Melissa Savenko's Richmond Real Estate Review

Richmond Is One of the Top Markets in the USA for Residential Rental Properties

According to an article published by RISMedia, Richmond, Virginia  is one of the top markets in the entire country for purchasing residential rental property. That doesn't surprise me.  HUGE and growing public university with inadequate housing supply.  Growing Millenial population.   In-migration of professionals from other parts of the country to take jobs at some of the big Richmond employers, like Capital One, Martin Agency, VCU, etc.

The problem right now is there is so little supply of investment properties and we have an ever-increasing pool of investors chasing the same limited supply.  My long-time investors are crabby about it, since people new to the game are driving the price of real estate up, up, UP.  And it makes it more difficult to find and land investment properties, when you are in competition.

My suggestion:  Figure out your ideal renter profile.  Do you want undergraduates?  Young professionals?  Families with school age children?  Then look to areas that right now might be considered "fringe" for your ideal renter but still have main amenities they would want, whether it's walkability, yard and access to the river, good schools.  Recognize that you may likely have to offer discounted rent to overcome the perceived locational disadvantage to get great tenants.  In other words, follow the Nos. 1, 2 and 3 of real estate - location, location, location! - but try to be predictive of the next "hot" areas by being logical about the known wants and needs of the rental population.

As always, just my $.02.  Always interested in the opinions of others, so hit me up and share your thoughts in the "Comments" section.

 

 

 

The New Shockoe Bottom Proposal - Some Questions

Well, the worst kept secret in Richmond was finally announced yesterday, when Mayor Jones unveiled his plan for a baseball stadium and substantial ancillary development in Shockoe Bottom.

I'm actually sick of this discussion.  It's been written about ad nauseum, including last week's cover story for Style Weekly.  The public is tired, having fought this plan two time - three times? - before.  And I think that is exactly what the Mayor and the Richmond business community pushing this plan are counting on.  They have won the war of attrittion by wearing the public down and being better financed.  Well, and all the back-door dealing certainly helped.  Kudos for the Machiavellian decision to announce the new plan on November 11, 2o013, and have the first City Council meeting discussion of the proposal on Monday, November 25, 2013, the week of Thanksgiving.  Shades of Redskins Training Center and Treegate.  Also kudos for getting City Council teed up to approve the first ordinance with no detailed information about the financing.  Here's my favorite quote: 

"The precise financing details have not yet been made clear, but city officials have made assurances that the new tax revenue from the development would cover the costs incurred by the city."

Kinda makes me think of Obama's promise that I could keep my health plan.  But I digress.

The plan centers around a new minor league ball park in Shockoe Bottom to replace the Diamond on Boulevard.  Included in the plan are a Hyatt hotel with a 65,000 Kroger on the ground floor, apartments, an as-yet-unfunded "Slavery Heritage site," and structured parking.  The usual suspects in the real estate development world are involved:  Charles McFarlane for the hotel, Louis Salomonsky for the apartments, and Highwood Properties for the to-be-developed future commercial component.  Venture Richmond - the front for all the major corporate interests in town - is cheer-leading, as are the Richmond Squirrels' management.  Mayor Jones' cronies have fallen in line, including Delores McQuinn, the Head of the Slave Trail Commission, who apparently believes this plan, with an unfunded slave heritage site and assurances of signage for the Slave Trail, is the best we can do on commemorating the history of the area.  None of that is surprising.  However, Charlie Diradour, the leader of the previous "Baseball on the Boulevard" movement, expressing openness to the proposal - now that IS a surprise.

I'm not going to go on about why I think this is a terrible idea.  You can go back to 2009 and my multiple blog posts on the subject if you want read more detailed analysis.  My opinions haven't changed.  But I am going to raise a few questions that I think deserve answers.  Now mind you, I think these questions deserve answers.  I really don't think we, the public, are going to get honest - or even dishonest - answers.  But I might as well ask the questions, right?  So here it goes:

1.   Where is the almost $80M the City of Richmond is going to contribute coming from?

2.  Why is there no public funding in this proposal for the slavery heritage site that is proposed?  This seems to suggest the slavery heritage project is an after-thought, to address the criticism of people who object to a baseball stadium on a site of such historical importance.  Is this true?

3.  Why is the tax increment financing ("TIF") for this project adequate in 2013, when it was determined to be completely inadequate for the similar 2009 proposal?  Put another way, how is the proposed financing different in 2013 from the failed proposal in 2009?

4.  In light of the significance of the area to the history of the slave trade in America, don't you think it is tawdry, tacky, and disrespectful to put a baseball stadium smack in the middle of it?

5.  Why couldn't you remove the stadium from the plan, and instead substitute a museum to emphasize the history of the area?  Why couldn't the additional, economic development components of the plan - hotel, apartments, retail - be centered around such a museum, rather than a ball park?  If you contend a history-centered project would not work, can you explain why?

