2022 has been an interesting year in the housing market. Interest rates have essentially doubled from the start of the year, sales have slowed considerably, but prices trended up all year. So, what does 2023 have in store? Let’s take a quick look at where Virginia’s housing market could be headed in the coming year.
Buyers are in a better position than recent years. While higher interest rates have cooled buyer activity and reduced purchasing power, buyers that are still active in the market could find themselves in a better negotiating position than they have in years. Inventory has been building up for much of 2022 as market activity has slowed, providing more options for buyers. In addition, homes are staying on the market longer on average, which is allowing buyers to take more time to evaluate their options. Bidding wars are less common than they were just a year ago, and these trends are likely to continue into 2023.
Home prices will likely remain stable in many markets around the state. Home prices have been trending up in local markets across the commonwealth in 2022 even as home sales have slowed. This is largely a result of tight inventory conditions coupled with pent up demand in the market. It’s likely that prices will remain relatively stable in most areas of the state in the coming year. Some local markets that experienced a spike in demand in recent years, such as second home markets, could see some price corrections coming. However, most places in Virginia are more likely to have flat/stable price trends, and in some cases rising prices in 2023.
Inventory challenges will likely persist. We’ve seen the supply of active listings grow in most regions in Virginia this past year as the frenzied pace in the market has eased. While this is certainly good news for many, the reality is that the overall housing supply remains low. Years of underproduction of housing and growing demand from aging millennials vying to make their first home purchase continues to put a strain on the inventory. Many existing homeowners that refinanced in recent years are not keen on losing their ultra-low rate to move to a different property. So, while buyers will likely have more options than they did a couple years ago, supply levels are not likely to reach a balanced level in 2023.
For more information on housing, demographic, and economic trends in Virginia, be sure to check out Virginia REALTORS® other Economic Insights blogs.