The 2010 Central Virginia real estate market was the tale of two halves. The first half was pretty good: sales were up, inventory levels were steady, buyer interest was frantic in some neighborhoods, it wasn’t uncommon to hear about multiple offer situations. Total home sales were actually up year-over-year during the first 6 months of 2010.
However, 2010 home sales were artificially pushed up to the first half of the year because of the Homebuyer’s Tax Credit. But when the tax credit expired, the market changed drastically. The second six months of 2010 represented a 180 degree change from the first six: buyer interest was down, sales were down, and great homes weren’t getting showings. As the 4th Quarter rolled around, the panic of Q3 began to subside a bit. There was a sense of calmness in the market…and even a few positive signs. While sales were down in most market segments in Q4, Contracts Written during Q4 2010 were up (or relatively steady) in many market segments. Maybe a bit of hope for 2011…
There are definitely still some issues looming. First of all, inventory levels are still too high. A ‘balanced’ market represents approximately 6 months of inventory…many market segments have 12, 18, even 24+ months of inventory. If we think of basic supply and demand, there is way too much supply…meaning prices will probably continue to back off until inventory levels come under control.
The other major issue affecting buyer confidence and values are distressed properties (meaning short sales and foreclosures). Distressed property sales are becoming more common in Central Virginia (this is a national trend, not just specific to us). Distressed sales lead to buyer hesitancy (as they wonder if there is a better deal around the corner) and falling property values (banks are looking to unload inventory, not squeeze a few grand more out of each house). The uncertainty of the distressed home market (i.e. how many foreclosures are coming to the market moving forward?) has, to a certain extent, frozen the market.
Because of these two issues, 2011 could be another rocky year in Central Virginia real estate. If you are a buyer, make sure you make informed decisions by closely analyzing both recent sales and the current competition before making a decision. If you are selling, you need to ensure that your home shows well and that it is priced correctly in today’s market.