2008-Year End Virginia Home Sales Report

Trends in the Virginia Housing Market 2008 Report

By Lisa A. Fowler, PhD And John C. McClain, AICP Senior Fellow, Center for Regional Analysis

Highlights •

Virginia’s economy and housing market continued to perform reasonably well in light of the national recession and housing market declines as 2008 came to a close.

•

Very positive signs in the housing market in the 3rd quarter were tempered somewhat in the 4th quarter, but sales were down only moderately.

•

On an annual basis, prices were essentially flat in 2008 compared to 2007, a performance far exceeding most parts of the country. State-wide the median price was down by a modest 1.2 percent

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Performance of the housing market varied across the state, with the severest problems in the Northern Virginia suburbs of Washington. It is in the Northern Virginia area where the foreclosure problem is the worst.

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Many efforts are underway at the national and state policy levels to intervene in the market situation, and these efforts are expected to gain traction as 2009 progresses.

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Virginia Economic Overview, 2008 Much of the economic news as 2008 drew to a close was negative as a national economic recession was officially declared to have begun in December 2007 and economic measures continued to worsen. Virginia’s economy has fared better than the U.S and than most all other states.

National Economic Backdrop

Measures of economic performance at the national level continue to indicate worsening economic conditions as 2008 ended and 2009 began.

A summary of key indicators at the national level: •

Housing continues to be a drag on the economy with both new and existing home sales in a negative trend, and information on foreclosures indicating serious problems in many parts of the country.

•

National job growth has dropped from an annual average of adding 2.13 million new jobs in December 2006 to a loss of 2.5 million jobs from November 2007 to November 2008.

•

Both the manufacturing and business indices by the Institute of Supply Management show significant recessionary declines as of November 2008.

•

Initial claims for unemployment increased to near record levels and the unemployment rate stood at 7.2 percent in November.

•

Consumer confidence measures have dropped to all-time historic lows.

•

The financial crisis and the recession are the focus of Congress and the Administration and measures are being implemented and planned to address the economic situation.

There is hope and expectation that the actions and plans along with time for markets to recover will result in economic recovery, in general, by later in 2009.

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Virginia Economic Trends

Virginia’s economy has slowed as 2008 was ending although economic measures are much more positive for the state than the U.S. Following robust job growth in the years of 2004-2006, job growth moderated to +34,200 in 2007 and in 2008 increased at an annualized rate of 13,100 (based on data through November). Thus far Virginia’s economy has not suffered as it did in the recession earlier in the decade.

Annual Job Change Virginia 1000s 120 100 80 60 40 20 0 -20

2008*

2007

2006

2005

2004

2003

2002

2001

2000

-40

Source: BLS

The services sectors continue to perform very well considering national and comparable states’ economies and job changes. Virginia has lost jobs in manufacturing and in the sectors most directly related to the housing market problems: construction, financial services, and retail trade.

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2007 – 2008* Job Change By Sector - Virginia Total = 13,100

(Ranked by Size of Sector) Prof & Bus Svc

7,600

Educ & Hlth Svc

9,600

St & Loc Gov

8,600

Retail Trade

-4,100

Leisure & Hosp Construction

2,400 -5,900

Other Svc

2,600

Financial

-2,200

Information

-700

Manufacturing

-4,800

Wlse Trade

300

Transp & Util

-200

-8000

-6000

-4000

-2000

0

2000

4000

6000

8000

10000

12000

* 2008 Annualized based on Jan-Nov Data Source: BLS, GMU Center for Regional Analysis

The unemployment rate has starting edging up but remains well below – almost 2 full percentage points - what is happening at the national level.

Unemployment Rate November Each Year

7

%

6 5 4 3 2

6.5 4.6 U.S. Virginia

1 0

Source: BLS (Not seasonally adjusted)

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Housing Market Activity in Virginia Fourth Quarter 2008 Though a modest decline in sales of existing homes in the fourth quarter of 2008 compared with the fourth quarter of 2007, average and median sales prices were down more at the end of the year. Many local markets in Northern Virginia drove both the sales and price trends, with sometimes dramatic increases in sales activity in the fourth quarter accompanied by substantial price declines. Some other markets across the state fared better than the state overall in terms of sales and prices.

In the fourth quarter, nearly 17,000 homes were sold in the local associations across the state of Virginia, representing a drop of just fewer than five percent compared with the fourth quarter of 2007. Double digit declines in market activity were experienced in Harrisonburg-Rockingham, Lexington-Buena Vista, Richmond Metro and Williamsburg; however, these declines were offset in the Prince William, Northern Virginia, Fredericksburg, and Dulles Area markets where home sales were up. (The number of homes sold in the Prince William market was 148 percent higher in the fourth quarter of 2008 compared with the fourth quarter of 2007.)

