Melissa Savenko's Richmond Real Estate Review

Analysis of the Central Virginia Area Housing Market - Second Quarter 2009 Report

Well, this report was released a few weeks ago, I thought I'd post it, it is still pretty interesting.  I've included the ENTIRE 21-page report here, and the 2-page synopsis here.  The report is prepared by George Mason University, and contains some interesting information, like:

• Sales increased 63% between the 1Q and 2Q of 2009, a larger-than-average Spring "bump."
• 48% - almost HALF! - of the sales in the Richmond metropolitan region for 2Q 2009 were under $200,000, compared to 37% of sales in 2Q 2008.
• Homes under $200,000 spent an average of 73 days on market ("DOM"), compared to 100 DOM for homes priced $400,000 or more.
• In the Richmond Metropolitan area, sales were down 11% in 2Q 2009 compared to 2Q 2008, but that was the smallest sales decline in the past three quarters.

Most of the data seems to confirm what we real estate agents are seeing every day - the buyers out there are predominantly first-time home buyers, typically buying in the starter home price range.  Other buyers are taking their time and being EXTREMELY picky.

I suspect the 14% price decline 2Q 2009 over 2Q 2008 can probably be attributed to the larger-than-average number of distressed sales - short sales and foreclosures.  Right now, bargain hunters with cash can pick up amazing deals, particularly in the foreclosure arena.  Short sales can also be a source of great deals, but often those transactions take longer and involve lots more paperwork and hassle.  So know what you're doing - or work with a real estate agent that does - if you plan to buy a short sale property.  Oh, and I'm always available to assist as a buyer's agent, familiar with both foreclosures and short sales.  [:)]

Anyway, the sales data for residential real estate is showing signs of improvement.  Unfortunately, people are still worried about their jobs, and being understandably cautious about making a major investment, like a new home.  So I think we're going to have to wait it out and see if consumers start to have more confidence in the market, and get off the fence while inventory is high, and prices and interest rates are low.

Good luck to everyone out there in this really tough market.  I prefer to be a "glass half full" girl and hope that these small signs mean things are looking up, and we've moved past the bottom, possibly in 2Q 2009.  Fingers crossed that I'm right!

Paradise Park - And My Baby's On Her Way to Stardom!

OK, well, maybe Part II of the title to this post is a BIT of an overreaction.  But, I have to link to this great post from John Sarvay of Floricane, giving some wonderful press to Paradise Park, one of the Fan District's smaller pocket parks and truly hidden surprises.  Paradise Park happens to be located directly behind my house, and I happen to think it is super cool.  AND, I have to point out that the picture Mr. Sarvay uses in his blog post features my own little rock star, Miss Sasha Savenko, at our recent first ever neighborhood yard sale to benefit Paradise Park. 

Thanks to John for highlighting an amazing - and largely unknown - urban treasure.  And a HUGE shout out and "thank you" to Donna Joyce, my next door neighbor and President of the Friends of Paradise Park, who has tirelessly worked to encourage the neighbors and the community to rally around Paradise Park and to contribute their time, energy, effort, and money to making it an even better little urban paradise.  Check out the "Friends of Paradise Park" group on Facebook for all kinds of information on the history of the park and current and upcoming activities and events. 

Join everyone Saturday, August 8, 2009, from 11:30 a.m. until 3:00 p.m., for Paradise Park's "We Made a Mural!" celebration, featuring music, crafts, and all sorts of other wonderfulness. Come meet my amazing neighbors and participate in the fun!

MORE on the "When Real Estate Will Hit Bottom" Poll

Huh.  I just clicked on the poll results and got COMPLETELY different results than I got yesterday.  So now I know the results must start over daily.  Here are the results today, based on 66 votes:

July-September 2009:  28%

October-December 2009:  31%

First Half 2010:  19%

Second Half 2010:  19%

So, today, almost 60% of the people polled think the real estate market will hit bottom by the end of the year, while 38% believe it will be 2010, split evenly between the first half and second half of the year.  Yesterday, people were much more pessimistic, with 46% believing the real estate market wasn't going to turn around until 2010.

What gives?  Why the much rosier outlook today, compared to yesterday?  I really don't know.  There was some positive economic news, could that be it?  If you have a theory, I'd love to hear it. 

But, I think I am now tired of this Zillow poll.  I am going to retire it, and find something else fun to put there.  If I can figure out how to do it......hmmm.....

Things I Think Are Wrong About the City of Richmond Proposal to Buy the GRTC Bus Barn Site - Part I

I wanted to write something detailed and brilliant, but I'm under the gun and don't want to completely drop the ball on this topic.  So, rather than the well-reasoned and convincing analysis I was going to prepare, you get.....BULLET POINTS!

