The Richmond resale market: 2008 expectations

Doom and gloom? No way. Richmond’s beating the national average

by Jo Lord

When it comes to what the new year holds for Richmond’s home resale market, both buyers and sellers have questions. (Plenty of them.) Is this a buyers’ market? If so, what are the best bargains? What price range? What part of town? Newer versus older? Is this a good time for the real estate investor to purchase rental properties? To sort it all out, BoomerLife talked to top area real estate professionals to get the lay of the land on resale housing.

The prospects for Richmond’s resale market are good, according to Cyndi Merritt, a realtor with Keller Williams Realty. “We’re anticipating that 2008 will continue to be a good buyer’s to balanced market,” she says, explaining that a balanced market favors buyers and sellers more or less equally. She says that a key factor in Richmond’s resale market is that sellers are being more realistic when pricing their homes, which encourages sales. Houses with an average price point of about $270,000 are spending only about 75 days on the market before selling. What’s more, listings are selling at about 96% of the list price.

Good news, right? Then, what about the frustration of sellers who are getting far less for their homes than they might have a couple of years ago? Yes, says Merritt, some sellers are taking a hit on the front end of the transaction. On the other hand, they won’t pay as much for their next house as they would have two years ago, either. Her final analysis: “Real estate is cyclical, so you expect to have ups and downs. We’re on a nice, even curve.”

The backstory

Rich Napier agrees with Merritt’s assessment that Richmond’s resale market will improve in 2008. Napier is president of custom home builder Napier Signature Homes and 2007 president of the Home Builders Association of Virginia. He says Richmond is a strong market made stronger with low interest rates, low core inflation, a good job market, more houses for buyers to choose from and less pressure to act quickly, since the market has cooled. “All the fundamentals are in place. The housing market just got so hot that it needed to slow down. We’re seeing the correction now. The sky’s not falling.”

So what made us think that it was? “People need to realize that we saw the largest increase in existing and new home sales in the history of housing from late 2003 through 2006, when the slow-up began,” Napier says. “The overall housing market is looked at statewide or nationally. You get a lot of press doing national overviews and people begin to think, ‘That’s how it is where I live.’ ” Not so for Richmond, he says.

California, Florida, Las Vegas and the Washington, D.C. metro area were the hot areas during the boom years, with the highest demand and price appreciation. Conversely, they had the most severe downturn when a correction began in late 2005. That’s largely the story the media’s been telling. In reality, Napier says, Richmond area sales haven’t been off that much – only 8.6 percent from September 2006 to September 2007. “Richmond homes appreciated a bit during the boom years, but prices weren’t as inflated as the hottest areas. As a result, Richmond isn’t showing negative growth now, where those areas are. The problem is, when you turn on the national news you’re not hearing about Richmond. You’re hearing about Las Vegas and Florida. The national press has been glass-half-empty.”

The numbers

Bill White’s figures back Napier’s assertion that Richmond’s housing market is healthier than the country’s. White is president of Joyner Fine Properties and former president of the Richmond Association of Realtors. He says area homes appreciated by 4.2 percent in 2007. In contrast, homes nationally depreciated by 1.2 percent. What’s more, Richmond’s three-year home values were also strong, with 36.9 percent appreciation and average gains of $63,800 compared to 15.4 percent appreciation nationally and average gains of $29,900. He says the midpoint range is the hardest-hit segment in the area while lower- and higher-priced homes under $270,000 and over $750,000 are selling. The most expensive area in town, with an average sale price of about $540,000, is Goochland. The most affordable, with an average price of $109,557, is south of the James River, edged by Hull Street, Chippenham Parkway and Interstate 95.

The bargains

So where are the bargains for home buyers? “There are bargains out there, but you’ve got to find them,” says Napier. “Every home won’t be a bargain.” Newer existing homes in good locations could be a good buy, he says. So could homes priced between $400,000 and $800,000, owing to oversupply. As for locales, he says the area west of Richmond has always been a hot market, as have the areas north and south of the James River. He also mentions parts of Goochland and Powhatan.

Becky Accashian agrees that bargains aren’t extremely easy to come by. Accashian, owner and president of Century 21 Signature Realty, says it’s tough to generalize because bargains result from an elusive combination of location, condition and pricing. She suggests that bargain hunters look for houses that have been on the market for a while. “When someone overprices their house and the market doesn’t have acceptance of that pricing, it stays on the market for a long time. Then they start adjusting the price and it hurts them because people think there’s something wrong with the house. Ultimately, in a lot of cases, they’ll get less for their house than they could have.” She says buyers should also be attuned to houses that don’t “show” well. “The way a house looks cosmetically can determine the value in a buyer’s mind, whether it’s true or not. You could get a good deal if you’re wiling to put in some sweat equity.”

The investment scenario

Let’s say you’re not looking to buy or sell a primary residence. Can you still capitalize on the current market by purchasing rental property? You bet. “It’s a wonderful time for buying investment property,” Accashian says. “Donald Trump recently said on CNN that anybody that can buy a house right now and doesn’t is crazy.” Among the factors driving the resurgence in investment buying are good interest rates and increasingly savvy sellers pricing their houses more realistically. “During the frenzy, the small investor market died,” Accashian says. “The numbers didn’t work. Buyers were saying to themselves, ‘I can’t get a return on this purchase from a rental standpoint,’ but now small investors are moving back into the market.”

So what’s the big picture message for the Richmond home resale market? All in all, it’s good news. We’ll let Rich Napier of Napier Signature Homes have the last word. “In our market over time I’ve not seen a depreciation in real estate, ever,” he says. “Of course every situation is individual, but overall Richmond real estate is still a great investment.”

Jo Lord is a freelance writer and baby boomer who lives and works out of her little bungalow in Richmond, Virginia. Her work regularly appears in numerous publications around the city.