6.  For the Squirrels, how do you as an organization intend to address the poll results that showed that 67% of fans did not favor baseball in the Bottom, and only 22% did?

7.  Again, for the Squirrels, do you believe you will have sufficient new fans/attendees coming from the areas immediately around the Shockoe Bottom baseball stadium to make up for the residents of Henrico County, Chesterfield County, and Hanover County who have said they will not patronize a downtown ball park?  If you do believe there will be additional new fan base, what studies or documentation do you have to support this position?

8.  How do you address the perceptions that Shockoe Bottom is not safe or family-friendly, especially in light of quotes like the following:

"I told my son who lives downtown to stay away from Shockoe Bottom for his own safety," Venture Richmond Executive Director Jack Berry said. "That's pretty bad when the guy who's promoting downtown feels that way."

"Shockoe Bottom Firms Urge Action to Stop Violence," May 14, 2010. 

That's enough.  I don't have the time or the energy to devote to anything longer than this 15 minute, stream-of-consciousness post.  And I don't think anything I or members of the public say are going to change this plan one iota.  The only thing that might - and I say might - derail this plan is if the public outrage over the desecration of such a significant and largely intact historic slave heritage site got so big, and so significant, that the administration and the real estate development and business community had to back down.  And I mean national level outrage, not just local level outrage. 

Here's the saddest thing, to me, about this whole thing.  I don't think it's going to work.  I think the baseball stadium piece is going to be a gigantic flop.  If 67% of your surveyed patrons are saying they ain't coming, I think that's something you should listen to.  I just don't see you replacing 4,000 fans with an equivalent number of Ledbury-shirt-and Shockoe-Denim-wearing downtown hipsters.  I mean, they might come once, to check it out.  Hell, I'll come once, to check it out, and I am the laziest person in the world about venturing out of my own neighborhood.  But if you think enough of the "Creative Class" are going to attend ball games to replace the urban and suburban families that currently are the main patrons of Squirrels baseball, I think you are delusional.  I mean, the hipsters might come once to watch a pig towed around the infield and six dudes dressed up in wigs and maid uniforms dancing to "Footloose," but I don't see them buying season tickets.

Maybe I will be completely and utterly proved wrong.  If this plan moves forward, I sincerely hope I am stratospherically wrong. I am a born-and-raised Richmonder, and I love this City, despite all its dysfunction.  I want any City development, especially something as massive as this, to be a success.  But I don't believe a Downtown ball park will be successful.  And more importantly, once we've destroyed and built over historically significant sites, there is no going back.

I believe Downtown development should be what's best, not what is expedient and not what makes the private sector the most amount of money right now.  I think Downtown development should be focused on what is unique about Downtown Richmond. That is the history, and the river.  Not baseball.

 

The RMA Parking Deck Debacle, OR Just When You're Sure the City of Richmond CAN'T Be Any Stupider, They Prove You Wrong!

O.M.G.  The one d*mn day I don't read the whole paper.  Just came across this article on the front page of the Metro Section of the Richmond Times-Dispatch: "City Wants to Take Downtown Expressway Parking Deck from the RMA."  The article literally compelled me to run to my office and bang out this blog post.  I am constantly amazed at the stupidity of the City of Richmond.  Just when you think it can't get any worse, it does.

If you don't feel like reading the article, here is the very short summary.  In 1990, the City of Richmond paid for the construction of the parking deck over the Downtown Expressway by the purchase of $18.9M in Richmond Metropolitan Authority ("RMA") bonds. The City was supposed to be paid back by the revenue from the parking deck.  The RMA has not repaid the City of Richmond.  In fact, in the over 20 years since the parking deck has been open (1992), it appears the City of Richmond has not been paid one. red. cent.  The City of Richmond is owed the entire principal amount of the bonds PLUS another $15M in interest. 

So, the RMA owes the City of Richmond almost $34M.  So, what is the City going to do about this?  The City Council, by consent agenda, was prepared last night to (i) foreclose on the parking deck; and (ii) forgive the RMA's $34M debt.

Yup, folks, you heard that right.  It was the City administration's recommendation to City Council that the City take back a non-performing asset and forgive $34M in debt.  To an entity that has net positive cash flow in the millions of dollars of years a year.  [NOTE:  The RMA capital budget for 2013-2014 is $12.77M, of which $7.56M is operating expense, and $5.21M is salaries and benefits.  See Page 24].  An entity that has been jerking the City around over The Diamond, and control of the Downtown Expressway, for at least the last two years.

