Hampton Roads Planning District CommissionHRPDCVA


Hampton Roads Economic Monthly

Housing Highs and Lows

by Nikki Johnson, Regional Economist

November 2023

The story of the housing market over the last few years has been one of rapid change and unexpected turns. In 2020 and 2021, while the broader economy was suffering a historic contraction, housing activity was booming. Nationally, mortgage originations reached record levels. In Hampton Roads, seasonally adjusted home sales outpaced sales during the housing boom of the early 2000s. The surge in demand caused home prices to soar in the first two years of the pandemic, rising 20% between February 2020 and February 2022.

As inflation started to intensify in the latter half of 2021, the Federal Reserve took action by implementing a series of rate hikes, which led to an uptick in interest rates in 2022. As a result, the average rate for a 30-year fixed mortgage climbed dramatically, jumping over three percentage points from 3.1% in December 2021 to 6.3% by December 2022. As of October 2023, mortgage rates have risen even further, reaching 7.6%. While the increase in mortgage rates depressed sales, home prices have continued to increase.

As illustrated in Graph 1, homes sold in the region have steadily declined since early 2022. In August 2023, home sales were approximately 17.6% below pre-pandemic levels of February 2020. While home prices dipped in the first half of 2022 in response to reduced demand, they have continued to climb since then. In August 2023, the median sale price of a residential home in Hampton Roads was 32.6% higher than in February 2020. Adjusted for inflation, prices are up 12.2% from February 2020.

The resilience of home prices is due, in part, to an imbalance in supply and demand. While the demand for housing has slowed, the supply of homes remains too constrained to meet demand. As illustrated in Graph 2, it would have taken an estimated three months to sell off all active listing in the region in February 2020. After falling to record lows in 2021, inventories have only rebounded slightly to 1.5 months as of August 2023, nearly 50% below pre-pandemic levels.


Line Graph of Median Sales Price and Homes Sold in Hampton Roads, Percent Change from February 2020 Line graph depicting Month's Supply of Inventory, Hampton Roads, January 2010-August 2023
Data source: ZIllow Home Value Index (ZVHI), Real Estate Information Network, HRPDC


The combination of high mortgage rates, elevated home prices, and limited inventories has led to a historic deterioration in affordability. The Federal Reserve Bank of Atlanta’s Housing Affordability Index shows affordability has fallen to its lowest level on record as monthly payments from both higher home prices and mortgage rate payments are causing housing costs to rise faster than incomes.

The recent changes in the housing market will continue to have a lasting impact in the years to come. While a further substantial rise in mortgage rates seems unlikely, the Federal Reserve signaling a “higher for longer” interest rate environment suggests we won’t be returning to rates below 3% in the short term. To ease the persistent upward pressure on home prices, a significant increase in housing inventories will be essential.

If you have any questions or comments, please feel free to contact us at njohnson@hrpdcva.gov

To view November's full economic monthly report, click HERE.

Home » Departments » Economics » Hampton Roads Economic Monthly