The residential housing market saw unprecedented patterns in 2020, thanks in large part to the global pandemic. Looking ahead, real estate investors might wonder if 2021 will bring similar trends.
Looking for 2022's forecast? Check it out here.
In Hampton Roads, the fast-paced seller’s market shows very few signs of slowing down soon. As we start the new year, interest rates are at all-time lows, demand is strong, and average selling prices remain higher than usual.
While many experts are predicting continued increases in settled sales and sales prices, there are several factors both potential homebuyers and property sellers should keep an eye on in the coming year that could shake things up. Read on to find out what we expect from the real estate market in 2021.
Predictions for the 2021 Hampton Roads Real Estate Market
We’ve kept a close eye on the trends of the housing market in Virginia Beach and surrounding cities like Norfolk, Portsmouth, and Newport News. Based on our observations, here are three things we see happening in 2021 Hampton Roads residential real estate:
Demand won’t go away. We’re expecting a 6-8% growth in existing home sales over the course of 2021 across Hampton Roads. In fact, between millennials with growing families, downsizing baby boomers, and seasoned investors, there is a healthy supply of buyers to keep demand stable for several years to come.
Active supply will increase. Looking ahead to spring and summer, buyers can expect to see more options begin to appear on the market as supply slightly increases. These properties will come from those who didn’t sell last year because of COVID-19, landlords looking to switch from renting to selling, and owners facing new financial situations. This uptick in listings will provide buyers with more opportunities and tame the competition a bit, but we believe it will remain a seller’s market.
Price growth will remain strong. We see home price growth trending up 4.5-6.5% throughout Hampton Roads this year. However, we expect most of that growth to happen in the first half of the year before starting to slow.
Top Housing Market Trends to Watch in 2021:
The past year has revealed several housing trends that buyers, sellers, and investors will want to bear in mind for confident decision making in the coming year:
Housing affordability: With Hampton Roads residents already spending roughly 25% of their income on mortgage payments, housing affordability is not a new issue for the Tidewater region. Historically low interest rates in 2020 helped keep mortgage payments affordable for buyers even as average purchase prices have risen. With little room left for interest rates to drop, increasing home values may mean many buyers - especially first-time home buyers - find themselves priced out of the market. This trend will only be exacerbated if interest rates begin to rise.
Multigenerational housing: The challenges of affordability and accommodating remote employment are sparking more interest in multigenerational housing. Properties with multiple masters, in-law suites, and accessory dwelling units will be increasingly sought after. Look for new construction builds to start focusing on providing additional dwelling units and separate living spaces for the whole family to enjoy.
A return to seasonality: Typically, the housing market ebbs and flows in relatively habitual trends. When the world closed because of the 2020 pandemic, those trends were completely disrupted. As we begin 2021, we expect a return to the normal patterns of new listings in March, a busy market in the summer, and a typical slow down next winter.
Hampton Roads Neighborhoods and Cities on the Rise in 2021
CGP has been watching the growth trends in Virginia Beach, Norfolk, and surrounding Hampton Roads areas throughout the past several years. Here are a few local areas where we expect to see the most price and sales growth in 2021:
Ocean View - Norfolk: Next time you’re nearby, make sure to drive down Ocean View Avenue (Route 60). Evidence of new development and revitalization in the area known as “East Beach” (or East Ocean View) is hard to miss and this activity will inevitably– and quickly–head west. Here’s what’s driving growth:
Affordability: The median single-family home price is $250,000 as of December 2020. Ocean View is currently one of the only areas you can buy a single-family within walking distance of the Chesapeake Bay for under $300K, a huge perk for families wanting to maintain the beach lifestyle without breaking the bank.
Location: Ocean View boasts close proximity to the beach, a short commute to multiple military bases, and easy access to the highway for weekend getaways or access to the rest of Hampton Roads.
Amenities: Explore Ocean View’s golf course, fishing pier, community parks, local breweries, coffee shops, and restaurants to see all this area has to offer.
Chesapeake and Suffolk: With the work-from-home trend likely here to stay for the foreseeable future, Chesapeake and Suffolk offer families the suburban balance of affordability and space while within driving distance of beaches and the city amenities of Virginia Beach and Norfolk. Here’s what’s driving growth in these cities:
Affordability: Compared to neighboring cities of Virginia Beach and Norfolk, families can expect to get more for their budget. The price per square foot in Virginia Beach is $166, compared to $151 and $138 in Chesapeake and Suffolk respectively.
