Virginia's Fastest Growing Markets and 2021 Trends


Virginia's real estate market rebounded nicely in 2020, with most sectors overcoming the post-COVID slump of the first two quarters. Ultimately, the total number of home sales for the year, 132,370, surpassed that of 2019 by 4.8%. The chief economist for Virginia Realtors predicts that the median home price in the state will be $349,196 in 2021, a 9.5% increase over 2020.

While there are several reasons for this rebounding success, quality of life is a big reason why people are moving to and investing in Old Dominion. U.S. News and World Report ranks Virginia seventh in the nation for quality of life overall. The state has low crime, great opportunities for advancement, and good education and healthcare systems.

Other factors behind the thriving real estate market in many parts of the state are low interest rates, low inventory, and steadily declining unemployment. The unemployment rate in Virginia fell from 7.9% in July of 2020 to 4.9% at year's end. As the economy continues to shake off the throes of COVID-19, buyer confidence is up. 

It's important to note that Virginia has distinct regions, each with its own real estate trends. The seller's market in Northern Virginia is less robust than breakout areas like Richmond, Norfolk, and Virginia Beach. Meanwhile, along the Shenandoah Valley, home prices are falling, and properties remain on the market longer. 

Overall, however, most analysts predict a continued seller's market in Virginia throughout 2021.

Fastest Growing Real Estate Markets in Virginia

1. Richmond, Virginia

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According to Forbes, the capital city of Richmond is one of the hottest real estate markets in the country right now, claiming the number 12 spoton its list of Top Housing Markets to Watch in 2021. Home to the beautiful Fan District and steeped in American history, Richmond is a tight seller's market where half the homes sell for more than their listing price. The median home sale price is $263,000, a 21.9% year-over-year increase. Properties remain just 12 days on the market. 

2.  Virginia Beach, Virginia

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Properties in this popular recreational area increased 8.3% year-over-year; the median sales price is now $287,000. The city has a Redfin Compete Score of 76, which is very competitive. Properties sell for just about listing price and remain on the market for 25 days. The seller's market here is partly driven by low inventory — there is currently less than six weeks available.

3. Norfolk, Virginia

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Like Virginia Beach, Norfolk is a popular coastal community located on the Chesapeake Bay, near the North Carolina border. Home to Naval Station Norfolk, the region has a strong military presence and is a popular spot for military retirees. The median home sales price here is $240,000, up 9.1% year-over-year. Many properties get multiple offers; overall, homes sell at 0.3% below the list price. 

4. Newport News, Virginia

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Newport News is an attractive suburb of Norfolk that earns high marks for diversity and nightlife. Overall, Niche gives it a grade of B+. The median sales price here is $229,000, up 23.9% year-over-year. Homes typically sell for just 0.3% under list price, and they remain on the market an average of 30 days. The Redfin Compete Score for this coastal Virginia city is 72, making it very competitive. Hot properties can glean multiple offers and result in bidding wars.

5.  Arlington, Virginia

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This expensive commuter suburb of Washington D.C., Arlington earns a Redfin Compete Score of 70, or very competitive. The median sales price here, $605,000, increased 3.5% year-over-year. Like other D.C. suburbs, Arlington's competitive seller's market is fueled by low inventory and a strong desire to purchase a home in what Niche determined was the #1 best city to live in America for 2020.

6. Falls Church, Virginia

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Niche gives this family-friendly suburb of D.C. an overall score of A+ for its excellent public schools, diversity, and nightlife. The price of real estate here reflects its high regard. The median sales price is $557,500, an increase of 5.7% year-over-year. Homes remain on the market for 29 days on average.

7. Alexandria, Virginia

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Alexandria makes the 9th spoton Niche's list of Best Cities for Young Professionals in America. This D.C. suburb gets particularly high marks for nightlife and diversity. Public schools are better in other Northern Virginia suburbs, like Falls Church and Arlington. The median sales price of a home here is $512,500, up 4.6% year-over-year. Homes remain on the market for 36 days; 38% of homes sold for above list price.

8. Ashburn, Virginia

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Ashburn claims the #10 spoton Niche's 2020 list of Best Suburbs to Live in Virginia. This D.C. bedroom community has excellent public schools and provides residents with the quintessential suburban experience. The median home price here is $542,300, up 5.3% year-over-year. The market here is relatively stable, but Realtors have expressed concern overpricing homes accurately; despite low inventory, homes that are overpriced run the risk of languishing on the market.

General Statewide Trends

Historic Low-Interest Rates

Most analysts predict that interest rates will continue to be low throughout 2021, meaning that buyers have an opportunity to afford more home than they would otherwise. In Virginia, rates have dropped as low as 2.5% for a conventional mortgage. Although low-interest rates can't compensate for high prices in Fairfax County and other Washington D.C. suburbs, it does make homes affordable in hot markets like Richmond and Norfolk.

Disappointing Condo Sales

While single-family home sales boomed in 2020, the condo market in Northern Virginiaslumped, according to Laura Schwarz, a licensed Realtor in Virginia, Maryland, and D.C. People seemed averse to buying property that would bring them in close contact with strangers, and the market was already showing signs of oversaturation. This is potentially a good market for investors — but you should be aware that the rental market in Northern Virginia is also slow.

Low Inventory and the Affordability Gap

As COVID-19 persists in making sellers skittish, low inventory is a problem throughout the United States, particularly in prime markets. Unlike other parts of the country, however, housing shortages are not creating much of an affordability gap in Virginia. Affordability may eventually prove to be an issue in Richmond, where prices are rising fast to meet demand. In Northern Virginia, however, where the median home price is already high, sales prices have only risen slightly. Investors looking to purchase a home in the D.C. suburbs should proceed with caution, as it is possible that this sector could potentially shift to a buyer's market if a glut of homes come on the market after 2021.

Conclusion

Virginia continues to be a seller's market in 2021, fueled by low interest rates, low inventory, and steady economic recovery. Prices are rising fast in coastal cities but have generally held steady, with only small increases, in pricier Northern Virginia. Accordingly, investors should look to purchase single-family homes further from the suburbs of D.C. The condo market, hurt by fears surrounding COVID-19, is declining, and the rental market is oversaturated.

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