Hampton Roads’ low supply of homes for sale presents challenges for homebuyers

Newlyweds Jennifer and Thomas Karnes tried to sweeten every deal to make themselves stand out in Hampton Roads’ tight real estate market.

The couple waived home inspections, made full-price offers without contingencies, offered escalation clauses thousands of dollars over asking price and 100% of closing costs, wrote “love” letters, sent pre-approval letters in lieu of pre-qualification letters and even offered one seller $100 worth of bitcoin.

Instead, they were outbid countless times, told by a real estate agent that “VA loans are trash,” and were met with repeated frustration and disappointment until finally successfully closing a deal.

‘Multiple bids on each house’

Liz Moore, board president of the regional Real Estate Information Network, said it’s no secret that residential home inventory has been and remains low from Williamsburg to the North Carolina line — and across the entire country.

The number of homes for sale in Hampton Roads has been dropping year over year. Buyers had roughly 2.5 times more options on the market in February 2020 than this past February, or 6,596 active listings compared with 2,501 listings, according to REIN data. The number of homes for sale dropped by 25% from 3,350 in February last year.

“There’s a significantly higher number of buyers in the market than we have listings for,” Moore said. “And so the challenge with that is it means there’s multiple buyers for every new listing that comes on the market and that often means there are multiple bids on each house.”

Buyers are finding themselves competing for listings and that tends to drive sales prices up, she said.

Old Dominion University economist Vinod Agarwal said the median sales price at the end of 2021 for existing homes in Hampton Roads was $279,000 — a high gain of 9.4% from 2020.

“When new listings come, it takes only about a month for the market to basically clear,” he said. “Homes are simply selling faster than the supply that’s coming in.”

Many homes sell before a sign can even be placed outside the dwelling, Agarwal said.

The median number of days homes in the region spent on the market was 11 in February compared with 20 days a year ago, according to REIN. Hampton Roads home sales were down slightly, by 22 homes or 1%, from February last year.

Rising mortgage rates present another affordability challenge now. The average 30-year fixed-rate mortgage rose to 4.42% as of March 24, an increase from 3.11% at the end of December, according to the Freddie Mac weekly survey. Mortgage rates had remained below 3% much of last year.

“I don’t think it will change in the immediately foreseeable future, but I do believe that interest rate hikes coupled with sellers who are realizing it’s a great time to jump on the bandwagon will bring more listings this spring and summer,” Moore said.

Patience and persistence required

The Karneses began looking for their house last spring before they married in October. Thomas Karnes, an Illinois native, retires as a chief master sergeant from the Air Force on April 1 and wanted to stay in the region.

Jennifer Karnes, a Chesapeake native, had already experienced a tough market when she bought a small 1950s house near Naval Station Norfolk seven years ago. Hers was a full-price offer back then, and the fourth one on the house.

“I cannot imagine what this market is like for a first-time home buyer looking for a starter home; I remember that feeling well,” Karnes said.

Originally, her plan was to build equity, move from that starter home and keep it as a rental property but the couple want to take advantage of the seller’s market and realize the gain now. And living well below their means for several years enabled the Karneses to save cash and not have to sell until they found their next home.

But that was easier said than done. Jennifer Karnes, a civilian financial attorney for the Navy, said, “We went weeks without a listing even coming up.”

Together, the couple looked at about 35 homes and bid competitively — within 24 hours of each showing — on six.

Their first offer on a 1920s home in dire need of repair was to be sold as is. With a leaky roof and windows, the house also needed a costly paint job, but the Karneses made a full-price offer with no contingencies anyway.

After days of waiting, they learned their offer was declined.

Ten minutes after another listing piqued their interest, the Karneses took off from work and dashed out the door to see it but their vehicle got rear-ended on the way. They arrived with only 15 minutes to see the home, she said.

Although their commute from this home included a tunnel, they made an aggressive offer.

“We were so excited to finally be the first offer,” Karnes said. “We were outbid. At least this time they responded.”

Adjusting expectations

The final listing that answered their prayers was priced $150,000 over the Zestimate, a home value that real estate marketing platform Zillow presents online.

“We made an offer, and thankfully, were chosen,” she said.

That offer included waiving every inspection and paying every cost including $50,000 over the listing price, but Karnes said they were still outbid by $2,000.

“Luckily, we had a better structured deal and were chosen,” she said.

Originally, they sought a turn-key home in the mid-$500,000 range. The couple bought a fixer-upper in need of a new kitchen and bathrooms for $750,000.

Built in 1967, the 3,600-square-foot home has five bedrooms and four bathrooms. The daughter of an electrician and shipfitter, Karnes said she crawled through the crawl space and the attic to do her own home inspection.

“At the end of the day, it’s high-stakes gambling at this point,” she said. “You have to ignore the competitiveness of the market going in and understand what you’re willing to give up, competitively structure your offer within that frame and adjust your expectations.”

Finally on March 24, the new Mr. and Mrs. Karnes accomplished their goal and walked over the threshold of their new home in the Thoroughgood section of Virginia Beach.

Sandra J. Pennecke, 757-652-5836, sandra.pennecke@insidebiz.com