Why I think the idea of the City of Richmond and RRHA buying the GRTC bus barn site in a private deal is a terrible, horrible, no good, very bad idea:

• Last time I checked, GRTC was a quasi-governmental entity.  So, doesn't any sale of that parcel have to be an open market sale, to ensure that the transaction is arm's length and that GRTC receives fair market value?
• The City isn't a real estate developer.
• When the City has tried to be a real estate developer, they've done a terrible job, IMHO. 
• The City and RRHA sure seem pretty tight lipped about the ultimate plans - or even the conceptual plans, for that matter - for the site.  That doesn't inspire confidence, at least not for me.
• I am pretty confident that the neighborhood associations and the constituents could bring enough political pressure to bear on a private developer to ensure a good end result, that would make most people happy.
• I have NO confidence that the City could or would develop the property in an appropriate manner. 
• RRHA's involvement means affordable housing.  Now, if we could agree on what affordable housing is, that would be the first step.  And if I thought the City and/or RRHA could or would do an appropriate and aesthetically pleasing development with an affordable housing component, that would be another.  But if "affordable housing" means ugly buildings with cheap building materials and cruddy faux Victorian elements, I'm out. 
• Let's be realistic.  Using that site exclusively for affordable housing is not the highest and best use of the property and doesn't make economic sense.
• Good design doesn't have to be expensive.  Affordable housing doesn't have to be ugly.  Unfortunately, most of the time, it is.  I think ugly there would be very unfortunate.
• AGAIN, the City isn't a real estate developer.  Why are they trying to play one on TV?

All of this is just one woman's personal opinion.  I am all for Mayor Jones' "development by design, not default" philosophy.  But the City and RRHA should stick to their knitting.  Influence the development of the parcel through appropriate governmental tools, like zoning, proffers, exerting political influence.  Hold a series of public meetings for the neighborhood associations, local businesses, residents, and any other interested parties and ask what THEY want to see on that parcel.  Communicate with the community about what the City wants there, and why.  Come up with the ideal, and then let's see if we can find someone to implement it.  But don't try to play developer. 

Them's my thoughts.  That, and $.25, won't get you a cup of coffee.

Results So Far on "When Real Estate Will Hit Bottom" Poll

Interesting. I added a little polling widget to the blog for a few days.  The poll asks the question "When do you believe the real estate market will hit bottom?"  So far we have the following results, based on 83 responses:

July-September 2009:  27%

October-December 2009:  26%

First Half, 2010:  20%

Second Half, 2010:  26%

So while a few more than 50% believe the bottom will come - or is here! - this year, 46% believe it's not until next year, and of those folks, more than half believe the bottom is another full year away.

If we assume these poll results are representative of what active buyers believe, then almost half of the people in the market to buy will be fence-sitting, waiting for better prices next year.  That is all well and good if price was the only relevant factor in the ultimate VALUE that you get when purchasing.  But there are other considerations, such as amount of inventory, interest rates - which are still low, but can't stay low forever - and the first time home buyer tax credit, which goes POOF! if you are not closed by November 30, 2009.

The market, or at least the sub-markets in which I do the vast majority of my business, is showing signs of picking up, for which we are all happy and grateful.  The reality is no one is going to know when the bottom was until it is already past us.  But for now, the poll is interesting, so I'm going to leave it up for a few more days.  Give it a click!

Take a Poll - When Is the Real Estate Market Going to Hit Bottom?

Cool.  I found this nifty widget to add to my blog site, and I actually figured out how to make it show up on the blog site.  Yea!  The widget is a poll that allows you to predict the bottoming out of the real estate market.  I'm presuming this is referring to the residential real estate market, and does NOT include the commercial market.  But whatever the underlying assumptions are, I think it's a fun little interactive thingy to try for a day or two.  You can't miss it, it's at the top left side of the blog, should be right there beside this post, as you're reading it. 

Let's see what the general consensus is.  I don't know how the widget is going to work, so I don't know whether all the results of the polling will be shown in real time, although I suspect they will.  Whatever the result, I think it will be a fun experiment.  So jump on in there with your personal prediction, and we'll discuss amongst ourselves later.

West Broad Village Developers Sued by Hotel Group

More evidence of the distress that appears yet to come in the commercial real estate world.  The Aloft Hotel West, a division of the hip W Hotel chain, is suing the West Broad Village developer for additional infrastructure improvements and the lack of supporting retail and commercial tenants. 

Random Question:  Where is the Aloft EAST, if there is a West? 

GVA Advantis in Richmond - R.I.P.?

GVA Advantis, a large, regional commercial brokerage with offices in Richmond, seems to be either dead or on life support.  People have been predicting that the commercial real estate world meltdown is still to come.  So, is this an example of the beginning of the REALLY bad times for the commercial real estate world?  Only time will tell....

GRTC Bus Barn Sale - The City of Richmond as Developer? Say It Ain't So....

Oh. My. Goodness.  I go on vacation, don’t read the paper for a few days and I miss a MAJOR development in Richmond real estate.  It is confirmed that the City of Richmond and the Richmond Redevelopment Housing Authority (“RRHA”) want to buy the Greater Richmond Transit Corporation (“GRTC”) site in the Fan at Robinson and Cary.

 

Now, I did write about the rumors floating around that the City was interested, and wanted an “affordable housing” component.  But the Mayor and his staff were being coy, to say the least, and refusing to comment on the rumors.

