Purchasing Power Continues to Diminish As Rising Interest Rates Keep Potential Buyers And Sellers On Standby

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 August 22nd and August 30th, 2023, and reflects housing market conditions in Virginia in August 2023. A total of 582 Virginia REALTORS^® members responded to the survey, including 441 who had participated in a home sales transaction in the last 31 days.

Current Market Conditions

Buyers

According to Virginia REALTORS^®, buyer activity decreased in August. The Buyer Activity Index for August was 39, a decline from 49 in July. About 19% of REALTORS^® rated the level of buyer activity in their local markets as “high” or “very high” in July, and about 40% of REALTORS^® rated buyer activity in their local market as “low” or “very low”.

According to survey respondents, roughly 28% of buyers in August were first-time home buyers, down 1% from July. About 23% of respondents accepted an all-cash purchase in August, which is a 2% increase from a month ago. Approximately 17% of home sales in August were non-primary residence sales (e.g., rental property, second home, vacation home), down from 16% in July.

The average number of offers decreased slightly from July to August, according to REALTORS^® responding to the Confidence Survey. Recent transactions received an average of 2 offers in August, a fall from 3.2 in July. Virtually 50% of respondents in August stated that bids came in above the listing price, an 8% decline from a month ago.

Sellers

Seller activity remained unchanged in August compared to the previous month, according to Virginia REALTORS^®. The Seller Activity Index in August was 10, which is still the lowest recorded Seller Activity Index since the survey was established in 2021. In August, approximately 2% of REALTORS^® reported that seller activity was “high to very high” in their local market, and 81% of respondents said seller activity was “low to very low.”

Obstacles

As we fade out of the summer 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

About 40% of Virginia REALTORS^® stated that the lack of housing inventory in the state was hindering buyers from purchasing a home in the August summer season. In the survey, about 27% of Virginia REALTORS^® emphasized that rising interest rates are their buyer clients’ most significant obstacle, the highest recorded since collecting this data. In August, about 1% of Virginia REALTORS^® stated that saving for a down payment and increasing home prices is the biggest challenge for their buyer clients, unchanged from the previous month. According to the survey respondents, housing stock conditions still seem to be the biggest concern for buyers, and many are facing challenges from a combination of these obstacles.

Thinking about your buyer clients. Which factor is the primary impediment to making a purchase during the summer 2023 market?

Sellers

Nearly 19% of Virginia REALTORS^® stated that their seller clients were unwilling to lose their low-interest rate for a higher rate when they sell their homes. About 15% of Virginia REALTORS^® noted that the need for more inventory in the market is hindering their seller clients from being able to sell their homes and find a different home to move to in August. About 10% of REALTORS^® in August said that rising home prices were stopping sellers from selling their homes because they are anxious that they won’t get the same type/size of a home elsewhere in their price range. Many sellers face a combination of all these factors, making them insecure about selling their property. The lock-in effect of low interest was the biggest obstacle amongst Virginia REALTORS^® seller clients.

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

Reasons For Selling

There are many reasons why people decide to sell their homes. This month, we asked Virginia REALTORS^® what was the most common reason their seller clients wanted to sell their properties in the last 30 days. Approximately 28% of clients wanted to sell their homes because they were moving somewhere outside the commonwealth, the highest among all other reasons. Roughly 14% of people were looking to relocate somewhere else in Virginia. Around 16% were looking for a smaller home within the same area they reside in, and 12% were looking for a bigger house within the same locality. Virtually 6% stated that their clients aimed to sell their second home/investment property.

Market Outlook

Confidence in buyer activity lowered in August compared to last month from 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 37 in August, down from 48 in July. About 15% of respondents indicated that they thought buyer activity would be strong in the next three months in their local markets, a decrease from 25% in July.

The Seller Activity Index: 3-Month Outlook fell short in August compared to July. The Seller Activity Index in August was 17, a decrease from 20 in July. Around 6% of Virginia REALTORS^® reported that they think seller activity will be strong in three months, down 1% from the previous month.

The share of survey respondents who expect prices to rise in their local markets in the next three months fell in August. Roughly 36% of Virginia REALTORS^® responding to the survey stated that they believe prices will increase within the next three months. About 25% of REALTORS^® believe that home prices will fall within the next three months. Nearly 34% 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^®. The statistics from this survey have a margin of error of +/- 3.8%.

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 current articles.