I recently enjoyed lunch with several ladies from my neighborhood. Before I could unfold my napkin, I was showered with questions I get everywhere I go; “Are you still crazy busy? How much longer will this market last? Will there be lots of foreclosures when it ends?” I’m flattered that people think I have all the answers. Unfortunately, my crystal ball broke many years ago, but I’m happy to share a few opinions and observations. Just don’t quote me!
Let’s start with some history. Hampton Roads has long enjoyed a strong real estate market with steady appreciation in values from 4 to 7 percent a year and sometimes more. This is largely due to the presence here of every branch of the military, which creates a steady flow of supply and demand. You could move here, buy a home, transfer out in two years, and sell your home for a profit — truly the American Dream.
Around 2002 – 2003, we began experiencing a seller’s market that intensified and continued for several years, peaking between 2005 – 2007. When it ended in 2008, home values that had escalated to unbelievable heights came crashing down and continued to fall for the next few years. Tax assessments, which had skyrocketed, were forced to come back down to reflect the declining values. This was followed by many years with no appreciation at all.
The fears of many realtors who sold homes during those peak years became reality. Homeowners who needed to move could not afford to sell. Their homes were worth anywhere from 10 to 50 thousand dollars less than what they owed. Some were able to sell with short sales, many lost their homes in foreclosures and many more turned their homes into rentals, often taking a monthly loss. For years, I was the bearer of bad news. When sellers called, my first question was, “When did you buy?” I then had to tell them how much it was going to cost them to sell.
Finally, about four to five years ago, we began to see some appreciation along with fewer short sales and foreclosures. We were shifting from a buyer’s market to a more level playing field.
Fast forward to 2019, when record-low inventory combined with record-low interest rates contributed to the rise of a seller’s market that has escalated to match what we saw 14 years ago. With competing offers and homes often selling for thousands above the asking price, buyers understandably feel they are overpaying. But keep in mind that home values have been suppressed for more than 10 years.
I think we are seeing a huge correction, which hopefully will mean these prices will not drop when the market subsides. One good ripple effect is that homeowners who have become landlords out of necessity can finally afford to sell, as their homes have risen in value to what they paid for them during the last seller’s market. This is adding inventory for buyers, so it’s a win-win for sellers and for buyers, who are desperate for more choices. Unfortunately, it’s not good for their tenants, as this is depleting the rental inventory, which is just as short as the resale inventory.
This brings me back to those original questions. Yes, we are still crazy busy. I can’t say for sure how long this will last, but we are already seeing a slight shift with more new listings than sales pending. This market will not go on for years, and, in my opinion, once the market stabilizes, home values will not drop as they did before. But don’t quote me.