According to the National Association of Realtors (NAR), 2016 was a great year for the area’s real estate markets. Central Virginia real estate agents agree that business was brisk, prices were trending upwards, and the Federal Reserve kept interest rates extremely low. Unsurprisingly, as late as October 2016, the National Association of Realtors, the Mortgage Bankers Association, and Fannie Mae and Freddie Mac were predicting that home sales nationwide were really going to heat up in 2017.
But later in the fourth quarter of 2016, NAR projections had cooled considerably. With national election results that were surprising to many sectors, speculation on what the new administration would mean for real estate in the coming years began. The first concern for many in the business was the Fed’s anticipated hike in mortgage lending rates, the first of which occurred in December 2016, making money for housing slightly more expensive to obtain. The second concern was inventory of what they called affordable housing. NAR conducted a survey in the fourth quarter of 2016, and found that there was a significant decrease in consumer confidence as we enter the 2017 market. But here’s the thing: Consumers’ confidence was not that they couldn’t find a house, but that the house in question would be affordable.
Affordability appears to be the new buzzword for real estate in 2017. The definition of affordable encompasses more than just the pricing of the home, but includes possible resale value, condition of the home, and costs associated with owning the home (think homeowners association dues, commuting time, or costs of utilities).
Despite a certain sense of healthy caution however, NAR is still projecting a sunny outlook for real estate in 2017 for several reasons:
- the interest rates, though rising, are going up at
a very moderate pace;
- the risk of a housing “crash” is very low for
- Millenials are now entering their prime home-buying years;
- the continued upward trend of the American economy (the longest positive cycle in history).
In Central Virginia, where markets have been on a steady but gradual climb out of the “Great Recession” since about 2010, real estate professionals are upbeat about the outlook for the coming year. Billy Flint of the Flint Property Group cites MLS data for the area of $499 million in closed sales in 2015, and $567 million in closed sales in 2016, and sees the market holding steady in 2017. “The Great Recession did take a toll,” he explains, “and Central Virginia was somewhat slower going into it, and it will be slower coming out, but I remain bullish on Central Virginia real estate in the long term.” Banks are still cautious about lending, and interest rates are on the rise, but in Central Virginia, houses are selling and so is land. In fact, though the past years have seen a decrease in the demand for what Flint calls “recreational rural property,” it is an excellent time to consider buying land. “In 30 years of selling properties, I’ve never seen a better opportunity to buy land than I see now. After all, they’re not making any more of it,” he says.
In addition to a robust inventory, area real estate agents see the possibility of increases in housing prices in the coming year, and even the current and projected interest rate hikes are unlikely to deter many buyers. “The market conditions are more favorable now than they have been in a decade,” says Jane Blickenstaff, who has been selling real estate in the Lynchburg area since 1977. She and her team at Blickenstaff and Company Realtors are very optimistic about the 2017 market, citing that their main concern is that there will be enough inventory to meet demand this spring and summer. In December the Federal Reserve announced its first modest interest rate increase since 2006, and they project more increases in 2017. These are very small increases though, and most experts see rates going up less than 1 percent, which really doesn’t change a buyer’s monthly payment significantly.
Wendy Reddy, of Reddy Real Estate, Inc., has been watching real estate trends in the area for over 17 years and spends a lot of time thinking about the statistical part of market trends. She, too, forecasts a 2017 with generally moderate growth. This relative balance between pricing and inventory, Reddy says, is a far cry from the pre-recession years of the “housing bubble,” but the flip side is that it is a safer time to buy. Agents and clients have more realistic and pragmatic expectations and are more measured and careful about their research and decision process. “I want my clients to be wise,” she says, “and that means having a thorough knowledge of how much inventory is out there, what the breakdown is.” Compared to the early 2000s, she feels that buyers are much more cautious and discerning. “Current buyers tend to be very practical,” she explains. “Many believe smaller is better, and it’s not uncommon for buyers to ask nitty-gritty questions about the age of the roof, or heating costs. They are concerned about every dollar.”
Sellers Market? Buyers Market?
According to Central Virginia real estate agents, the market will display characteristics of both sellers and buyers markets depending on a home’s location and affordability. Forest, in Bedford County, is an increasingly popular area, according to both Reddy and Flint, and so is Downtown Lynchburg—especially along the Riverwalk Trail. There is also steady interest in homes situated along the Route 29 and Route 811 corridors. Both agents also shared that the segment of houses or condos priced between $200,000 and $350,000 are in the affordability “sweet spot.” Inventory in that price range sells like proverbial hotcakes. Blickenstaff adds, “New construction is also selling as fast as the builders can build if they build to the market.” Homeowners or builders who will be looking to sell a house in that range in 2017 will likely be successful, provided it is in good shape and priced appropriately.
On the other hand, experts appear to agree that houses in higher price ranges, specifically anything over $400,000, find themselves in more of a buyers market. “There is heavier inventory in the $400,000 and above price range,” says Reddy. “Buyers can be aggressive, and it often comes down to who has made the most improvements.”
What can sellers do to increase their chances for success in 2017? Educate yourself about the competition, price the home appropriately, and make sure that it shows well to potential buyers. The best way to educate yourself is to speak with someone who has been in real estate in the area. A licensed real estate agent will be able to give you individualized feedback on your home: its condition, location and current market value. In today’s market, the condition of your home is very important to its selling potential. Real estate agents may recommend updating paint colors, decluttering congested areas and refinishing floors. “Less than 30 percent of your population can walk into a house and be able to envision what it will look like fixed up,” explains Reddy, “so go ahead and make those improvements and updates.” It will help your sale in the long run. In this market, expect buyers to be more sophisticated and savvy, and be prepared to address issues that may come up.
For people looking to purchase a home or land in 2017, the advice is clear: Don’t sit on the fence! The days of competitive “buyers markets” when homes could be purchased for a fraction of their pre-2008 value are in the past. It appears unlikely that you will see plunging prices in 2017, so if you wait to make an offer because you hope the sellers will drop the price, you are likely to miss out. On the other hand, if you are handy, and willing to do some improvements or renovations, there are still some very good deals to be had, particularly in previously owned, newer homes or even in historic properties. Educate yourself about the type of property you are interested in, talk with a bank about what you can afford, and enlist the services of a real estate professional to assist you in your search to prevent any unforeseen issues or disappointments. Real estate can be a volatile and challenging market to stay on top of, which is why the best real estate professionals will always recommend that you take the time to interview several agents before selecting the one who you feel understands your situation and has the experience and expertise to be the best guide for you.
The real estate forecast for Central Virginia is a good one: solid, steady, moderate growth across the market for 2017. The area continues to thrive, with the exponential growth of local universities and healthy diversification of industry from healthcare to nuclear technology, and manufacturing. In addition to newly nesting millennials, the area is also seeing an influx of the newly retired baby-boomers from up and down the Eastern seaboard who’ve chosen the area for its location, climate, charm and historic importance—not to mention the added attractions of features such as walkability, a vibrant city market, and the Riverwalk Trail downtown. With a forecast like this, regardless of whether you are selling or buying, or just taking an active interest in the local real estate markets in the coming year, for Central Virginia the year ahead looks sunny indeed.