WHOA. I knew I hadn't blogged in ages, but I didn't know it was almost a year and a half. That's crazy. Time flies when you're having fun. Or when you are busy.
And that's the biggest news in the last 18 months. The market, at least in the old and historic neighborhoods of the City where I do most of my work, has picked up significantly. In some submarkets, such as the Fan and the Museum District, we're currently in a STRONG seller's market. This rapid shift has been hard for some buyers to understand. Many still seem to have the mentality that this is a buyer's market, and they can offer substantial discounts off list price, or ask for concessions like closing costs, and the sellers should be glad to have their offer. Nope. Not the case for some submarkets.
And I think that's the most interesting thing about this current Richmond real estate market. Is this a bubble? Why are prices rising so rapidly? Should we be concerned about Real Estate Crash 2.0?
My take: No. A crash is not coming. This is the result of a significant structural and demographic shift in the market. You are not seeing this white hot market across all of the Greater Richmond Metropolitan area. You are seeing it in the City. Almost exclusively. And some Henrico County submarkets, like Lakeside, that are immediately adjacent to the City.
What's going on? What is the big change? Downsizing Baby Boomers are a BIG driver. I am seeing more and more 50-60-somethings, coming from Short Pump or Midlothian or other points north, south, east and west, who are looking for a lifestyle change. They don't want the huge suburban house. They definitely don't want the huge suburban yard. The kids are grown and in college, so schools are no longer an issue. And they want to be able to walk to restaurants, museums, shops, art galleries. This is a group that I don't feel like you saw much of back in 2006 when I started in real estate. But what was a trickle has become a flood.
I do most of my work in the City, and much of that in the Fan District and the Museum District. The typical buyers in those areas in the past have been (i) folks affiliated with VCU, as professors, administrators, etc., who wanted to be close to work; (ii) young professionals, who wanted an urban walkable lifestyle; and (iii) young families, who moved to the Fan for William Fox Elementary.
[NOTE: Until fairly recently the Museum District was districted for John B. Cary Elementary, which was not perceived to be as good a school as Fox. That difference used to account, in my opinion, for the price differential between the Fan and the Museum District. The Museum District is now districted to Fox, so much of that price differential is disappearing.]
You're now adding these downsizers, many of whom are selling a large and expensive house somewhere in one of the counties, and can afford to buy in the upper end of the City property price range. Often with cash. And then there are the folks who are relocating to Richmond from somewhere urban - Washington D.C., New York, Boston, just to name a few localities recent clients of mine have come from - and want the same urban lifestyle that they are coming from.
So why the rapid escalation in values and the extraordinarily fast switch from a buyer's, or at least a balanced, market to a clear seller's market? Limited supply, ever increasing demand. There is only so much urban core real estate, and more and more people want it.
Certainly, there are other factors coming into play. Housing values are coming back to the point that people who have been underwater since 2007 are able to consider a move. Interest rates may rise, and that concern is getting people off the fence. First time buyers, who have not been as large a part of the market as they have been traditionally, something like 25% vs. the "typical" 33%, are getting off the fence and are finally ready to buy, after living through the 2007-2012 recession. It's 2015, and they are tired of paying rent.
I think 2015 is going to be a really interesting year. So far, all signs are pointing to it being a barn burner. [NOTE: I am knocking on wood as I say that, because I don't want to jinx myself]. I consider myself very lucky that I grew up in Bellevue and Ginter Park, lived at Libbie and Grove during law school, and currently live and work in the Fan, all super-white-hot neighborhoods. My prediction: All of those neighborhoods, as well as Battery Park, Byrd Park, Church Hill, and Lakeside, will continue to blow up.
We'll see. Hopefully it won't take me 18 months to follow up on this post.
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