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Correcting course
"Home sales peaked in the second quarter of 2005 and have trended down since then," he said. "But during the last four months, it appears sales are stabilizing. In metro Richmond last month, sales had leveled off." "Richmond has a certain demand for new housing so the market will resume," Tyler continued. "In the greater Richmond area, prices aren't declining except for the second quarter average price, but I think that was due to more sales for town- houses and condominiums [which tend to be less expensive]." Chesterfield demographer Bill Handley says the 2006 median sales price of a new single-family home was $345,600 with an average of $399,000. Median is the midpoint of all single-family home sales and is considered a better indicator because it is not skewed by the sales of very high-priced homes. "It's hard to maintain that high average without people moving in from the outside," he said. Handley projects that there will be just 1,200 new single-family homes built in Chesterfield this year, "the lowest in 20 years." Builders have been adjusting to the slowdown by building fewer homes, a situation that could increase demand in the near future. For the 12-month period ending June 30, Chesterfield issued 1,800 building permits compared to 1,344 in Henrico and 495 in Hanover. During that same time period the previous year, Chesterfield issued 2,242 building permits. "The downturn in housing is not a lessening of demand," explained Tyler Craddock, director of public and government affairs for the Richmond Home Building Association. "The issue is affordability. There's pent up demand…but government policy, cost of raw materials, and the cost of land [are factors]. The market is adjusting to providing housing at a price point." To make that adjustment, local homebuilders are throwing in extras or cutting prices. Main Street Homes in Chesterfield is doing a media blitz via newspapers, radio and television with an offer to pay $2,000 a month for six months on new home mortgages. "A lot of builders who weren't taking contingent contracts [that require selling the buyer's home first] may have lost out," said Kevin Kirwan, sales manager for StyleCraft Homes. "We've been taking contingent contracts, and it seems to be paying off. Our buyers seem to be pricing their [existing] homes better now so they can move into our homes. People realize the market is not as strong as it was, but it's still historically strong." Some industry experts are blaming lending institutions as foreclosure rates continue to rise nationally. During the housing boom, many homebuyers used interest only and variable interest loans to purchase homes that were more expensive than they could actually afford. Lenders were also more lenient in approving mortgages for buyers with no money down or bad credit. The more relaxed mortgage market caused buyers - many of whom normally wouldn't have been able to qualify for a mortgage - to flood the market, causing bidding wars on many properties. "There's been a domino effect because you can't buy another house unless you can sell what you have," added one real estate expert who declined to be identified. "Those buying expensive homes are bulletproof because of their incomes, having cash on hand and with good credit. Two years ago, some people were getting a loan if they were breathing." "It allowed virtually anyone to buy a home with no money down and poor credit," said Jerry Mabry, president and CEO of Village Bank Mortgage. "But now people who buy bonds and securities realized some loans were risky, and the underwriting criteria for new loan approvals has tightened. We're back to the basics of 5-6 years ago with having good credit and making a down payment. [Compared to two years ago,] I'd estimate that 25-30 percent of the people can't qualify for a loan." "There's more inventory than buyers now," said James Losen, a real estate agent with Long & Foster. "I believe the mortgage industry was sustaining the market with their creative financing. Sellers today need to get their homes in tiptop condition before selling rather than providing an allowance for decorating or repairs. And, of course, price the home reasonably." Tyler said investors who bought homes quickly to resell them and those buying to avoid higher prices later have left the real estate market. With more homes for sale, homes are on the market for longer now. Homes priced at less than $250,000 are selling faster than more expensive properties because there is a larger pool of buyers who can qualify to buy them. A long-term prediction of Chesterfield's housing market calls for a 48 percent increase in the number of homes from 2006-2026. Handley projects a 41 percent increase in population by 2026 and an 84 percent jump in the square footage for retail, office and industrial. Chesterfield has been placing more emphasis on recruiting new businesses and expanding existing ones.
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