Virginia Beach and Colorado Springs see rising home sales amid high mortgage prevalence

Home sales in Virginia Beach, VA, and Colorado Springs, CO, are expected to rise significantly next year, with projections indicating growth between 13.5% and 27.1%. This contrasts sharply with the national forecast of a modest 1.5% increase. However, these two cities stand out for having a high percentage of homeowners with mortgages compared to other top housing markets.

Realtor.com chief economist Danielle Hale states, "These top markets are areas where there is an outsized share of younger families who are often buying their first or second home. As a result, they tend to have a greater share of homeowners who have a mortgage relative to other markets."

Virginia Beach and Colorado Springs have significant numbers of government-backed loans such as Veterans Affairs (VA) loans and Federal Housing Administration (FHA) mortgages. These financial products contribute to market growth even when many homeowners carry mortgages.

The report indicates that outright ownership is prevalent in other leading markets like McAllen and El Paso, TX. In McAllen, 61.7% of homeowners own their homes without a mortgage. This trend offers insulation from the "mortgage-rate lock-in" effect that discourages sellers from moving due to low-interest rates on existing mortgages.

In contrast, military connections in Virginia Beach and Colorado Springs lead to higher mobility among residents as military families move frequently. This contributes to dynamic housing markets despite high mortgage rates.

More than half of the mortgages in these cities come from government-backed sources due to the high use of VA loans which offer no down payment options and competitive interest rates.

Hale notes that lower anticipated mortgage rates will improve purchasing power: "The good news for households in these markets is that the anticipated drop in mortgage rates is going to help improve prospects and the purchasing power of every dollar in these markets."

With new construction projects underway in both Virginia Beach and Colorado Springs, potential buyers may find more opportunities despite low inventory challenges elsewhere.