It continues to be an interesting year, and today’s real estate market is no different. In Central Virginia, we are seeing the spring market in the fall, with strong sales continuing due to pent up demand. At the current purchase rate, there is about a 3 month’s supply of inventory in the Charlottesville area. A 6 months supply is considered a Balanced market and below that number is a Seller’s market. As you can see, we are in a strong seller’s market.
LOCAL HOUSING TRENDS
The move to the suburbs is real and in our Charlottesville area the counties of Nelson, Louisa and Buckingham saw an increased number of sales in July of 2020 as compared to July 2019. As a result of the pandemic, we saw a shift of more people moving out of cities across the country. Many people are working from home and even as we recover, many will continue to work from home. This shift also has changed how we live in our homes. New home sizes had been falling for the past 4-5 years, but we are now seeing an increase in home size.
NATIONAL HOUSING TRENDS
I had the opportunity to listen to Dr Robert Dietz, economist for The National Association of Home Builders, speak last week. According to Dr Dietz, the latest prediction is calling for a 2-year period for economic recovery, and housing is leading this recovery with 16% of GDP.
FINANCING AND PRICING
We are also seeing gains for mortgage purchase applications. However, increased Refinance activity due to the low interest rates helps keep inventory low as more people are staying in their homes and remodeling instead of selling. Due to the low inventory and high demand, we are seeing prices up by about 3%.
NEW CONSTRUCTION IMPACT
Since there is a shortage of resale homes coming onto the market, it will be necessary to have a strong new construction industry. However, there are several headwinds for new construction. Until there is a vaccine or treatment, there is the risk of renewed lockdowns. There continues to be a shortage of skilled construction workers, and although we are seeing an increase in trade schools, training takes time. There has been a 170% increase in lumber prices since April. This adds about $16,000-$20,000 to a new build.
GLOBAL IMPACT ON NEW CONSTRUCTION
New home prices and the cost of remodeling will gradually go up as builders go through the current stock of lumber. Since we get about 1/3 of our lumber from Canada, we will want to watch what happens with the tariff. Another impact on new construction, is the fact that the global supply chain has been disrupted because of Covid and the natural disasters. For new construction, you can expect higher prices and delays.
As you can see, there is cause for optimism, but one thing that we have learned this year is that things can change quickly.