Clearly someone needs to teach the City administration the definition of "leverage."  Perhaps followed by a little lesson in negotiating.  I mean, we already knew they were lacking in that whole negotiating skill thing when they gave away the Westhampton School building to Bon Secours for peanuts in the Redskins Training Camp deal.  Particularly since it wasn't really theirs to give away, it was the surplus property of the City of Richmond Public School system.  Details, details!  But really, this has crossed the line from the ridiculous into the sublimely absurd.  This is the conversation I imagine taking place:

"Yeah, well, that d*mn parking deck has never made any money, but I'm sure we at the City will do a MUCH better job running it.  We'll have it generating income in no time!  What, there have been operating deficits in the past?  Hmmmm.....we'll figure it out!  We've got lots of smart people here.  Just look at how great we did negotiating the deal for the Redskins Training Facility!  We'll just let those nice folks at the RMA keep that $34M they owe us, we'll just take this parking deck and go on our way...."

Dear Mayor Jones and Administration:  Here is a suggested script for your negotiations.  Please, I beg you.  Try it. 

"Hi, RMA?  Yeah, this is the City.  We kind of have a problem.  You owe us a sh*t ton of money.  Yup, $34M.  So here is how this is going to go.  We're going to take back the parking deck.  THEN we're going to sue you for the $34M deficiency.  You have a couple choices.  You can pay us that money in nice, cold, hard cash, or you can hand over some assets, like the Diamond, and give us the remainder in cash.  Maybe we'd consider some non-cash concessions, like a contractual agreement from you to stop screwing around with us over the Downtown Expressway.  We're tired of dealing with the bullsh*t about 'regional cooperation' while you take our land, fail to compensate us, jerk us around, and treat us like the poor cousin.  Looks like you're going to have to play nice."

And City Council, you all should be absolutely ASHAMED of yourselves that this horrific provision was somehow on the consent agenda.  I mean seriously, WTH?  I know it's only a part-time job, but surely y'all or your staff could have figured out that giving away $34M was not a super idea. 

Here's what I think should happen.  City, if you want to run the parking deck, fine, whatever, I really couldn't care less.  Just try not to lose money.  But since you don't seem to have any need for that $34M, I propose that you turn it over to the City of Richmond Public Schools ("RPS"), to be split equally between capital expenditures and instructional expenditures.  That should about make up for the value you stole from RPS in the Westhampton School deal.

As always, just one woman's opinion.  Comments and feedback welcome.

 [NOTE, SEPTEMBER 25:  As a commenter pointed out, of course, the City would not be entitled to the parking deck AND $34M in cash.  The City would be entitled to the parking deck PLUS the deficiency, meaning the difference between the $34M they are owed and the value of the asset they took back.  And if the parking deck has been losing money all this time, I am having a hard time believing there is any way the deck itself could be worth $34M, or even anything close to that. However you look at it, the RMA owes the City LOTS of money.  Why wouldn't we force them to pay up?]

 

City Council Shoots Down a Referendum on the Issue of Baseball on the Boulevard versus Shockoe Bottom - What I Really Think

This was initially posted as a response to a comment on a forum on the referendum issue.  It's so d*mn long, I realized I probably should have just posted it as a blog post.  So, here it is.  Pot shots and comments welcome.  I can handle it.  [;)]

**********

From your post, I suspect a few things.  I suspect you haven’t been in Richmond too long.  You don’t seem to understand the history of the “Baseball in the Bottom” versus “Baseball on the Boulevard” debate.  This issue has been raised and vigorously debated two previous times, in 2003 and 2009.  In both instances, a ballpark in the Bottom was defeated by an uprising of citizen opposition, for a number of reasons.  Some prefer the current location.  Some oppose the proposed location in the Bottom, for a number of different reasons.  Some think the Bottom should be preserved and promoted for its unique history.  Some find the location unreasonable, for the parking, the accessibility, the flood plain issues, and the cost.  The tax increment financing plans that were floated by “Baseball in the Bottom” proponents in the past were demonstrated to be overly optimistic, at best, pure fallacy at worst.  For folks who want to see regional cooperation for a stadium, the overwhelming response was the counties, and their citizens, had no interest in driving to a marginal area of the City to pay good money to park and to see a baseball game.  The current location was overwhelmingly preferred.  And ultimately, the developers and politicians who were promoting the “Baseball in the Bottom” proposals backed down, but not without fierce grassroots opposition.

I do not believe Charles Samuels recommended a referendum on the issue to keep a baseball stadium in his district, as you suggest.  I believe Charles Samuels proposed a referendum to ensure that citizens had a voice, and were not back-doored by the development community and the current administration, as they have been in the past.  How many times have we been presented with an “option,” that turned out to be fait accompli?  How many times have promises been made to the citizens, to be completely ignored?  And anyone who believes there will be a reasonable debate about “options,” when this administration presents them with a done deal, is clearly lacking in both historical perspective and common sense.

