Capital Gains Exclusion Seen as Impactful Incentive to Overcome Market Barriers, According to Virginia REALTORS^®

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

Each month, the Virginia REALTORS^® Confidence Survey gathers important information from REALTORS^® on local housing markets based on their experiences with real estate transactions in the prior month. This data provides a real-time look at housing market conditions. This month’s Confidence Survey was conducted between May 28^th and June 4^th, 2025, and reflects housing market conditions in Virginia in May 2025. A total of 974 Virginia REALTORS^® members responded to the survey, including 738 who participated in a home sales transaction in the past month.

Current Market Conditions

Buyers

According to survey respondents, buyer activity declined in May compared to the previous month. The Buyer Activity Index for May fell to 43, down from 52 in April. Approximately 18% of respondents rated the level of buyer activity in their local markets as “high” or “very high,” while 33% of REALTORS® described buyer activity in their local market as “low” or “very low.”

Results From Virginia REALTORS^® Confidence Survey

In May, approximately 36% of REALTORS^® reported that their most recent transaction involved a first-time homebuyer, an increase from 26% in April. Additionally, nearly 21% of home sales in May were all-cash purchases, which is a decrease from 24% in April. Around 17% of REALTORS^® indicated that their recent transactions involved a non-primary residence, such as a rental property, second home, or vacation home, which is down by one percentage point from the previous month.

Recently closed listings in May had an average of 2.1 offers, a slight decrease from 2.3 in April. About 38% of REALTORS^® reported that offers in May exceeded the listing price, down from 42% the prior month.

Sellers

According to REALTORS^®, seller activity has increased compared to the previous month. The Seller Activity Index for May reached 43, which is a four-point rise from April. About 15% of REALTORS^® reported that seller activity was “high to very high” in their local market, while 29% characterized it as “low to very low.”

Obstacles

Buyers

Many buyers are facing a mix of challenges in the current real estate market, but some issues stood out more than others in the home-buying process this month. A survey conducted in May revealed that about 25% of respondents reported limited housing availability in Virginia as a significant obstacle for their clients. Additionally, nearly 25% of agents cited high interest rates as the primary factor impeding home purchases this month. Approximately 7% of REALTORS^® indicated that their clients were having difficulty saving for a down payment.

Results From Virginia REALTORS^® Confidence Survey

Sellers

In May, survey respondents reported that nearly 14% of Virginia REALTORS® observed that their seller clients were hesitant to move, primarily due to concerns about losing their low interest rates. Additionally, almost 10% of agents mentioned that their clients encountered challenges in finding suitable homes due to limited market inventory. Around 14% of agents identified rising home prices as the main obstacle for their clients when selling their properties. Despite these challenges, many REALTORS^® indicated that their clients were facing a combination of these issues in May.

Results From Virginia REALTORS^® Confidence Survey

Pending Sales Activity

In April, the number of pending sales in Virginia reached 9,962, reflecting a 1.5% increase or 143 more pending sales compared to the previous year. While most pending sales typically result in successful closings, several recurring issues can prevent transactions from closing as planned.

In May, 630 real estate agents in Virginia reported that at least one of their seller clients had a purchase agreement; however, 171 of these sales did not close as expected.

To understand the reasons behind the pending sales that failed, we asked REALTORS^® what issues their clients faced in May. Nearly 40% of respondents identified inspection issues as the primary reason for the breakdown of purchase agreements. Additionally, 12% cited low appraisals as a contributing factor. About 29% mentioned that buyers were unable to secure mortgage approval in time to complete the sale. Furthermore, 12% observed that some buyers lost their jobs or faced financial difficulties, which impacted their mortgage approval. Lastly, approximately 9% stated that their client’s previous home failed to sell in time, and 8% reported that significant title issues prevented the home from closing.

Reasons For Selling

Results From Virginia REALTORS® Confidence Survey

Possible Benefits for Buyers and Sellers

The housing market continues to face challenges that discourage many potential participants, including high interest rates, limited inventory, as well as concerns about taxes and affordability. In our latest survey, we asked Virginia REALTORS® which policy incentive would most effectively motivate their seller clients to list their homes: an exclusion from capital gains tax OR a reduction in the grantor tax.

According to the survey results, a substantial 81% of REALTORS® believe that excluding home sales from capital gains tax would be the most effective incentive to encourage sellers to enter the market, while 18% preferred a reduction in the grantor tax as a more meaningful benefit.

Results From Virginia REALTORS® Confidence Survey

Buyers

On the buyer side, Virginia offers several programs to support homeownership, including the Virginia Housing Down Payment Assistance Grant program. When asked about this program, 21% of REALTORS® said their buyer clients had used it, and they rated their clients’ experience highly, averaging a 4.5 out of 5 rating. However, 73% of REALTORS® indicated that their clients did not use the program. Among those, the most common reasons were that the clients either did not qualify or did not need assistance (63%). Notably, 26% of REALTORS® said their clients were unaware of the program entirely, signaling a potential opportunity for greater outreach and education.

Results From Virginia REALTORS® Confidence Survey

Market Outlook

Results From Virginia REALTORS^® Confidence Survey

The outlook for future buyer activity decreased from the previous month. This index measures REALTORS^®’ expectations for market performance over the next three months. The three-month buyer activity index in May was 47, a dip from 52 in April. Nearly 18% of respondents believe that buyer activity will increase sharply in their local markets over the next three months, while 25% believe their market will experience a sharp decrease during that time.

The Seller Activity Index (3-Month Outlook) experienced a slight decrease from April to May, now standing at 48, down from 49 in April. Approximately 15% of Virginia REALTORS^® believe that seller activity will rise in the next three months, whereas 19% expect a decline from June to August.

Lastly, around 31% of surveyed Virginia REALTORS^® surveyed foresee a rise in home prices in the next three months. Almost 30% believe prices will stay stable from May to July, while 32% anticipate a decline.

Virginia REALTORS^® Confidence Survey: 2025 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 expected 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 +/- 3.16%.

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.