as well as increases in listed homes in Central Virginia and parts of Hampton Roads indicate that the inventory levels “could be stabilizing.”

But Markland isn’t as optimistic about the Richmond region. She says land supply constraints could impact the price of new home construction, since buying and prepping land makes up a significant portion of construction costs.

“Even though we see fading strength in sales performance, there’s no way for those average prices to come down when markets are at a premium,” Markland says. “Construction of the home only makes up about 60% to 70% of the cost of the property. That land factor can swing significantly in the price.”

While rate hikes and sales decreases have eased, real estate professionals in Virginia continue to face evolving challenges. In part because of the limited land supply in areas like Richmond, the state’s inventory problem is likely to get worse before it gets better.

“The industry is waving this distress signal. We have a crisis on our hands, and we’ve got to address it,” says Markland. “But it can’t just be industry coming to the table, because lots are approved by local government.”

Home sales slowed in 2023 and in final month of year

Home sales in Virginia dropped 20% last year, compared with 2022, and were the lowest the market had seen since 2014, according to new data released Tuesday by Virginia Realtors.

Across Virginia, 98,464 homes sold in 2023, which is 24,780 fewer than the number of sales in 2022.

Nine out of every 10 counties and cities in the state had fewer sales last year than the year before, reflecting a widespread cooldown. And though there were fewer sales, Virginia’s median home price climbed nearly every month of the year.

The median sales price for all of 2023 was $390,000, an increase of $25,000, or about 4%, from 2022’s median sales price. Sale prices rose 11 out of 12 months in 2023, and price growth accelerated in the second half of the year, according to the report. The median sales price has climbed every year since 2019, when it was $295,685.

In December 2023, there were 6,929 home sales in Virginia, and the median sales price was $382,725, a jump of 6.6%, or about $24,000, over December 2022. Most December 2023 sales were between $200,000 and $400,000 — about 42.6% — and a quarter of sales were between $400,000 and $600,000. Another 10.4% were sold for more than $800,000, and about 11.4% sold for less than $200,000.

Pending sales dropped in the final month of the year, down 2.1% from December 2022. There were also 3% fewer listings than in December 2022. But there were about 1% more active listings on the market, the first year-over-year increase in active listings in Virginia’s housing market in nine months.

Fed’s Fifth District economy sees mild expansion

Economic activity in the Federal Reserve’s Fifth District (a multistate region including Virginia, North Carolina, South Carolina, West Virginia and Maryland) expanded mildly in recent weeks, according to the latest edition of the Federal Reserve’s Beige Book, released Wednesday.

Published eight times per year, the Beige Book is based on anecdotal information about economic conditions gathered from the nation’s 12 Federal Reserve Banks. It is compiled from reports by bank and branch directors, as well as information gathered from business contacts, economists, market experts and other sources. Wednesday’s release is an update from the Fed’s Nov. 29, 2023 report.

Here’s what the most recent Beige Book edition revealed about the direction the economy is taking:

Employment in the Fifth District grew moderately in the past few weeks, although the tight labor market continued to put upward pressure on wages. Some respondents reported operational changes as a result, like a specialized software company that expects to cut investment plans this year because salaries increased by 15% of the firm’s total revenue and the company needs to continue hiring workers to meet customer demand.

Price growth continued to slow slightly, according to the Fed, but year-over-year inflation remained “somewhat elevated.” Service providers saw a 3.8% increase in prices received, down half a percentage point from the previous reporting period. Manufacturers reported a 2.8% increase in prices received, up slightly from the previous report.

Manufacturing activity in the region slowed in recent weeks. While contacts in some industries tied to consumers’ discretionary spending reported declines, like a wine producer who reported a 30% drop in sales, some contacts saw unexpected increases in demand. An automobile fabric manufacturer reported an uptick in new orders, notable because its customers historically have pulled back on spending each December.

Fifth District ports’ trade volumes were down in recent weeks. Imports were lower year-over-year as wholesalers continued to work on reducing high inventory levels. Loaded exports, though, were up. Spot shipping rates to the East Coast increased because carriers had issues at the Panama Canal and the Red Sea. Container dwell times fluctuated.

Freight volumes for trucking firms were slightly lower than in the prior report, and firms did not see a seasonal uptick. In the full truckload segment, food, medical, automotive and retail shipments provided the greatest demand. Trucking companies did not experience significant backlogs on new equipment orders but occasionally had issues receiving some parts.

Retailers in the Fifth District reported steady to slightly increasing demand and revenues. Travel and tourism respondents reported steady to increasing sales, hotel occupancy rates and passenger air travel.

Residential real estate activity declined modestly due to an expected seasonal slowdown. Home prices increased moderately, while days on the market increased slightly but remained below historic averages. Construction costs had moderated, builders reported, but shortages of some building materials and specialty subcontractor labor continued.

Commercial real estate market activity was flat in the previous few weeks. The retail segment remained strong, particularly among fast casual restaurant chains. Class A office space tightened as firms upgraded their space and moved away from central business districts. Construction projects were largely limited to the industrial and multifamily sectors.

In the financial sector, loan demand continued to soften modestly. The biggest slowdown in demand was in residential mortgage lending. Deposit balances remained flat, and institutions continued to see competition for available funds.

Overall revenues and demand for services for nonfinancial service providers in the Fifth District remained stable. Competition put pressure on pricing and maintaining current clients. Firms reported wages and workforce availability were continuing challenges.

REIN elects new board

The Real Estate Information Network has a new board of directors and executive committee, the multiple listing service for the Hampton Roads region announced Wednesday.

The 2024 board includes:

  • Gary Lundholm, president
  • Barbara Wolcott, vice president
  • Barry Nachman, treasurer
  • Kimberly Plourde, secretary
  • Lee Cross, director
  • Amy Doll, director
  • Dorcas Helfant-Browning, director
  • Cavelle Mollineaux, director
  • Jon McAchran, past president.

REIN has about 8,000 licensed members and 9,263 total members. It serves an area that stretches from Williamsburg and Gloucester down to Moyock, Edenton and Elizabeth City, North Carolina. Members of its executive committee (president, vice president, secretary and treasurer) serve one-year terms on the committee, and the board of directors, all either principals or managing brokers of a stockholder-member firm, each serve two-year terms. They are elected by REIN broker-stockholders.

Hampton Roads home sales down in November

Home sales in Hampton Roads were down in November, both compared with October and November 2022, the Real Estate Information Network (REIN) reported in December.

A total of 1,690 settled sales were down 10.77% from October and 12.12% from November 2022, according to REIN. Pending sales were also down 7.69% compared with October and 7.16% compared with November 2022. The median sales price of homes sold in November was down slightly, from $330,140 in October to $330,000 in November. But it’s up from $302,000 in November 2022.

There were 3,980 active residential listings, up slightly compared to October (3,968) and up about 3% compared with November 2022. Also, the median days on the market was 19, the same as October and down one day compared with the year prior.

“Traditionally, buyers get focused on other things around the holidays and sales see a decline,” Jon McAchran of AtCoastal Realty and president of REIN’s board, said in a statement. “That said, this is a great time of the year for serious homebuyers since competition will probably be a bit less intense for a couple of months.”

The inventory of houses for sale has remained steady and is up slightly from last month and from November 2022.