Housing Inventory Continues to Dampen As Sellers Become More Reluctant To Move Into Another Home For A Higher Mortgage Rate.

By Abel Opoku-Adjei
Research Associate, Virginia REALTORS^®

Each month, the Virginia REALTORS^® Confidence Survey gathers insights from REALTORS^® on local housing markets based on their experiences with real estate transactions in the prior month. This information provides a real-time look at housing market conditions. This month’s Confidence Survey was conducted between December 27th, 2023, and January 4th, 2024, and reflects housing market conditions in Virginia in December 2023. A total of 549 Virginia REALTORS^® members responded to the survey, including 364 who had participated in a home sales transaction in the last 31 days.

Current Market Conditions

Buyers

According to Virginia REALTORS^®, buyer activity increased in December. The Buyer Activity Index for December was 31, higher than it was in November at 27. Roughly 12% of REALTORS^® rated the level of buyer activity in their local markets as “high” or “very high” in December, and approximately 50% of REALTORS^® rated buyer activity in their local market as “low” or “very low”.

According to survey respondents, about 25% of buyers in December were first-time home buyers, 6% lower than the previous month. Virtually 29% of respondents accepted an all-cash purchase in December, a 4% increase compared to November. Approximately 19% of home sales in December were non-primary residence sales (e.g., rental property, second home, vacation home), unchanged from November.

Recent transactions received an average of 1.9 offers in December, which is the same as it was in November. About 25% of respondents in December stated that bids came in above the listing price, which is 6% lower than last month.

Sellers

Seller activity in December decreased slightly compared to November, according to Virginia REALTORS^®. The Seller Activity Index in December was 13, a 1% drop from November. Virtually 2% of REALTORS^® reported that seller activity was “high to very high” in their local market, and 76% of respondents said seller activity was “low to very low.”

Obstacles

As we start to fade out of the fall market, many potential buyers and sellers face similar challenges that hinder them from participating in the housing market. In the survey, we asked Virginia REALTORS^® about the main obstacles their clients are facing.

Buyers

Even though interest rates have been slowly declining in recent weeks, many potential buyers are reluctant to enter the market because rates have doubled since 2022. Around 24% of Virginia REALTORS^® stated that rising interest rates are their buyer clients’ most significant obstacle. Roughly 41% of Virginia REALTORS^® stated that the lack of housing inventory in the state was stopping their buyers from purchasing a home in the December market.

Thinking about your buyer clients. Which factor is the primary impediment to purchasing in the fall 2023 market?

Sellers

About 19% of Virginia REALTORS^® stated that their seller clients were unwilling to lose their low interest rate for a higher rate in the December market, which is unchanged from November. Nearly 13% of Virginia REALTORS^® noted that the lack of inventory in their local market made them reluctant to sell their home in December. Around 13% of REALTORS^® said that rising home prices were stopping sellers from selling their homes because they were worried that they would not get the same type/size of a home elsewhere in their price range. Most potential home buyers in Virginia faced a combination of these obstacles according to REALTORS^® in December.

Thinking about your seller clients. Which factor is the primary impediment to selling their home during the fall 2023 market?

Reasons For Selling

Results From Virginia REALTORS^® Confidence Survey

In December, we asked Virginia REALTORS^® what was the most common reason their seller clients wanted to sell their homes in the last 31 days. Many people continue to have reasons to move out of Virginia, making out-migration still one of the biggest reasons people sell their homes in the commonwealth. Nearly 27% of clients wanted to sell their homes because they were moving somewhere outside of the commonwealth. About 13% of people were looking to relocate somewhere else in Virginia. Almost 15% were looking for a smaller home within the same area they reside in, and 16% were looking for a bigger house within the same locality. Roughly 9% of sellers were looking to sell their investment property in December.

Market Outlook

Confidence in buyer activity increased from November to December, says REALTORS^® in Virginia. This index gauges how REALTORS^® think the market will perform in the following three months. The three-month buyer activity index was 58 in December, an increase from 37 in November. About 34% of respondents indicated that they thought buyer activity would be strong in the next three months in their local markets, and 17% stated that they believed buyer activity would drop in the next three months.

The Seller Activity Index: 3-Month Outlook increased in December compared to November. The Seller Activity Index in December was 37, a rise from 27 in November. About 12% of Virginia REALTORS^® reported that they think seller activity will be strong in three months, and 38% said it would be low.

Virginia REALTORS^®, who responded to the survey, believes that home prices will stagnate in the coming months. Approximately 21% of Virginia REALTORS^® responding to the survey stated that they believe prices will decrease within the next three months. About 46% of REALTORS^® believe that home prices will increase within the next three months. Around 28% of respondents to the survey indicated that prices would remain the same for the next three months.

Virginia REALTORS^® Confidence Survey: 2023 Highlights

^A An index greater than 50 indicates more respondents reported the level of activity as “high to very high” than reported the level of activity as “low to very low.”

^B An index greater than 50 indicates more respondents expect future activity to be “strong” than expect future activity to be “weak”.

A note about surveys: This is not a randomized sample survey of Virginia REALTORS® members. However, the number of responses and the geographic coverage of respondents make it possible to draw conclusions about the opinions and expectations of Virginia REALTORS®. The statistics from this survey have a margin of error of +/- 4.18%.

Responses to our surveys are confidential. We do not look at individual responses but rather report data in the aggregate.

For more information about Virginia’s housing market, check out our most recent home sales report, local housing market data, or Facebook Live.