VAR’s Q1 home sales report is out. So how’s the housing market in Virginia?
Well, it depends on which market in Virginia you’re talking about. And even within markets, things can vary: one part of your community may be faring much better than another. The first quarter home sales numbers are in, and all across Virginia, some statistics are sweet, others are sour. Only one thing’s clear: There’s no sign we’re out of this housing mess yet, and that’s a fact that’s hard to swallow for Virginia homeowners. The good news is that some data seem to be signalling what could be the beginning of the end of the housing market’s woes.
When homeowners ask, “How’s the market?” what they really want to know is: “How’s the value of my house holding up?”
Based on the numbers in VAR’s report, it’s hard to say. Median prices statewide climbed 8.9% compared to the same period in 2009, but dropped back 1.5% compared to the fourth quarter of 2009. In fact, after three consecutive quarters of increases in the median sales price, this was the first decline – thus breaking the trend of steady price increases.
Foreclosures are still a problem.
Virginia posted 15,563 foreclosures between January and March, an increase of 6.1% over the last quarter of 2009. This is a huge issue for home values, because when a home goes into foreclosure, it can affect the value of other homes in the area.
Here’s the bottom line on our foreclosure problem: Jobs.
Unemployment in the Commonwealth is at its highest point in decades at 7.4%. Virginia’s doing better than 36 other states, but our unemployment rate is still high enough to prevent many homeowners with monthly mortgage bills from being able to pay them on time. So all of the sub-prime mortgage defaults that have gotten so much attention are being joined by a flood of normal mortgage defaults. It’s a double whammy, and Virginia’s home values are being held back because of it.
Experts agree that we won’t get out of this housing mess until unemployment retreats to normal levels. For Virginia, that would be a figure of about 4% or less. Getting there could take a long time.
What’s the outlook?
Don’t bet on a quick recovery. The first time homebuyer tax credit has just expired. As bad as the housing crisis has been, many believe this government housing stimulus plan has helped avert a death blow to the housing market. But with the stimulus now gone, natural market forces will take over, and it’s not difficult to imagine some potential negative outcomes:
- Median home sales prices could drop by roughly $8,000 (the maximum amount of the tax credit).
- Home shoppers may feel less motivated to get out there and buy. This could decrease demand and increase supply in the housing market.
There are very few trends to point to in VAR’s home sales report. The graph lines zigzag up and down with no clear trajectory. Many housing economists are now predicting a long, slow, L-shaped recovery, and VAR’s data supports this.
Hang in there.
Check out the full report at www.VARealtor.com/HomeSales.