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.