There was a very interesting article in the Richmond Times-Dispatch's Business Section earlier this week. The headline, above the fold, reads "Measure of Home Prices Gains Most in Six Years." The lead off line says CoreLogic reported a 5% year-over-year increase in home sales from September 2011 to September 2012.
This in great news for the national market. But most relevant to us here in Richmond is the news that homes sales in the Richmond region increased 16% 3Q 2012 against 3Q 2011. Unfortunately, this news doesn't come until nine paragraphs into the article.
Why do I care? In my opinion, lots of people, both buyers and sellers, have bought into the national psychology. They've been hearing for so long from so many sources that the market is terrible, that zillions of homeowners are underwater, that real estate is an uncertain, at best, and foolhardy, at worst, investment. The buyers and sellers have bought that story, hook, line, and sinker. So, now that their local reality isn't behaving the way they've been trained to believe it would behave, they are having difficulties. That makes it harder for everyone trying to do a deal in the housing market.
So, here are a few of my thoughts on just the Richmond market. I'm considering the Richmond market to be all of the City of Richmond and the Counties of Chesterfield, Hanover, and Henrico. But I also acknowledge my expertise is in the urban market, and particularly the old and historic City of Richmond neighborhoods from the Fan to Westhampton to Ginter Park. So my perspective is based on my experience in those markets, and my much more generalized observation of the outlying suburban markets.
- If you are a buyer trying to time the market, you've missed the bottom. Sorry. You're not smarter than everyone else out there. I think the bottom of the overall market was late 2011.
- If you are an investor looking for a "steal," not a "deal," those transactions are going to be fewer and farther between. And you are going to be competing against more people, as newbie investors are jumping into the market in significant numbers.
- Speaking of investors, I believe we will experience an apartment bubble. I do believe that there are certain sub-markets in the City of Richmond and Henrico that can sustain additional multifamily development, especially if that development is designed to serve a different demographic, i.e., not VCU students, graduate or otherwise. But I predict some marginally located projects and some late-to-the-game developers are going to get burned. As are some of the older urban apartment projects, which I speculate - no hard data here, would love it from anyone that wants to share - are being cannibalized by the shinier, fancier new projects.
- In the most competitive urban markets, particularly certain neighborhoods served by outstanding elementary schools, inventory is low and will drive price appreciation. In fact, inventories in parts of Area 10 and 20 are currently showing a seller's market, and in some cases a strong seller's market.
- Sellers who are considering selling in the traditional Spring market might want to consider getting their property on the market sooner, rather than later. See Point #4 above? Less inventory = less competition. If the pool of buyers has a limited choice of properties to pick from, you might have a better chance of selling, and selling quickly.
So, those are just a few thoughts, based on what we're seeing locally. Keep that in mind and take the "national" news with a grain of salt.
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