With supply low and demand high, Hampton Roads housing market is RED HOT
Norfolk Realtor Kathryn Kramer has seen prospective homebuyers try many tactics to secure a contract in the midst of the booming residential real estate market, but one sticks out in her mind. • During a competition for a home this month, the second-highest bidder asked the person with the top bid to walk away in exchange for $30,000 cash. The person refused because they didn’t want to venture back out into the current housing market, Kramer said.
A record low inventory of homes on the market, combined with low interest rates, translated to a great 2020 for area real estate companies. In the midst of an economyshrinking pandemic, residential housing has remained a bright spot locally.
“The houses right now are flying off the shelves, and that’s a supply-and-demand study for the ages right now,” said J. Van Rose Jr., principal owner of Rose & Womble Realty.
Buying sight unseen
Rose & Womble agent Ryan Benton has seen several house hunters buy a home without ever stepping a foot inside. One of them was Leslie Jett, a Department of Defense employee working in Italy who is relocating and needs a place to live immediately once he arrives.
Benton dealt with another DOD employee who bought a house sight unseen last year. “They pulled up, and they already owned it,” he said.
Benton said he tells prospective buyers to go see a home within three days of it
hitting the market, or have an agent see it for them, and be fully prepared to place a bid.
For a $320,000 home in Suffolk posted midweek with no pictures online, Benton had 12 showings and two offers by the end of the first day, and four more offers by the end of the second. The home went under contract three days after being listed. All of the offers were above the asking price.
Kramer is seeing all the signs of a red-hot sellers’ market. Bidding wars, people paying above the asking price, escalation clauses — where buyers sign contracts to increase their bids if the seller receives a higher offer — are all commonplace in the current environment. In extreme cases, she said pay Trying the buyers sellers’ to buy have closing from been overseas, costs. willing Jett to had an even tougher task. He has bought homes twice before and has been renting the past seven years while traveling overseas, but he said searching for a home in this market was an entirely new experience. He said it was great that the internet allowed him to scope out houses online with virtual tours, calculate mortgage payments and even determine commute times from possible new homes.
“But these same helpful tools have created a hyperactive environment where things move so fast it’s hard to be competitive when you aren’t on the same time zones or waking/working hours,” Jett said in an email.
Living in Italy put him six hours ahead of Eastern Standard Time, so he got into the habit of searching online for potential homes immediately upon waking up at 6 a.m. his time, or midnight on the East Coast. Then Benton’s East Coast friends would search again after they had started their days and alert him of any possibilities via smartphone, usually between 2 and 4 p.m. in Italy. Many homes would be under contract in a matter of hours, not days.
Jett said some local buyers also had the advantage of being able to waive inspections or guarantee their purchase price regardless of a home’s appraised value. His lender, however, required the property to be appraised and required an inspection.
Creating a need ‘inside the market’
Rose who has been with his company for more than three decades, said several factors are overheating the market. Out of a metropolitan area of more than 1.7 million people, only around 3,000 homes are on the market, he said. The housing supply in Hampton Roads has declined by almost half during the past year, with just 3,350 active listings in February compared with 6,596 one year ago, according to the Real Estate Information Network research agency. In Virginia Beach and Chesapeake, it would take less than a month for inventory to dry up if no new properties went on the market. Overall in Hampton Roads, the supply would only last 1.16 months without new houses going on sale, down from 2.64 in February 2020. Six months of inventory market. sales 2,934 Even homes are with is up. considered going the REIN reduced under data a balanced contract supply, shows in 26% February, year-over-year. an increase Settled of almost sales were up about 20% in February, with 2,198 homes sold. The lack of supply is allowing sellers to charge more for their homes, according to statewide data from Virginia Realtors. The median price of a home was $320,000 in February, up nearly 10% from February 2020. The median price is $59,000 higher than it was five years ago. In Hampton Roads, the median price of a home in February increased around 12.5%, to $260,900, compared with a year ago. Homes are selling significantly faster. At the end of 2020, Hampton Roads homes spent on average only 38 days on the market — 87 days faster than the average at the end of 2016, according to data from Rose & Womble. Homes statewide on average spent 35 days on the market in February, 17 days faster than the same point in 2020. Rose said the fallout from the pandemic has acted to both limit the supply and increase demand. Some homebuyers have been forced into the market for something new because they’ve had to create space for home offices, day cares and remote classrooms, or all three. At the same time, some potential sellers kept their homes off the market because of the uncertain times and a reluctance to have people coming into their homes for a look.
Interest rates are another big factor. He said the median home price of $266,000, paired with a 2.5% interest rate, could fetch a monthly payment of as low as $1,075. Rose said such a mortgage payment is less than many monthly apartment rents in Hampton Roads.
Rose cautioned against comparing the current market to the boom in the early 2000s that led to the housing crisis and the Great Recession. Interest rates back then were 6.5%. Now, he said, people are not buying homes “recklessly” and are highly qualified due to the lower interest rates. In the lead up to the previous housing crisis, lenders approved risky loans to homebuyers who were unable to pay as interest rates rose, according to analysis from the Wharton business school at the University of Pennsylvania.
Reaching out to owners
If potential sellers are hesitant to take the plunge, it’s not due to a lack of effort by agents, Kramer said. She’s personally contacted people who either rent homes or have second homes in the area in an attempt to drum up listings. She said she’s probably sold five or six off-market homes this way during the supply shortage.
Benton said Rose & Womble sent letters to around 50 homeowners in one neighborhood asking if they would be willing to sell when one client wanted to move there specifically.
For those looking to buy a home now, Jett said finding both a lender and agent who have the agility to work quickly is essential. He also told them to be patient and to send a letter or email to the homeowner with a few photos of themselves, especially if they are chasing after their dream home, in order to make a personal connection with that seller. Jett himself was recently able to close a new construction home in West Ocean View in Norfolk.
Benton tells his buyers to not get too discouraged after losing out on a home.
“If a seller has six or seven offers to choose from, they are clearly only going to pick one,” he said.
The agent also encouraged would-be sellers to take advantage of the favorable market and list their home. If they decide to list, Benton said they should formulate a plan with their agent based on their neighborhood market and have a strategy for showing the house.