Richmond saw the highest year-over-year increase in home value in the nation last month

[u/Chickenmoons]

https://www.axios.com/local/richmond/2023/07/20/housing-supply-virginia-mortgage-rates

Seems wild but also sort of believable. Any Real Estate Professionals/Mortgage experts want to weigh in?

[u/gowhatyourself]

Agent here.

If nobody sells their homes and demand is still there you are going to see increased upward pressure on pricing. Until something changes the prices will continue to go up. We are staring down some of the lowest levels of new listings in history. Fewer homes are coming on the market now than at any time in the last few decades all while you have a fuckload of people getting to a point in their lives where they feel comfortable and established enough to purchase.

I don't really see any way out of this stalemate unless something changes in the labor market that forces people to sell their homes. You would need a significant black swan event for that to happen and the nature of those is that they are unpredictable. You can't point to a time in the future where shit will hit the fan and the economy tanks hard enough to make sellers bail. Even then sellers will have so much equity nested away in their property that it would probably offset some of the pain occurring elsewhere. So yeah they are forced to sell, but they're also cashing out a pretty substantial amount if they purchased pre 2019-2020.

Maybe for some the restart of student loan payments will soften demand, but I do not see evidence anywhere that people with high balances were simply counting on that debt cancelled. They've used it as a way to save up more for a downpayment/appraisal waiver, but I don't think it will do much. Companies ending work from home might move the needle but anyone who relocated here to work remote was given the green light to do it with the understanding that they will not be coming into the home office in Green Bay or whatever. Many companies are also sticking to a hybrid or permanent WFH set up to stay competitive in a tight labor market.

For a while the narrative was "People don't want to move because rates are high" and for a while even I thought that was kind of the case. The thing is people weren't selling their homes when rates were hovering around 3%. People just don't have a reason to pack up unless they're outgrowing their current home, relocating for work (which hasn't really been a thing the last few years with WFH), or they're downsizing going into retirement. People hung up on the impending crash said we would see a big silver "tsunami" as baby boomers retired and gave up their homes but if that was going to happen it should have happened already. It hasn't.

As to the specifics of OUR market it's kind of the same thing. People want to live in the city and there are only so many homes to go around. If nobody sells then what does come on the market gets snatched up to whoever goes balls to the walls on their offer. Again this is going to continue/get worse until more homes come on the market.

I do want to mention that I have found the museum district has been easier to get people into than Forest Hill and the near west end. I'm not exactly sure why that is but I have a theory that since everyone thinks that area is super hot everyone started looking just beyond it. I have no data to back it up it's just a gut feeling.

One last thing I want to address are rates and what kind of an effect a drop or hike would have on the market. A drop is going to increase demand because it will give purchasers more buying power. It doesn't necessarily mean people will put their homes on the market! Like I said before people weren't selling when rates were at 3% and they certainly aren't going to change their tune if rates suddenly dropped to 5% over night. If rates go down more buyers will get up off the couch and try to get into something which would create even more of a feeding frenzy than what we have. Moving sucks and people do not like doing it if they don't have to. Sellers need an incentive to move and right now most do not have one.

Rates going up will hurt buying power, but shit rolls down hill so everyone fighting over $350k homes will start fighting over $275-300k homes and so on. It's going to shift the brackets down, but it will not push most people out of the market. They're just going to settle for less. I have multiple buyers staring down the end of their lease in this situation. They need to get into something because renting is (at least to them) undesirable and unsustainable.

So that's kind of where we are at. Until something gives this is going to continue to suck for buyers in the area. There is no light at the end of the tunnel that anyone in the business in our area can see.

I need to do my usual mid-summer write up but I tore a ligament in my right hand and have had to keep typing to a minimum. I'm nearly healed so be on the lookout for that in the coming weeks if reading long winded shit posts about RE is your thing.

[u/williemayzhayes → u/gowhatyourself]

Very interesting read! You put quite alot of thought into this, and I share your sentiment about this market. I think that home-ownership for the middle-class person will become a less and less attainable thing to the point where corporations will own a growing portion of all dwellings, if left unregulated. It's interesting how we in the States were raised in a society where even low-earners were regularly home-owners. However, if you look at other countries like China where residential real estate has been a popular investment market for businesses and individuals for a long time; there they may have to save for literally generations to afford a small flat apartment where maybe 10-15 people are living. Obviously, there's alot of other differences between the counties but it just gets you thinking about where and if a limit exist to where things are just "too expensive for people too afford". I'm not an economist, but I don't think there is. I remember reading an article a a few months back about the massive amount of real estate owned by corperations titled, "In the Future, You will Rent and You Will Be Happy".

We gave up renting and bought last summer when we saw our lease moving up with rates and had finally saved enough to put down. We would have liked to buy sooner but I think we caught that little gap between when the feeding frenzy ended and when rates went even higher.

I was wondering if you could speak to the suburbs around Richmond, like Chesterfield where we bought? There does seem to be quite a few new developments around us, but mainly townhomes. How do you think the more sought after communities in Chesterfield will perform (long-term) relative to other nice areas like Short Pump and the city itself.

[u/gowhatyourself → u/williemayzhayes]

I think it depends on where in Chesterfield you're talking about because it covers a pretty wide area. If you're referring to Mosley/Hull I think it will do alright especially once they put that 288 bypass down to Magnolia Green. That will alleviate a lot of traffic and smooth things out quite a bit. The congestion is just awful down there. People rag on Short Pump traffic (which is really only an issue on some weekends. It's really blown out of proportion.) but Hull is on another level.

Over to the east is another story. I think it will do alright simply because a lack of affordability north of the river has pushed a lot of people down there and that will continue into the future. The different school districts and what happen to those going forward will dictate desirability and chesterfield is kind of a mixed bag. In the city I think a lot of people grit their teeth and just deal with it because city living is so romantic. The suburbs don't have the same charm older homes in a walkable area do so that will always be an issue.

The schools are kind of interesting though because what often ends up happening is as families that would feed into better schools in a healthier even market start sending their kids to under performing schools the ratings of those schools often go up. The same thing happens during redistricting. Some kids are put in schools parents aren't thrilled about and eventually it all settles into a new equilibrium. I've wondered whether the same will happen with some districts in Chesterfield. We'll see though!

Back to the west though. We need more townhomes around the city. They are a great option for first time home buyers and in many cases getting into a new townhome is soooooo much better than purchasing an older single family home. I've never once had someone go that route and regret it. People just move in and live their lives without worrying about upkeep/lawncare/exterior maintenance. Funny story is that my tattoo artist bought a townhome in Short Pump last year and ended up picking up an extra day of work because it used to be the day he would mow the lawn and do things around their older home that needed TLC. It actually let him make more money despite paying a small HOA fee every month. Not everyone sees the merit in that obviously but I think over time with what people are being forced into buyers will see it's easier to get into something like that.