 

Well, as of Saturday, it’s been confirmed.  An article on the front page of the Metro Section reads “GRTC Site to Be Used for Housing?” with the subtitle “Affordable Housing Now Issue as Debate Looms on Development of Property.” Talk about your understatements.  If people think the baseball debate of Boulevard vs. Bottom was a doozy, buckle your seat belts, people, we’re in for a wild ride!

 

Here’s the deal:  The City wants to buy the property at appraised value and then hold it, have a public process, and ultimately determine the highest and best use for the parcel.  Although the messages are mixed, CLEARLY, the City wants at least an affordable housing component there.  Here's the doublespeak, judge it for yourself:

 

"Personally, I don't think this would be the appropriate spot for [affordable housing]."  Elliott Harrigan, Chairman, RRHA Board of Commissioners.

"No specific plans for this site have been determined."  Tammy Hawley, Press Secretary to Mayor Jones.

"I think there could be a component for affordable housing."  T.K. Somanath, Executive Director, Better Housing Coalition.

"I asked Mayor Jones if this [the City's proposal] was going to have a low-income housing component in it, and my understanding was that it was not."  Elliott Harrigan.

"It is Mayor Jones' "administration's goal to provide high quality affordable housing within the City."  Written Proposal from the City for the Purchase of the Bus Barns.

"It is 'RRHA's mission to be the catalyst for quality affordable housing and community revitalization."  Written Proposal from the City for the Purchase of the Bus Barns.

 

The Chairman of RRHA, per the paper, met with the Mayor more than two (2) months ago about the RRHA plan to acquire the property. 

 

Let’s ignore the issue of what they plan to turn that property into if they can get their hands on it.  Here’s my big issue:  WTH?  There was a plan on the table two (2) months ago for RRHA to buy the property and the Mayor’s press secretary has been DENYING any specific plans in the paper and to the public?

 

Here’s what has been revealed:  There is a written proposal, probably a formal Letter of Intent, for the City to purchase the property for some sum of money, amortized over 20 years at a rate of 5% interest.  Apparently, the appraisal someone has prepared values the property at $4.7M and $5.4M.  [NOTE:  Dime to a donut, that appraisal was prepared by an appraisal firm hired by the City of Richmond.]   The RRHA approved the proposal in May.  GRTC, per its Chairman, learned of the proposal in mid-June.  The GRTC Board has seen, but not approved, the proposal.

 

Thanks be to whatever Higher Power you believe in, GRTC’s Board cannot accept or reject the proposal before it’s August 2009 Board meeting.

 

There is so much wrong with this situation that I cannot even begin.  That will have to wait for Blog Entry, Part II. 

Tick Tock, Tick Tock....That's the Sound of the Clock Running Out on the 1st Time Home Buyer Tax Credit....

I don't think lots of buyers know that the First Time Home Buyer Tax Credit EXPIRES November 30, 2009.  If your purchase isn't closed by that date, you are out of luck, do not pass go, and certainly do not collect the $8,000 tax credit the federal government is handing out to savvy first time home buyers.

What does that mean?  Well, let's work backwards on the time line and make a few assumptions:

• The offer date is NOT the critical date.  The ratification date, the date the contract is accepted, is the date from which all critical next steps are measured;
• Initial offers, especially in this market, where buyers want to offer well below the list price, usually require negotiation, which can take one to four weeks;
• After the offer is accepted, the transaction must typically "clear" some critical contingencies, including (i) financing; (ii) inspection; and (iii) appraisal.  ANY ONE OR MORE OF THESE CONTINGENCIES MAY HAVE TO BE NEGOTIATED, WHICH WILL ADD ADDITIONAL TIME TO THE CLOSING TIME LINE;
• The stupid Home Valuation Code of Conduct ("HVCC") will continue to wreak havoc with Fannie and Freddie insured loans;
• Lots of first time buyers will be using FHA financing, because it requires only 3.5% of the purchase price as down payment and has more generous credit score requirements, meaning your credit can be less than stellar;
• Other government loans that permit 100% financing, such as USDA and Veterans Administration ("VA") loans, will have even more onerous paperwork and "processing" requirements; and
• Frankly, even conventional financing - 20% down or more - is taking longer because of the HVCC and because of loan officer workloads with both sales and refinances.

SO, I think the lesson is, thirty (30) days from contract to closing in this environment is EXTREMELY ambitious, in light of the factors above.  I think even sixty (60) days may be ambitious.  I would not want to be the buyer who closed December 1, 2009 and essentially gave away $8,000 dollars.  So I advise first time home buyers to give themselves at least ninety (90) days to close a deal. 

And guess what that means?  If you buy my analysis, you need to be making an offer by August 30, 2009.  That's six weeks away.  That seems to come as a shocker to lots of people, who think they have all the time in the world. 

Don't miss the boat.  Buyers right now don't seem to have any sense of urgency, and I feel like for many it's because they do not understand this time line.  I'd sure as heck be kicking myself if I missed out on $8,000 because I waited too long to move on a house that I knew I wanted to buy.

As always, I am more than happy to assist any buyers out there that need representation.  And if you already have representation, listen to your real estate agent.  Time IS running out.  Good luck, and may the force be with you!