Foreclosure Forecast: Virginia Realtors Predict Home Sales Will Increase in 2024 After a Sharp Decline

This year’s home sales activity has dropped more than initially expected, but the outlook looks somewhat better for next year. Meanwhile, the average home price in several areas of Southwest Virginia and Virginia Beach is increasing faster than the statewide rate in Virginia.

According to the Virginia Association of Realtors (VAR), Virginia’s home sales activity is projected to see a strong recovery next year after a significant decline. However, it is important to note that rising prices and recently increased mortgage rates will remain key factors impacting the real estate market across the region.

The state is expected to end this year with a 23.6% annual decline in home sales activity, the association stated in its annual forecast. If accurate, this would represent the second consecutive year of a notable drop in sales activity, and sales activity is forecast to improve by 11.4% next year. Home prices are also expected to continue rising after a 4.4% increase in median home prices statewide in 2023.

VAR Chief Economist Ryan Price mentioned in an interview that home sales prices in Southwest and Southern Virginia markets have increased at a faster rate than in many other areas. “Many of these markets are attracting people from other parts of Virginia due to relatively lower prices compared to their place of origin,” Price said.

While the statewide median home sales price increased by 7% in August compared to the previous year, at least a dozen localities in Southwest and Southern Virginia saw their median sales prices increase by at least 10%, including the cities of Bristol and Lynchburg, and the counties of Bland, Campbell, Halifax, and Pittsylvania.

Similarly, several Southwest and Southern localities experienced median sales price increases of between 5% and 10%, including the cities of Martinsville, Roanoke, and Salem, and the counties of Bedford, Botetourt, and Washington.

Some other real estate experts in Virginia Beach, though attributing it to inflation, agreed with VAR’s forecast that home prices statewide will rise by approximately 1.2%.

In its latest forecast, VAR predicted a decline in sales activity for this year but only a 2.5% drop compared to the immediately preceding year.

Price also pointed out that most people did not foresee mortgage rates staying in the 6% to 7% range for much of the year. “When people look at the current interest rate environment, it reduces the number of homeowners who want to enter the market,” referring to the phenomenon of homeowners who cannot or do not want to give up their low fixed-rate mortgages to sell their homes.

Mortgage rates have steadily increased since the Federal Reserve began raising them in March 2022 to combat inflation.

In the first quarter of 2023, the average rate among homeowners with mortgages in Virginia was 3.8%, while the average 30-year fixed rate for a new mortgage at that time was 6.4%, Price said, adding that the difference between the two numbers perfectly illustrates why many people are holding off from entering the real estate market.

The Virginia Association of Realtors predicts that “30-year fixed mortgage rates will remain volatile in 2024 but will gradually trend downward to around 6.15% by the end of next year.”

Sherwood Clements, a professor at Virginia Tech, expressed skepticism about VAR’s prediction that mortgage rates will decrease, as he is more pessimistic regarding mortgage rates. “I find it hard to believe the Fed will lower interest rates.”

The Federal Reserve has been raising rates with the goal of reducing the annual U.S. inflation to a target of 2%, but annual inflation increased to 3.7% in August.

Both Price and Clements express that “the market is currently in a process of normalization” and that this moment is quite difficult for homebuyers in the state and the country in general, as rising rates reduce people’s purchasing power and consequently the number of properties they can consider buying.

The situation is not much better for sellers, who, as Price pointed out, generally become buyers themselves because they need another place to live.

Available Foreclosures:

Bristol: 5 homes available

Lynchburg: 8 homes available

Bland County: 3 homes available

Campbell County: 6 homes available

Halifax County: 4 homes available

Pittsylvania County: 7 homes available

Martinsville: 2 homes available

Roanoke: 9 homes available

Salem: 4 homes available

Bedford County: 5 homes available

Botetourt County: 3 homes available

Washington County: 6 homes available.

By Elias DaSilva | September 20, 2024.