Virginia’s housing market has been experiencing high home prices and low inventory for a long time, causing stress for homebuyers. An imbalance in supply and demand is the primary factor for this trend. Buyers are competing with each other and with investors who make cash offers without inspections, with quick closing times accentuating the situation.
High prices and low inventory
The average closing prices of houses in the Roanoke Valley spiked up to $311,507 in February, $20,000 more than the previous year. The average selling price of homes in Virginia also increased by 5.7%, or $20,000 in February 2023 compared to February 2022, despite a decline of 20.3% in home sales. The trend of high prices and low inventory has persisted for some time, resulting in an increase in rent rates as well.
Spring can bring hope
However, experts are optimistic that the market will improve during spring when more homes are expected to hit the market, which could even out the values and prices for prospective buyers. They advise potential buyers who want to enter the market to be patient and not buy something they are unsure of.
Slump in Homebuying in Los Angeles and Orange Counties
Meanwhile, Los Angeles and Orange County have experienced a significant slump in home buying activity. Sales of homes have decreased by 36% in a year to February’s slowest pace on record. In these two counties alone, sales have dipped by 2,765 since February 2022.
The reasons behind the slump
The main cause behind this decline is surging mortgage rates that have cut buying power by 25%, making Southern California’s high home prices even more unaffordable. Economic skittishness and soaring inflation have also contributed to declining sales. The pricier financing is a key factor, with the 30-year mortgage average at 6.3% compared to 3.8% last year.
Sales decline in Los Angeles County and Orange County
In Los Angeles County, buyers got an estimated house payment that’s 27% pricier than a year ago, while in Orange County buyers got a payment that’s 30% higher than a year ago. Single-family and condo sales fell by 36% and 41%, respectively, in Los Angeles County, while falling by 30% and 36%, respectively, in Orange County.
Improvement expected in the US housing market
Despite these challenges, the US housing market as a whole is showing signs of improvement. The pending home sales index has risen by 0.8% in February, beating economist expectations of a 2.9% drop. Leading market reports have also beaten expectations for the third consecutive month.
Pending home sales numbers are forward-looking
Pending home sales are now viewed as forward-looking barometers for the housing market’s future health. Existing-home sales, pending contracts, and new-home construction pending contracts have all turned the corner and climbed for the past three months.
Mortgage rates are improving
Mortgage rates have improved amid the federal government guaranteeing most mortgages’ status amidst uncertainty in the financial market. Some analysts expect to see an improvement in the US housing market this year as the Federal Reserve ends its aggressive monetary policy and potentially cuts rates as early as June.
Conclusion
To sum it all up, Virginia’s housing market is plagued with high prices and low inventory while Los Angeles’ and Orange Counties’ markets face a significant slump in home buying activity due to soaring mortgage rates and economic skittishness. However, the US housing market as a whole shows promising signs of improvement despite pandemic-induced uncertainty. The market’s current situation warrants patience and caution from both buyers and sellers.
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