By Kuangdi Zhao and Victoria Coates
Existing home sales, both nationally and locally, have been steadily increasing in recent years, with 2014 on the path to be the most successful since 2007, the year the recession began.
“We’ve gotten more steady in our sales,” said local real estate agent Scott Baker of JF Brown Real Estate.
Average home prices are gradually rebounding, too. According to the Virginia Board of Realtors, the median sales price for the third quarter of 2014 was $260,000, lower than in the second quarter but considerably higher than a few years ago. That price is for single-family homes, townhomes and condos in Virginia.
While sales and prices have increased since the recession ended in mid-2009, local real estate broker Janie Harris remains cautious in her outlook on the market.
[pullquote]“Even though it is an improved market, it is one that still leaves everyone a little anxious,” said Harris.[/pullquote]
One cause for local uncertainty is the new on-campus living requirement for third-year Washington and Lee University students, who make up a large portion of renters in the city and county. Students have been required to live in campus housing only for two years.
That means as many as 800 juniors and seniors typically rent housing in the community, although they may live in campus housing if they like. (Sorority and fraternity houses are owned by the university and are considered “on-campus housing.”)
W&L housing change could affect home sales
The third-year housing requirement, which will first apply to undergraduates who entered the university this fall, could affect not only the rental market, but residential real estate sales as well.
Scott Hoover, a professor at W&L’s Williams School of Commerce, expects the new policy to have a major effect on the local real estate market. If the proposal proceeds as planned, starting in 2016, several hundred fewer juniors will need to rent a local house or apartment.
The university has asked both the city and county for permission to add 338 new housing units on the backside of its campus, on land that falls in both jurisdictions. The request has been approved by both planning commissions but awaits action by the City Council and the County Board of Supervisors. Lexington City Council is scheduled to take up the matter tonight. The county Board of Supervisors will meet Monday to consider it.
The removal of several hundred students from the rental market will lessen demand and could lead to lower rents. And Hoover suggests a drop in rents could lessen the value of all residential property in the area.
Once there are not enough lessees to fill all rental houses, some houses that are currently occupied by students could become vacant. Landlords might then consider selling their houses, rather than having them sit empty and not generate any income.
This could increase the number of “For Sale” signs around town and, because of greater supply, prices could fall for all residential property.
“The thing we don’t know is how far,” Hoover said.
The performance of the local real estate market also depends on interest rates and the health of the local economy. If the economy is strong, the real estate market will likely perform well. And if money is cheap to borrow, that, too, can spur sales.
Rockbridge County’s unemployment rate of 4.7 percent is below the state rate of 5.2, which is lower than that of the nation, 5.8 percent. Lexington’s unemployment rate is 9.3 percent. All three rates have dropped considerably since the recession.
But interest rates for home loans are expected to rise after the Federal Reserve last month discontinued its policies to keep interest rates near zero. The interest rate for a 30-year fixed-rate mortgage is now about 4 percent.