The fourth quarter of 2016 contributed to a year of significant market strength. With particularly strong sales in November, following consumer reaction to the conclusion of the Federal election cycle and the anticipation of rising rates, the fourth quarter of 2016 outperformed the prior year fourth quarter by 6.8 percent (from 24,639 transactions to 26,308). Likewise, fourth quarter volume grew year-over-year, from $7.830 billion in 2015 to $8.527 billion in 2016. The 8.9 percent increase in volume resulted from the boost in pace, magnified by rising median prices. Median price for the fourth quarter rose 3.9 percent from 2015 to 2016, from $255,175 to $265,000.
The value of transactions for all of 2016 exceeded $37.916 billion, up 8 percent from the accumulated volume in 2015 ($35.095 billion). Despite mid-year inventory constraints, every quarter of 2016 outperformed prior year benchmarks. The strongest relative gains occurred in the second quarter, with the aggregate of sales for April, May, and June rising 10.7 percent higher than for the same months in 2015. Pace for the year rose 6.6 percent, with 116,091 transactions in 2016, over 108,870 in 2015.
Year-over-year, fourth quarter home sales increased in all price bands except the lowest, where limited inventory typically restricts market activity. Sales pace increased in every region of the state, and median price rose in all but the Southwest region.
Though 30-year and 15-year fixed mortgage interest rates remain at enticing lows, they each jumped notably from October to November and again from November to December. Responding to the Federal Reserve Bank’s decision to raise the key rate in December, rates for 30-year and 15-year fixed mortgage interest rates in the fourth quarter rose to 3.81 percent and 3.07 percent, an increase of 10.6 percent and 11.6 percent, respectively, to the third quarter rates. Rising but accessible rates may spur greater activity in 2017, particularly if entry level inventory loosens, as banks balance the prospect of higher margins with the risk of looser qualifications.
“The fourth quarter sealed a year of impressive strength in Virginia’s housing market,” said 2017 Virginia REALTORS® President Claire Forcier-Rowe. “For buyers and sellers, 2016 was a year of opportunity. Particularly as inventory constraints eased in the last half of the year, we saw surges in activity and price. Buyers have been able to take advantage of low rates, even as they rose in the last quarter, and invested confidently at the end of the year. Sellers are poised to profit from sustained high demand as we move into 2017.”