During the past few months, the real estate industry across the country has seen a lot of ups and downs. When it comes to the third quarter of 2020 in Charlottesville, Virginia, there are a few major findings that everyone should know when it comes to the real estate market.
By understanding the changes in the real estate market, it is possible to adapt quickly to the changes that are taking place both with respect to market conditions and consumer expectations.
The Key Takeaways from the 3rd Quarter Report on the Charlottesville, VA Real Estate Market
- The economic conditions in the Charlottesville area are getting better, as the unemployment rates continue to drop
- The confidence in the economy fell quickly in August but rebounded in September, contributing to an improved real estate market
- The rates on mortgages remained low in the 3rd quarter, encouraging buyers and refinance activity, and these mortgage rates are likely to remain low into 2021
- Sales activity in the local housing market picked up during the summer following a relatively slow spring
- Year over year, there was a 10 percent increase in sales activity during the 3rd quarter of 2020 compared to the same quarter in 2019
- Housing prices in the local Charlottesville area continue to climb, with the median sales price up 7 percent from last year
- The inventory of homes for sales in the local Charlottesville area remains low and continues to shrink quickly, with close to 50 percent fewer homes listed for sale during the 3rd quarter of 2020 compared to last year
The National Economy Continues To Drive the Real Estate Market in the Local Area
Even though the national economy suffered a major hit during the Spring of 2020, it did improve significantly during the third quarter. Even though the United States economy has gained jobs for five consecutive months in a row, and the national unemployment rate continues to fall, there are still a lot of signs relative to the uncertainty in the economy.
When looking at the local economy, the local region has added jobs consistently for 4 months in a row. For example, the month of August saw 68,000 jobs added. Despite this, there are still more than 200,000 fewer jobs available in the state of Virginia when compared to the same time last year. Therefore, even though the economy is continuing to improve, a full recovery is still a long way away.
In addition, it is important to take a closer look at new residential construction activity. During the summer, this did increase. In August alone, they were new permits issued for close to 100 residential units. Even though it is a positive sign that new construction is increasing, the vast majority of these permits are for single-family homes. Just a fraction of the permits has been issued for townhomes or multi-family units.
Taking a Closer Look at Consumer Confidence
It is clear that consumer confidence is still relatively weak with respect to the recovery of the economy in the local area. For example, consumer confidence indices in the mid-Atlantic area fell sharply in August. Even though it did rebound significantly in September, it is still a long way away from a full recovery.
While a consumer confidence index of 100 or greater indicates optimism about the economic conditions, the present consumer confidence index was 99.6 during the month of September. When looking at future consumer confidence indices, it is clear there is still a lot of uncertainty. Even though mortgage rates have been dropped significantly, to the point where the average of a 30-year fixed is less than 3 percent, the pace of mortgage applications slowed at the end of the summer.
Some of the reasons include:
- There is still a lot of uncertainty regarding the economy and families might not have the cash reserves to purchase a new home right now
- The inventory in Charlottesville remains low
- Many families still have a lot of uncertainty regarding their employment situation
The Housing Market in the Local Charlottesville Area Continues to Rebound
The housing market in the local area had a relatively low spring. Fortunately, it rebounded during the summer. The sales activity rose dramatically and numerous local markets during the third quarter. This includes July, August, and September.
September was certainly the busiest month, as real estate activity surged. A lot of this was due to pent-up demand in the housing market. Due to this activity, home prices continue to climb. Because the inventory remains low, home prices are rising relatively quickly. There continues to be a massive shortage of homes and the local real estate market, as many buyers are having issues finding a home within their budget.
Even though homes are still relatively expensive, mortgage rates continue to remain at historic lows. This is going to keep financing costs down, ensuring the Charlottesville market remains attractive.
Key Figures from Home Sales in the Charlottesville Market
- There were 1,447 sales that took place during the 3rd quarter, which is an increase of 10 percent when compared to last year
- The sales jump likely reflects some people who hit the pause button on their housing searches during the past few months of the pandemic
- Louisa and Nelson counties saw the biggest jump in their sales activity year over year, with respect to the same quarter
- Home prices continue to rise, with the median sales price of homes in the local area being $326,900
- Sales prices are 7 percent higher than they were last year, which represents a jump of close to $22,000
The dollars sold volume also jumped in the Charlottesville housing marketing during the third quarter. Compared to last year, the dollars sold volume was 23 percent more, with close to $600 million of sales taking place. This is the largest increase in dollars sold of any quarter during the past five years, largely attributed to the pent up demand in the housing market.
Finally, homes are on the market just a little bit longer now than they were last year. On average, homes are on the market for 60 days before they are sold, which is about 8 days longer than the same time last year. Even though this continues to increase, the average days on the market has been trending down across the region during the past several years.
Homes are selling in 39 days, on average, across the state, which is faster than the same time last year.
Taking a Closer Look at Inventory
The major issue in the local housing market continues to be inventory. At the end of the third quarter, there were only 925 active listings. When compared to last year, there are 831 fewer and active listings, on average, during this year when compared to last year.
Charlottesville is not alone when it comes to its inventory problem. There are similar inventory trends that are taking place and other Regional markets across the area. Because there is still a lot of demand in the Charlottesville market, as shown by the strong sales activity, the inventory shortage might be hurting sales totals. If buyers in the local area are unable to find homes within their price range, this could be hurting sales numbers. Across Virginia, the total number of active listings at the end of the third quarter was close to 40 percent lower than it was during the same time last year.
At the end of the third quarter, there was only about 2.5 months of supply. At the same time last year, there was 4.7 months of supply. During the past five years, this is the largest drop year over year. This only crystallizes the significant inventory problem that is currently in play across not only Charlottesville but the state of VA as a whole.
Looking to the Future: The Real Estate Market Continues To Recover
Even though the second quarter of 2020 was a tough one for the local real estate market, the area is continuing to rebound. Thanks to pent up demand in the housing market and the historically low mortgage rates, this is still an attractive area for buyers. Right now, one of the biggest problems in the local area is the lack of inventory.
The rapid sales pace is driving up the average home price, which may help the dollars sold metric, but could be hurting the number of sales overall. As the economy continues to rebound, it will be interesting to see if the inventory problem abates, which may contribute further to the recovery of the real estate market in the area.
