The second-most expensive real estate market in all of Virginia could be nearing a turning point.
Nearing, but not there yet.
Based on second-quarter data, Charlottesville-area real estate agents are “cautiously optimistic” the red-hot market could cool down as the housing supply has already started to tick up and interest rates — and mortgage rates along with them — will likely tick down soon.
“If the interest rates go down, the entire industry starts turning a little bit more, and people get to move into the homes they need, and move out of the homes they don’t need anymore,” Anne Burroughs, president of the Charlottesville Area Association of Realtors, told The Daily Progress.
Since the pandemic, the housing market has been defined by both increasing mortgage rates and housing prices, but that inhospitable dynamic may be beginning to change. Over the past year, the inventory in the region has increased by 10% to reach 786 active listings with a little more than 2 1/2 months of supply on the market, which is up from last year. Albemarle, Louisa and Nelson counties as well as the city of Charlottesville all gained more than 20 additional listings from 2023.
The needle has barely shifted in regard to the mortgage rate, sitting at 6.77% in the third week of July for a 30-year fixed mortgage. However, the Federal Reserve has suggested it is considering lowering interest rates in September, which would likely bring down mortgage rates in the fall.
“If we were to see inflation moving down … more or less in line with expectations, growth remains reasonably strong and the labor market remains consistent with current conditions, then I think a rate cut could be on the table at the September meeting,” said Federal Reserve Chairman Jerome Powell on July 31.
That sort of reduction could be the window of opportunity that prospective sellers have long awaited. When she spoke with The Daily Progress earlier this year regarding fourth-quarter data, Burroughs pointed out that homeowners were less inclined to put their houses on the market with the higher rates given they were able to refinance their properties during the pandemic after mortgage rates fell more than they had in decades, ranging from 2% to 3%.
“We’ve had this lock-in effect since COVID,” agreed Josh White, president-elect of the regional Realtor association. “I think people have a really hard time digesting a higher rate where it’s been at seven or more than seven. If the rates get back down in the low sixes or fives, it makes it a lot more palatable for people to make that jump, which should stimulate the market.”
Another factor supporting the region’s healthy market is the long-falling unemployment rate in the region which reached 2.3% in May, lower than the statewide rate of 2.7%. Between April and May, Virginia added 8,800 jobs, primarily in the private education services, health care and construction sectors. The Charlottesville area benefitted from this the most, with the greatest percentage of job growth of any Virginia market.
There was only a little variation in the number of new construction permits issued in the past couple of months compared to last year, with 17% more permits, or 513, issued for single-family houses. Permits for townhouses and multifamily residences fell by 35% from 2023.
While the future is beginning to look brighter for the Charlottesville housing market, the spring saw slightly less sales activity than this time last year, with 1,100 houses sold regionwide this year, 48 less than 2023. The season started out strong with good sales numbers through April and May. However, following an increase in the mortgage rate to 7% in May, June’s activity began to move “at a sluggish pace,” weighing down the quarter’s overall numbers, according to Burroughs.
Albemarle County experienced the largest drop in sales from 2023, with 44 fewer houses sold, totaling 486. Charlottesville and Fluvanna County also saw a decrease, with 134 houses sold in the city, 24 fewer than last year, and 122 in Fluvanna, 17 fewer than in 2023. Three fewer residences were sold in Nelson County than in the second quarter of 2023, with a total of 58 houses.
The counties of Greene and Louisa were the only localities in the Charlottesville-area footprint to see an increase in sales numbers from this time last year, with 28 more homes sold this spring in Louisa County than last year and 12 more in Greene County.
This trend is likely related to another finding gathered from the second-quarter data: a 3% increase in the median sales price for houses, resulting in a $14,150 gain to reach $460,050 in the region. Over the past year, the median sales price for residences in Albemarle County ticked up slightly to $533,750, while houses in Charlottesville went up by $50,000 from last year to a median sales price of $520,000.
“It’s 100% an affordability problem,” said Burroughs. “We’re seeing more and more people are more and more looking outside of Albemarle and Charlottesville, because they just can’t afford it. That’s where Greene and Louisa really benefit.”
The median sales price did increase by more than $10,000 in both of those counties since last year, though still falling well below their neighbors, with a median of $400,000 in Greene County and $399,900 in Louisa County.
The $50,000 uptick in the city’s median sales price does not mean all price tags for Charlottesville residences rose by that amount. White pointed out that the average can be skewed by the sale of only a couple multimillion-dollar properties as buyers are still interested in looking within city limits, though it remains one of the most expensive markets in the commonwealth, behind only the Washington suburbs in Northern Virginia.
“It’s just kind of nice to see that Charlottesville and the surrounding counties are still very attractive to a lot of the population; we’re not seeing an exodus,” said Burroughs. “I think there was some concern … that as Charlottesville became one of the more expensive areas in the state that we might start seeing an exodus of people, and we really haven’t seen that because people still like living here, even though it’s expensive.”
Source: www.dailyprogress.com
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