I know! You have been waiting for this since the New Year. Well, it is finally here. Let us take a quick look at what the housing market has done in to close out 2019.
We have to zoom out to begin though. We saw the national economy continue to be stable and strong. Job growth was positive and unemployment continued to be at historic lows. These almost certainly lead to a strong housing market at the national level. With that said, there is some slight trepidation as we are in an election year, and that can always have an impact on the economy and market. Forecasters though predict an ongoing upward trend, albeit slower than recently.
Central Virginia continued to reflect, if not outperform the national economy. There continues to be moderate growth, and a ten year trend of job growth. In 2019, the 12,200 jobs were added to the region. The bulk of these were in the Leisure and Hospitality, Education and Health Services, and Financial Services sectors. The growth of these jobs is reflective, obviously, of the development around RVA. More dining, more entertainment, school divisions growing, and economic institutions expanding are where we are seeing the most growth in RVA. There is correlation with the housing market here.
Additionally, there was an increase in the building permits applied for across the region. 7,600 new permits were requested, the highest since 2007. 39% of these permit requests were for multi-family buildings. A multi-family unit would consist of 5 or more units. What does this say about development in Central Virginia? Drive around Richmond and you can see the answer. Growth continues and is anticipated. Head to Scott’s Addition and you can see this. It is also happening outside the city-limits. People are willing to sacrifice yards for location. They want to be closer to the city or in the city. These projects supply that demand.
On the note of supply and demand, let us take a look at the housing market itself. Closed sales in 2019 increased in 3 of the 4 quarters, with the 4th quarter being the best of the year. The year saw a 3.2% increase from 2018, and the 4th quarter itself climbed 9% from its predecessor. Again, what does this mean?
The market is strong and steady. Demand is high and pricing is in the wheelhouse of buyers. RVA saw a 10% increase, with Hanover being the biggest jumper with a 25% boost in closed sales. The Tri-Cities too had growth with a 9% increase as well.
Pending sales were up too. The 4th quarter of 2019 saw a 15% increase from the previous year, implying a positive start to 2020. Richmond City was up 20%, Chesterfield 13%, Prince George 18% and Petersburg 17%.
Price is reflective of this high demand. 2019 median sales price was $259,950 up 5.2%. The 4th quarter average price was up 5% to $298,270. The Tri-Cities too climbed with a a 10% increase as well. This sounds very positive, and it is, but there is another layer to this.
As we have said all year, inventory is very low. The supply continues to fall all jurisdictions reporting decreases in the last quarter of the year. Central Virginia saw a drop of 17%. The question is why?
This could be answered with a few reason. First, retirees and boomers just are not as quick to downsize. This could be because their children are living with them or a parent is living with them. Many people are opting to live in blended family settings more at this time. A second reason could be that refinancing one’s mortgage is significantly better option because of the plummeting rates. Either way the shortfall in inventory does lead to challenges.
The biggest challenge or concern would be the potential for affordability issues. While the economy looks to remain strong and see moderate growth, the lack of inventory leads to some imbalance with supply and demand. This is offset though with lower rates allowing buyers to increase their purchasing power. If the trend of increased housing permits being requested continues, more relief could be on the way.
At the end of the day, or year in this case, the 2019 was another strong year with the economy and housing. The coming second quarter and third quarter of 2020 is going to be very impacting on the housing market. Will homeowners be enticed with the opportunity to see return on their investment and put their homes on the market? Or will they opt to wait and see.