Higher Mortgage Rates and Lack of Inventory are Obstacles for Sellers and Buyers

Results from the Virginia REALTORS^® Confidence Survey

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 April 26th and May 1st, 2023, and reflects housing market conditions in Virginia in April 2023. A total of 1,073 Virginia REALTORS^® members responded to the survey, including 808 who had participated in a home sales transaction in the last 30 days.

Current Market Conditions

Buyers

According to Virginia REALTORS^®, buyer activity increased in April. The Buyer Activity Index for April was 65, a rise from 51 in March. About 47% of REALTORS^® rated the level of buyer activity in their local markets as “high” or “very high” in April, and roughly 17% of REALTORS^® rated buyer activity in their local market as “low” or “very low”.

According to survey respondents, approximately 33% of buyers in April were first-time home buyers, a 3% decrease from March. In April, roughly 19% of respondents accepted an all-cash purchase, which is down from 21% in March. About 14% of home sales in April were non-primary residence sales (e.g., rental property, second home, vacation home), unchanged from the previous month.

The average number of offers increased from March to April, according to REALTORS^® responding to the Confidence Survey. Recent transactions received an average of 4 offers in April, an increase from 3.2 on average in March. About 65% of respondents in April stated that offers came in above the listing price, much higher than 44% in March.

Sellers

Seller activity declined in April, according to Virginia REALTORS^®. The Seller Activity Index in April was 11, down from 15 in March. About 4% of REALTORS^® reported that seller activity was “high to very high” in their local market in April, down 1% compared to last month. About 81% of respondents reported that seller activity was “low to very low” in April, a rise from 73% in March.

Obstacles

As we enter the spring 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 biggest obstacles their clients are facing.

Buyers

About 48% of Virginia REALTORS^® stated that the lack of inventory in the state’s housing stock is impeding buyers from purchasing a home in the spring season. In the survey, roughly 16% of Virginia REALTORS^® emphasized that rising interest rates are their buyer clients’ most significant obstacle. In April, approximately 1% of Virginia REALTORS^® stated that saving for a down payment and increasing home prices is the biggest challenge for their buyer clients.

Sellers

Many sellers are unwilling to sell their homes because current rates are unappealing to them, as they were able to obtain a lower interest rate on their current homes. About 14% of Virginia REALTORS^® stated that their seller clients are unwilling to lose their low interest rate for a higher rate when they sell their home. Roughly 25% of Virginia REALTORS^® implied that the lack of inventory in the market is hindering their seller clients from being able to sell their homes and find a different home to move into. Nearly 10% of REALTORS^® said that rising home prices are stopping sellers from selling their homes because they are worried they won’t get the same type or size of a home elsewhere in their price range.

Market Outlook

Despite the economic turmoil, confidence in buyer activity continues to rise. This index gauges how REALTORS^® think the market will perform in the following three months. The index increased to 64 in April from 52 in March. About 42% of respondents indicated that they thought buyer activity would be strong in the next three months in their local markets, an increase from 29% in March.

The Seller Activity Index: 3-Month Outlook declined for the third consecutive month. The Seller Activity Index in April was 25, a fall from 29 in March. Around 7% of Virginia REALTORS^® reported that they think seller activity will be strong in three months, decreasing by 1% from a month ago.

The share of survey respondents who expect prices to rise in their local markets in the next three months increased in April. About 50% of Virginia REALTORS^® responding to the survey stated that they believe prices will increase within the next three months. Roughly 16% of REALTORS^® believe that home prices will decline within the next three months. Around 30% of respondents to the survey indicated that prices would most likely 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^®. These statistics from this survey have a margin of error of +/- 2.9%.

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.