Will the Virginia housing market crash in 2022? While we’re seeing supply, demand, and price trends like never before, a well-rounded understanding of what’s going on behind them is crucial for investors.
The 2022 housing market has been another wild ride for buyers and sellers in Hampton Roads and across the country thanks to rising mortgage interest rates, rock-bottom inventory, and still-rising home prices. The astounding midyear statistics can be a little baffling in this unique real estate atmosphere, so our experts are breaking it down for you.
Skip To:
What’s Happening to the Hampton Roads Housing Market in 2022?
If you take a brief glance at the Hampton Roads housing market during the first half of 2022 compared to the first half of 2021, the overall state of the market may look like we are headed for a crash. But what’s going on behind the scenes tells a different story:
Less homes have sold: As predicted, a sharp rise in mortgage interest rates over the past 6 months has caused demand to soften. In fact, the total number of homes sold over the first half of 2022 fell 8.00% compared to 2021.
Less homes have been listed: New inventory continues to be scarce, just as we saw in the first quarter of the year. Year over year, we saw a 9.27% decrease in homes listed in the first half of this year compared to last. Increased interest rates have also made home sellers - who also tend to be subsequent buyers - less incentivized to move.
Absorption rates are the same: The two above factors have meant that consumption has stayed the same in the Hampton Roads market, even though the actual numbers look significantly different in 2022 when compared to 2021. The absorption rates in June 2021 and June 2022 were both 1.3 months.
Prices continue to rise: Because of all this, we’ve been missing the impetus needed to shift the housing price trend. The first two quarters of 2022 have shown a combined 9.56% increase in median sales price year-over-year.
Are Housing Prices Going to Drop in 2022?
Home prices were still hitting record highs in early 2022 in Virginia and beyond. Since January, the Hampton Roads real estate market has seen an additional increase of almost 10% on the median sales prices of properties, and there’s no sign that it will slow down soon.
Pending sales were down in June by over 15% compared to last year, indicating that demand is truly beginning to lessen in Hampton Roads this summer. Unfortunately, that doesn’t necessarily mean that prices are going to drop simultaneously. Less competition for properties simply gives buyers more leverage when negotiating with sellers.
We’re hoping to see homes start to appreciate at a healthier rate before long, but there are a few things that will need to happen in the housing market before we see that return to normal that buyers are anxious for.
When Will Housing Market Prices Drop?
Housing prices continue to rise, and the whole country seems to be waiting anxiously for them to level out. To return to a “normal” and healthy housing market in Virginia Beach and nearby cities, we’ll be looking for:
Inventory to increase to a 3.5-5 month supply: Inventory in the area is highly dependent on sellers, because there isn’t a lot of room for new builds. As of June 30th, 2022, Hampton Roads only had 1.3 months worth of inventory on the market. It will only increase if listings are added and supply is dampened. For the market to drop, this is key.
Demand to cool off: Virginia Beach, Norfolk, and surrounding cities are in a unique position with demand. In addition to the regular housing market traffic that other cities experience, military and industry families are constantly moving into the area. This makes calming demand just as tricky as upping the supply.
Cash buyers to be satiated: The NAR reported that 25% of sales of existing Hampton Roads homes in April 2022 were cash buyers. We’ve seen that those purchasing a property with cash have been flooding into the market over the past few years. Because this group isn’t using loans, rising interest rates don’t affect their demand.
All in all, prices will continue to rise until we reach that healthy balance of supply and demand. Keep an eye out for key factors like homes being on the market for 35 days or more and an absorption rate above 3.5 months.
So What’s the Good News about the 2022 Housing Market for Buyers?
After two years of anything-but-normal, prospective homebuyers in Virginia are desperate for some good news. Myths about buying homes have increased buyers’ anxieties.
Here are a few details for those of you who need housing this year:
Less bidding wars: Properties that are priced well, in great condition, and in popular locations are still receiving multiple offers, but many listings are not experiencing bidding wars anymore.
Sellers compromising again: Instead of sellers holding all the cards like they have for the past few years, they are now willing to make concessions for a full-price offer. Especially if the home has sat on the market for a few days.
Cash is king: Buyers who can pay with cash continue to have valuable leverage while we wait for the housing market to go down.
Should I Still Sell My House in 2022?
Sellers can still find a lot of success in the Hampton Roads housing market this year. If you’re working with a broker with a great track record and knack for marketing well (*hint* like CGP Real Estate), you can find a great buyer and take advantage of the prices while they are still in your favor.
To pull out a winning sale, you’ll need to really think about how you are pricing and presenting your property. A year ago you might have been able to sell your house in a weekend, but to reach the same kind of success now, you’ll need to put in the effort.
Here are a few things to try:
Get a home inspection before listing: No, inspections aren’t just for buyers. By identifying what repairs are most crucial, you’ll be able to list properly and be empowered to put your best foot forward.
Be careful and accurate when setting a list price: With less competition, buyers are able to do their homework and aren’t buying above appraisal value as they were before. Use a free Home Sale Calculator and work with a real estate representative who can give you a thorough assessment.
Present the property with care: Show your property in the best condition possible. Get professional listing photos, make those cosmetic updates, and consider putting things in storage for showings.
Invest in those repairs: If you still want to get the most money from selling your home, assess the repairs recommended by the home inspector, and get to work. We’ve learned that updated kitchens often sell over list price, broken fixtures leave a lasting impression, and there are a few repairs you just definitely should not do yourself.
THE BOTTOM LINE:
In truth, navigating the housing market will be a grind for the rest of the year. The slowing of demand has not been supplemented by an increase in homes for sale, so prices haven’t yet started to stabilize and we don’t see a return to a healthy market this year like everyone’s been waiting for.
As we move forward into the back half of 2022, you’ll want to buy and sell with careful expertise. Just reach out and let us know how we can help you end the year with a win.