The geographic trends were flipped with regards to price changes. Overall, the median price of a home sold in the fourth quarter in Virginia was $207,047 in the fourth quarter of 2008, down 14.7 percent from the fourth quarter of 2007. The average price was $285,869, down 14.3 percent from a year earlier. The biggest price declines continue to be greatest in the Northern Virginia area markets, including Prince William and Northern Virginia. Some markets actually saw prices rise in the fourth quarter, including Williamsburg, Chesapeake Bay and Rivers and Lynchburg. Prices were down only modestly in the fourth quarter in the major market of Hamptons Roads.

The number of pending sales was also down across much of the state. In the fourth quarter of 2008, there were 17,261 pending sales, compared with 21,529 in the fourth quarter of 2007.

Like the pattern of sales activity, pending sales continue to be higher at the end of 2008 compared with the end of 2007 in many Northern Virginia area markets.

Annual The year 2008 was a rocky year for residential real estate across the nation and around much of the state of Virginia. As a whole, however, Virginia fared better than many other states.

Prices were basically flat in 2008 and while home sales activity was down statewide, the drop was not as dramatic as in many other parts of the country. With the state, different local markets experienced the uncertain year with different levels of severity.

In 2008, nearly 82,000 homes were sold in the state of Virginia, down 13.6 percent from the number sold in 2007. In the Northern Virginia area, the year was split in two, with a first half 5Â Â

marked by declines and the second half marked by dramatic home sale increases. In other major markets, such as Hampton Roads and the Richmond Metro Area, the lower sales activity has been fairly constant throughout the year. While smaller markets were not immune from the decline in sales activity, some, including Greater Piedmont, Lexington-Buena Vista, and Dan River, did only see modest declines (or modest increases).

100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0

Sales of Existing Homes Units Sold: 2007 and 2008 94,662 81,808

2007

2008

Source: Virginia Association of REALTORS, GMU

While some states have experienced double digit price depreciation, home prices remained relatively stable in Virginia in 2008. The median price of a home sold in 2008 was $244,493, compared with $247,395 in 2007, which reflects a minor drop of 1.2 percent in median home price in Virginia. Some parts of the state, many in Northern Virginia, faced steeper price declines in response to the overheated market. However, other locations experienced much more modest price declines or even price appreciation in 2008. For example, median home prices were up 11 percent in Williamsburg and up 12 percent in the Chesapeake Bay and Rivers regions. Prices were relatively flat in Roanoke, New River Valley, HarrisonburgRockingham, and Hampton Roads.

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300,000

Median Home Price: 2007 and 2008

250,000 247,395

244,493

2007

2008

200,000 150,000 100,000 50,000 0 Source: Virginia Association of REALTORS, GMU

Based on a review of 2008 housing market activity, and the data from the most recent quarter, it does not appear that a dramatic turn in most housing markets across Virginia should be expected in the first part of 2009. State and federal policies, including administration policies directed at homeowners at risk of foreclosure and state policies, will certainly have an effect on how quickly the Virginia housing market picks up.

Foreclosures in Virginia The foreclosure issue is a major one and the national level, and Virginia has not avoided the issue. The trend of foreclosures in Virginia has shown them to have increased significantly in 2008, although they appear to be reaching a plateau as of November 2008. Virginia foreclosures are lower than the national average: the rate nationally is 1.84 percent of housing units and the rate in Virginia is 1.5 percent.

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Virginia Foreclosures 7000

2006

2007

2008

6000 5000 4000 3000 2000 1000 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jum Jul Aug Sep Oct Nov

0

Source: RealtyTrac, GMU Center for Regional Analysis

However, as indicated in the 3rd quarter report, the foreclosure problem is not state-wide, and in fact is dominated by the foreclosure problems in Northern Virginia. From the chart below it is easily seen that the majority of foreclosures in the state are concentrated in Northern Virginia.

There are also problems in the metro areas of Richmond, Virginia Beach and Winchester, but the rest of the state is experiencing very minimal foreclosure issues with only a handful in the other metropolitan areas.

Foreclosures Virginia Metropolitan Areas July 15 and Oct 15, 2008 Chart Title Blacksburg Charlottesville Danville Harrisonburg Lynchburg

9 16

Oct Jul

160 6 16 20,633

N. Virginia 1,118

Richmond Roanoke

20 2,326

Va Beach - Norfolk Winchester

510

Source: RealtyTrac, GMU Center for Regional Analysis

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