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Richmond real estate market may have bottomed out
Asked to expound on when the buyers will return, Sears said, "It may have already bottomed…maybe. The market in July has been positive." To be precise, real estate in the Richmond metro peaked in October 2005 and hit bottom last "May 28 at 4 p.m.," Sears smiled. "It's no longer the market of bells and whistles," he added. "It's the market of meat and potatoes with some space. Be ready for next year." Sears, director of research and consulting services for Grant Massie Land Company, was part of a panel discussion put on by the Home Building Association of Richmond last Wednesday. Compared to the other panel members, he was uplifting, though he chided builders for creating part of their problem. Pointing to the hefty prices for new homes, he said, "The builders have left the buyers." Bill White, owner of Joyner Fine Properties, agreed. One of his numerous charts pointed to the widening gap between household income and home prices that started growing apart in 2001. "We're poised to come out of this," he said optimistically. Regarding household income, the national firm Claritas supports their premise (see chart). Since 2002, the median household income in Chesterfield has only increased 2 percent. During the same six-year period, Henrico's median income grew 4.8 percent while the Richmond metro as a whole climbed 8.4 percent. The metro area includes Amelia, Caroline, Chesterfield, Cumberland, Dinwiddie, Goochland, Hanover, Henrico, James City, King & Queen, King William, Louisa, New Kent, Powhatan, Prince George and Sussex counties, the cities of Colonial Heights, Hopewell, Petersburg and Richmond and the town of Ashland. Several on the panel referred to the national media, laying some of the blame at the feet of the Richmond Times-Dispatch, other daily newspapers and television news. The media, they indicated, reported the worst declines in Nevada, California and Florida, leaving the impression that Richmond also suffered from much lower sale prices and high foreclosure rates. "All real estate is local with national influences," offered White. "Richmond didn't have the run-up [in sales prices as other markets did] - particularly second home markets. Richmond wasn't as affected." While average sale prices for new homes have declined here, much of that is due to a higher percentage of sales being condominiums. "Condos are being accepted by the conservative Richmond buyers," explained White. But the rebound here and nationwide is likely to be held back by tightening regulatory scrutiny. "They want us to provide more equity in our loans [to builders] and properly assess our risk rating of our loan portfolios," Bonnie Agee, who handles single-family home construction loans for Fulton Bank, told the group. "Regulators are strictly adhering to regulation guidelines." A year ago, homebuyers with a credit score of 740 could get a 100 percent loan, but that's not likely today, according to Steve Mills with Wells Fargo Home Mortgage. "We all have to pay for Nevada, California and Florida." Tightening credit will impact the firsttime buyer most because the credit score is more important, he said. Home sales for those mostly youthful buyers will be helped by "trickle up economics…FHA and VHA loans and BOM&D - the bank of mom and dad…Federal subsidies are coming." But mortgage insurance is more difficult to obtain for condos, he added. The ability to get a mortgage loan will be influenced by where you live. There have been fewer foreclosures in Chesterfield County compared to Richmond and Henrico County, so that helps. Northern Virginia and Virginia Beach are problem areas, and Fredericksburg is rated as "declining and depressed." "The underwriters of loans are making few exceptions," said Mills. Median household income*
*Median household income means half the households have income higher and half lower. Source: Claritas |
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