By: Chief Economist Lisa Sturtevant, PhD
As 2019 winds down, Virginia REALTORS® has been analyzing economic and housing market data in order to predict what we expect for the housing industry in Virginia in 2020. This year, the housing market performed very well in the Commonwealth. There will be an estimated 125,571 home sales in 2019, a 2.8% increase over last year. Home prices continued to rise throughout the year. At $295,238, the estimated 2019 median home price in Virginia was up 5.4% jump from 2018. Will the housing market continue its strong run in 2020? What should we make out of the uncertainty at the national level?
The short answer: The Virginia economy and housing market are both poised to be strong in 2020, particularly in the first half of the year. Despite concerns of a potential impending national recession, any downturn in the coming year would likely be mild (not like the 2007-2009 recession). In the past, Virginia has been somewhat insulated from the most dramatic impacts of an economic downturn.
There is a range of positive indicators for the state’s economy, including strong consumer spending, extremely low unemployment, broad increases in wages, and high levels of consumer confidence (at least in the near-term economy). When the state’s economy is doing well, demand for housing is strong, and therefore local housing markets throughout the state perform well.
2020 Outlook for Virginia
- Virginia is expected to add nearly 48,000 new jobs in 2020, reflecting a growth rate of 1.2% over 2019. This is somewhat lower than the five-year average annual job increase but is a steady rise over 2019.
- Fueled by steady job growth, the pace of home sales activity is expected to rise in 2020. This forecast suggests that in 2020, there will be 129,343 total sales of existing homes in Virginia, a 3.0% increase in sales over 2019. By comparison, the National Association of REALTORS® is projecting an increase of 3.7% in sales transactions nationally in 2020. The somewhat slower growth in sales in Virginia in 2020 compared to the nation reflects the continued constraints associated with limited inventory in the state.
- Strong demand and low inventories will continue to push prices up in 2020, and particularly in the first half of the year. The median annual sales price statewide in 2020 is expected to hit over $300,000 for the first time. At $308,819, the median price in Virginia is expected to be up 4.6% over 2019. NAR is projecting 2020 prices nationally to be 3.6% higher than 2019. The faster price growth in Virginia is a result of strong employment-driven demand (particularly in Northern Virginia), as well as continued low inventory.
- New home construction has remained below what is needed to meet demand though it is expected that housing starts will increase in 2020 to an estimated 35,450 homes, which includes both single-family and multifamily units. This level of new home construction reflects an 8.9% increase over 2019, compared with a larger 11.5% increase nationally that is being projected by NAR.
- Virginia REALTORS® is projecting that the average 30-year mortgage rate for 2019 will settle at 4.00% while the 2020 rate will rise slightly to 4.25%. By comparison, NAR is projecting that the annual 2020 average 30-year fixed rate mortgage will be 3.80%. Our higher projections reflect recent economic data that suggests that the risks of recession in 2020 are declining and that the Fed will not continue to drop interest rates in the year ahead.
While this is a statewide outlook for 2020, economic and housing market conditions will, of course, vary across Virginia. Be sure to follow our Home Sales Reports for monthly statistics and analysis on statewide and regional market conditions.
This outlook takes into account current conditions on the ground and expectations about things to come. Unanticipated events, such as a federal government shutdown or a major business location decision, could have an impact on these forecasts. We will continue to monitor trends around Virginia to provide the most up-to-date assessment of the strength and performance of the state’s economy and housing market so that our REALTOR® members can be better able to serve their clients and their communities.