Hampton Roads residential market tightens
The Navy man sat in Barbara Gatewood Sgueglia’s office in tears.
His rent was being raised from $1,600 to $2,750, and with several children and his wife in school, he just couldn’t swing it, even if the landlord offered to split the difference.
Anything else he could afford would likely be “much less appealing,” says Sgueglia, Hampton Roads Realtors Association board chairman and founder of the Military Relocation Team in Chesapeake.
The sailor’s situation has become all too common in Hampton Roads, she says. The number of available rentals has dropped so low and rents have risen so high that it’s become hard for people to find what they can afford.
Part of the reason is that Hampton Roads, with its large military presence, has a lot of what Sgueglia calls “accidental landlords.” These are military families who bought a starter home several years ago and rented it out to build equity when they got reassigned. Now they’re moving back — and the area’s real estate market is so tight, it’s hard to find a new place for themselves.
“They’ve had to move back into their [old] homes and the renter has to move out,” Sgueglia says. “That takes another rental off the market.” The Hampton Roads market had 606 newly listed rental properties during August, according to raw data from the Real Estate Information Network Inc. (REIN) — a steep decline from three years ago, when 1,142 apartments were newly listed.
Other investors may have pulled out because of problems they encountered during the pandemic and sold their properties at the height of the real estate market, she says.
Meanwhile more people are looking to rent, says J. Van Rose, president of Rose & Womble Realty Co. in Virginia Beach.
“One of the reasons the housing market was so blisteringly hot was with interest rates as low as they were, you could buy almost a $400,000 house with a 3% interest rate and it would be cheaper than going into an apartment by a long shot,” he says. “Now that interest rate has gone up, it’s closed that gap.”
The situation for renters in Hampton Roads is almost dire, says Jeremy Caleb Johnson, an agent and associate broker with Long & Foster/Christie’s International Real Estate in Virginia Beach.
The rule of thumb for rent in most parts of the area had averaged about $1 per square foot of property, meaning an 1,100-square-foot townhome or condo would rent for $1,100 unless there was something remarkable about it, he says. The average rate is now about $1.25 to $1.30 per square foot in what for many renters has become what he termed “an ultra competitive market.” The average monthly rent for the region was $1,800 as of Sept. 1, up nearly $200 from the same period last year.
“We see multiple applications for a property in many, many instances,” says Johnson, board chairman-elect of the Hampton Roads Realtors Association. “We see people offering above the advertised rent.”
Robert McNab, director of the Dragas Center for Economic Analysis and Policy at Old Dominion University’s Strome College of Business, says Hampton Roads is playing catch-up when it comes to rental rates. Prior to the pandemic, they increased slower than the national average. Now they’re accelerating faster.
“Of course, those increases in housing values and rental prices are outstripping gains in wages and salaries,” he says. “That places extraordinary stress on families in Hampton Roads, especially for military families that may be moving to the region and their basic allowance for housing has not kept pace with the rental price appreciation in the region.”
The challenge for Hampton Roads is to diversify its economy, which is highly dependent on Department of Defense spending, McNab says. It accounts for approximately $4 out of every $10 of economic activity in the region.
“Private sector job growth has lagged behind that of other metro areas in Virginia and the nation, so the broad challenge going forward is how to create more robust private sector growth that is not connected to the federal government,” he says. “This is something that’s obviously not going to happen overnight. It’s going to take a concerted effort.”
Sgueglia’s Navy serviceman and his family were ultimately able to remain in their rental property, after they negotiated a $2,200 monthly payment from the landlord, a decrease from $2,750.
“We ended up settling,” she says. “He’s staying. The owner isn’t thrilled, but the owner is a [former] serviceman himself, so he understands.”