Job Growth: With the growing presence of large companies like Amazon and Dollar Tree in Chesapeake and Suffolk, new jobs and industries continue to attract new residents to the area.
Space: Both Chesapeake and Suffolk have something that Virginia Beach and Norfolk don’t: land to develop. We expect to see new construction starts to increase in both cities this year - a sign that builder’s are confident the market will remain strong in these areas.
Town Center in Virginia Beach - Known as the City Business District of Virginia Beach, Town Center and its surrounding neighborhoods has a lot to offer. Here’s why we think this area is primed for growth in 2021.
Prices: The median single-family home price in this area was $250k in 2020. Compared to the rest of Virginia Beach, that’s notably affordable.
Access and Location: Town Center truly is the center of Virginia Beach and home to some of Virginia Beach’s best shopping, dining, and entertainment. And being right off the highway, the area is known for its ease of access to everything the Hampton Roads has to offer - the oceanfront, the bay, the upper peninsula, and more.
Looking to buy and invest in one of these areas? Make sure your offer is one that can’t be refused by checking out this post.
Will the Housing Market Crash in 2021?
Most likely not. While the residential real estate industry continues to be a bright spot in the economy, there are two catalysts that could slow the market down in 2021:
Influx of new supply: If a surplus of properties were introduced to the market all at the same time, demand could have a hard time keeping pace. While the chance of that happening is slight, there are a few factors that could lead to a quick increase in listings:
Foreclosure moratorium changes: Throughout the pandemic, foreclosure moratoriums have been in place to assist those struggling to afford housing. If these moratoriums are lifted anytime soon, we could see many new foreclosed properties becoming available at once - harkening back to the market slump of 2008. But although 5.83% of all loans are in some stage of forbearance as we start the new year, this number is far lower than that of 2008. Although concerning, these moratoriums and fiscal stimulus options could continue through 2021, so most experts are not predicting a sudden influx of foreclosed homes on the market at this time.
COVID-19 vaccines: We’re still waiting to see the effects of a COVID-19 vaccine on the housing market. If the widespread provision of the vaccine returns a sense of stability to homeowners who were waiting to sell, listings could increase rapidly. Although a large increase in new listings due to this is unlikely, it could possibly have an impact on the market this year
Suppressed demand: When COVID-19 hit, we initially saw a decrease in demand. Existing home sales then skyrocketed in the second half of 2020 when mortgage interest rates dipped incredibly low. If this demand starts to ease in 2021, there could be a shift in market strength. However, there are two factors that could suppress demand quickly:
More restrictive lending: If lending practices change and become more restrictive, lenders could require higher credit scores or larger minimum down payments, making buying a home less affordable for many.
Increased interest rates: The federal government intends to keep interest rates to banks low for the foreseeable future. And although this does not directly correlate to home loan rates, it does tend to influence the rates banks set. While we expect an uptick in rates from 2020, the consensus among experts is that rates will remain relatively low in 2021 - likely around 3%.
The Bottom Line
Buying a Home in Hampton Roads in 2021:
The shortfall in supply and fast paced market should calm down somewhat over the next several months. Properties will still move quickly and there will still be competition. Unfortunately for Hampton Roads, there is little room to develop new housing in the hot-spots of Virginia Beach & Norfolk. Where there is new construction, it seems to be at a higher price point. Although we foresee interest rates remaining low, it will remain difficult to find your ideal property in certain areas of Hampton Roads.
The key to success? Stay patient, get preapproved for your financing, and lock down your criteria with an experienced real estate professional.
Selling a Home in Hampton Roads in 2021:
If you are looking to sell your home in 2021, it will still be your year. With home prices and demand trending up, you are in a strong position to make a good sale. Just make sure you have a real estate broker helping you make the most out of the market, and remember the three keys to selling your home: price, location, and condition!
About the Author:
Scott Westfall is a licensed real estate broker with Broadsight Realty in Virginia Beach and owner of CGP Real Estate Consulting. CGP’s blog exists to give clients in Hampton Roads and beyond the power to buy, sell, and invest with confidence. Contact him today at CGP Real Estate to make your next real estate move in Hampton Roads.