Sales should increase modestly and prices will see continued robust growth in the commonwealth’s real-estate market, but the situation appears to be different from (and less dangerous than) the conditions that precipitated the housing crash of 2008, the top statewide housing trade group says.
Virginia Realtors on Dec. 8 came out with prognostications for the 2021 Old Dominion housing market. Among the key points:
• Sales, which despite the COVID crisis have shown exceptional resiliency in 2020, are expected to continue their growth but be hemmed in by a lack of inventory. As a result, the trade organization expects about 135,000 residential transactions next year, up 2 percent from 2020.
• In some good news for the inventory crunch, the trade group expects permits for new construction to rise 8.9 percent to just under 38,000 for the year, as builders ramp up to meet demand.
• The group expects median home prices, already at a record high (and expected to finish 2020 8.1 percent higher than 2019) to grow another 9.5 percent in 2021.
With prices far outpacing income growth, and with significant questions about the health of the national economy still lingering, is this ongoing cycle of price appreciation as dangerous as the one that led to the real-estate bubble slightly more than a decade ago?
One who is not overly concerned about that prospect is Lisa Sturtevant, chief economist for Virginia Realtors, who says conditions today are significantly different from those at the start of the 2000s.
“The projected price increases reflect underlying fundamentals – very strong demand for homeownership and very low, historically low, supply,” Sturtevant told the Sun Gazette. “The segment of the economy that drives much of the homeownership demand has remained relatively unimpacted by this recession. In addition, unlike during the last recession, mortgage lending requirements are very conservative. The price growth we’re seeing is not being artificial driven by loose lending standards or predatory lending.”
But in the same breath, Sturtevant acknowledged that having housing costs outpace income increases will cause challenges.
“While we are not seeing a bubble, housing affordability is a growing challenge and will ultimately slow the pace of price growth,” she said. “Moderate-income households and particularly first-time homebuyers will be increasingly priced out of the market and, therefore, demand will soften.”
In its crystal ball, Virginia Realtors anticipates the commonwealth’s jobs total to rise compared to 2020 but remain below post-COVID levels, with statewide unemployment falling to 5 percent by the end of next year – lower than it is now but roughly double pre-pandemic rates.
– Scott McCaffrey
[Sun Gazette Newspapers provides content to, but otherwise is unaffiliated with, InsideNoVa or Rappahannock Media LLC.]