Charlottesville home prices hit ‘all-time high,’ slowing market

That’s more than $28,000 more expensive than prices at this time last year — a 7% increase, according to the association’s second quarter report out Wednesday. A “chronically low inventory” combined with a “robust” pool of buyers has pushed up the price of homes and slowed the real estate market.

The most affordable county in the area is Nelson, whose median home price dropped 25% from last year: $425,000 to its current $320,000.

In Charlottesville, the median price of a house is $530,000, 11% higher than this time last year. 

“That’s a long way from affordable,” S. Lisa Herndon, president of the association, told The Daily Progress.

Still, Charlottesville’s housing market is trending better than the rest of Virginia. Herndon called the Charlottesville area — a region that includes the city and the surrounding counties of Albemarle, Greene, Nelson, Louisa and Fluvanna — an “economic bubble” that doesn’t always reflect what’s going on in the rest of Virginia. 

“That needs to be stated,” Herndon said. “Homes are far from affordable, but there are those who won’t be as affected by it.” 

With high interest rates and low inventory of housing stock, home sales in Charlottesville and the surrounding counties are “sluggish,” according to the second-quarter report. 

Compared to a year ago, there were 232 fewer home sales in the second quarter this year, and the median sales price was up 7%.

That’s no surprise to Herndon and Burroughs, who said that high prices, low sales and low inventory “remained as predicted” from previous quarters. 

“Some of the buyer’s have had to kind of go on the sidelines,” Burroughs said. 

The biggest drop in home sales this quarter was in the $200,000-$400,000 range, Burroughs said. With rates sitting at an average of 6.78% for a 30-year fixed mortgage in the third week in July, buyers may put off buying a home until mortgage rates become more manageable. 

With interest rates expected to fall around 5 percent come 2024, Burroughs said next year may be a more desirable time to sell, pushing inventory up in the area. 

For now, sellers are holding off putting their homes on the market due to the “lock-in effect.” Sellers want to hold on to the low mortgages they locked in during the refinance rates of 2020 and 2021, Burroughs said. 

For buyers, that means working with a team of Realtors to decide if this is the right time to buy, Burroughs said. For sellers, that means managing expectations and setting realistic prices for the conditions of a home, as buyers are being more cautious. 

The area is also seeing “more inventory coming online” from new construction, Burroughs said. The county approves building permits more readily than other places in Virginia, and Charlottesville homebuilders have avoided the supply-chain delays affecting other East Coast builders. 

“Builders have seen how buyers are not able to find homes, and therefore they’re thinking, ‘Well, there’s nothing else to buy, let me at least lock in new construction,’” Burroughs said. 

But despite activity in new construction, “There’s just not a lot of affordable new construction in our area,” Burroughs said. Demand for more expensive houses come from people with “deeper pockets,” who are typically not as affected by fluctuations in interest rates.  

High interest rates are also not necessarily an indication of recession. With the area’s unemployment at a “healthy” 2.4% in May and 6,900 jobs added to Virginia’s economy between April and May, buying power has the opportunity to increase, Herndon said. 

Keeping jobs in the area is one of the motivations of the ongoing zoning rewrite in Charlottesville, said Herndon, who sits on the Charlottesville Affordable Housing Fund Committee. 

“[Charlottesville] is looking for more density, and they’re trying to get the biggest bang for their buck by opening up a lot of the zoning to increase housing, adding more townhouses, duplexes and multiplex homes,” Herndon said. “That’s one I hope will open up and make homes more affordable by increasing the inventory.”