‘Frenzied’ housing market is normalizing

The residential real estate market frenzy in Virginia may be slowing to more normal conditions, the chief economist with Virginia Realtors said in a new report out this week.

For the first time in more than a year, sales activity slowed in September, compared with a year ago.

Last month, there were 13,079 home sales in Virginia, down 2% from September 2020, when sales were surging.

“While sales are down year-over-year, it’s important to remember that the market last September was unusually active,” Virginia Realtors Chief Economist Lisa Sturtevant said in a statement. “Slower sales activity does indicate a cooling in the market, but it also suggests that we’re seeing more typical seasonality in the market.”

It’s the first year-over-year dip since June 2020 and reflects a cooldown around the state.

“One signal that a return to seasonality is underway is that total sales in Virginia declined 9.4% between August and September this year, which is a typical end-of-summer slowdown,” the report says. “Between 2015 and 2019, sales fell an average of 15.6% between August and September. During the 2020 surge, sales activity was relatively strong between the summer and fall transition, inching down just 2.9% from August to September last year.”

Year-to-date sales are up so far this year, up 16.2% compared to the same period in 2020. Growth can be seen in markets stretching from Hampton Roads to the Richmond metro area, Northern Virginia and most of Southwest Virginia.

In the Shenandoah Valley, Virginia Realtors Vice President Katrina Smith, broker and owner of Winchester-based RE/MAX Synergy, said her area reflects what is happening around the state. “We were so frenzied for the last eight to 12 months, it was unlike any market I’ve seen in 16 years,” she said.

The median price for Virginia homes in September was $350,000, about $20,000 higher than a year ago, or a 6.1% increase, according to the report.

Smith said anything that came on the market around that price point in the past year had back-to-back showings.

“The moment it came on the market, it was booked for days,” she said. “When you are a seller, that was great that you had so much to choose from.”

It was harder for buyers, though. She wrote eight different offers for a buyer before one was accepted, she recalled. It was hard on not just the buyers, but the agents too, she added.

The September figures are a return to somewhat more normal market patterns, though sales continue to far outpace pre-pandemic levels, up 27.1% from two years ago, according to the report.

In the Richmond area, Beth Dalton, a managing broker with Long & Foster and the president of Virginia Realtors, said they are still seeing multiple-offer scenarios and competitive offers at that. In spring through July, buyers were waiving everything, in many cases, just to seal the deal, she said. They would offer creative incentives, such as letting the seller leave things in the house they didn’t want to move. They nicknamed this trend “the Dumpster clause.”

This month, things are improving, and it’s “less frenzy-like,” she said. It’s still busy, with many transactions, but more like what the fall is usually like, she said.

Prices are still rising, but the growth has slowed, according to the report. Prices are up in most regions around the state. The largest median sales growth was in parts of Southwest Virginia, the Northern Neck and Chesapeake Bay areas, and parts of Southern Virginia.

Through the first nine months of 2021, the median sales price statewide is up 11.1% from a year ago, or a $35,000 increase. The statewide average sold-to-list ratio in September was 100.6%, which means on average, homes in Virginia closed at a price that was 0.6% higher than the seller’s asking price.

Smith, in Winchester, said not only were offers over asking, but buyers would bring extra cash to the table. But that’s  tapered off some and isn’t happening as frequently.

The frenzy led Ramey to expanding her business. She’s hired a new leasing coordinator to help with photography and staging. She estimates her company has sold about 50% more than last year.

In the Charlottesville area, Denise Ramey, a broker with Long & Foster and president-elect of Virginia Realtors, said she has a house listed at $600,000 and expected six to eight offers on the house, and that it would probably sell at 20% above asking price, at a minimum.

About half of all homes sold in Virginia in September were priced between $200,001 and $400,000, making it the largest segment in the market and nearly one out of four sold for between $400,001 and $600.000, according to the report. Price levels have been trending up, and homes priced above $600,000 accounted for more sales than homes priced below $200,000. In September 2020, it was the opposite.

But price is not the only thing sellers are looking at, she noted. When there are multiple offers to choose from, she assembles a spreadsheet for the seller to review, with factors such as contingencies, home inspections and financing terms. Even the closing date is something buyers are using to gain an advantage.

While the number of transactions slowed, higher prices pushed the sold dollar volume above last year. More than $5.6 billion of volume sold through September, up 3.4% from last year, an increase of $200 million statewide. But in September, it was down 10.4% from August, which Realtors say is expected for this time of year.

Homes are selling an average of 23 days faster, which is two weeks faster than a year ago. Ramey, in the Charlottesville area, said she will often list a house on a Wednesday, hold an open house on Friday, Saturday and Sunday, and review offers the following Monday.

Lack of inventory has been the biggest driver behind the price wars and multiple offers, she said. Now, inventory is growing slowly, a trend she expects to continue through the winter.

The fastest inventory growth is primarily in northern markets, including Northern Virginia, Winchester and the Fredericksburg area, but there are also in increases Hampton Roads, Southwest Virginia, areas of Central Virginia and parts of the Richmond metro area.

Virginia’s housing market is showing signs of falling back into typical seasonal patterns, according to the report. But it will still be a seller’s market for a while, Realtors are telling clients.

“Personally, I’m kind of looking forward to the market that we are moving into,” Smith said. “I think it’s a healthier market.”