You have to look back no further than the Redskins training facility transaction to see the disregard the Administration and business community have for the citizens’ opinions.  The Administration made a TERRIBLE deal with Bon Secours, giving up the proverbial farm in the form of the Westhampton School property, in return for a measly $6.4M investment in a sports medicine facility that will bear Bon Secours’ name and be a profit-generating facility.  This was a shockingly bad deal for the City, and most importantly, a shockingly bad deal for the School Board and the City of Richmond Public Schools.  But the City Council rubber-stamped it after getting a few additional financial concessions from Bon Secours.  THIS is the great deal the City negotiated on behalf of the citizens.  God forbid we ever see a bad deal. 

I hope we will see better from the baseball discussion, but here is what I suspect will happen.  The development community is already negotiating a deal with the Administration.  They will offer to build the stadium in the Bottom “for free,” with a (minor) museum or park of some sort commemorating African-American history included.  The plan will be presented as a done deal to Council, who will choose to rubber-stamp it.  Shocker.  Business as usual in the City, where all the real deals are made behind closed doors, by the overwhelmingly white, overwhelmingly old, overwhelmingly male business community (substitute Venture Richmond here, or the Greater Richmond Chamber).  The Administration will trumpet its accomplishment, while the developers and business leaders laugh behind their hands about how they got the Administration, once again, to do their bidding.  And who loses?  The citizens.

The most disappointing piece of this to me was the pablum the six City Councilpersons who opposed a citizens’ referendum spouted to support their positions.  A referendum is an “abdication of their responsibility as elected officials.” Huh?  Asking the citizens in a non-binding referendum for their opinion on the issue is an abdication of responsibility?  Sure don’t getthat.  Citizens “don’t have enough information” to make an informed decision.  Basically, they think we’re too stupid, but have the modicum of intelligence required to realize saying that don’t look too good.  And referendums “should be used sparingly.”  Last time I checked, they sure as heck are in the RVA.  This was a big time punt by all those councilpersons, waiting to be presented with real plans, which will then allow the debate to begin.  Anyone who has been around for a bit realizes the plan the Mayor and the development community want will be presented 90% down the road, leaving any opposition or alternatives at distinct disadvantage.  OR, the plan may just be presented as a done deal, such as with the Redskins.  No debate necessary.  We know what’s best for you.

There are City Council people I expect to be shills for the Administration.  And there are several I
expected much better of. For all six of you who voted “no” on the referendum, shame on you.  Good thing I don’t live in your districts, because I’d be doing what I can come election time to let you know exactly what this citizen thinks of your faith in me.  And to Charles Samuels, Parker Agelasto, and Reva Trammel:  Thank you.  Thank you for having faith in the citizens who elected you.  Thank you for taking a position that was not patronizing and condescending.  Thank you for believing in the people.

Turning Over a New Leaf, a/k/a Removing My Head from My Rear

Well, it's been over six months since I published a post, although there are two half-written posts from November 2012 and December 2012, respectively. 

[ASIDE:  Interestingly, the November 2012 post I never finished is about the School Board punting on the recommended elementary school closure of John B. Cary Elementary, and what a failure of leadership that was.  The topic is big in the news today, as the Richmond School Board voted 5-4 to close several schools, although Clark Springs Elementary got the axe, not John B. Cary.  That's a topic I may revisit myself.]

I've been navel-gazing for a lot of different reasons that I won't bore you with, but I've finally shaken off the funk and decided I want to write, I miss writing, and gosh darnit, I'm going to do it.  I have decided to be kinder to myself and lower my expectations.  So expect to see shorter posts, on more timely topics, and more focused on real estate.  I'll still talk about things going on in the realestate development community, such as the Redskins Training Facility, but I'm going to try to focus generally on local real estate issues and trends that affect the average buyer or seller.

So, next up:  My overview of the insane market that is the Historic Fan District right now.  Or perhaps something on the prevalence of pocket listings and the ethical issues they raise.  Or what to do in a rapidly appreciating market, for both buyers and sellers.  I don't really know.  I'm going to write about whatever tickles my fancy.  Although I am always open to suggestions.

Best,

Melissa

 

The Washington Redskins, Westhampton School, Now the Arthur Ashe Center - What's REALLY Going On in the RVA?

Well, the Redskins are coming to town.  For a few weeks each summer, that is, for training camp, and the City of Richmond is building them a brand new training facility on a swath of land behind the Science Museum.

Now, don't misunderstand me.  I'm glad the Redskins are coming to town.  And I personally believe the selected site is much preferable to the City Stadiumsite, apparently the runner up location.  But, there is all kinds of wheeling and dealing between the City administration and others that looks curiouser and curiouser.  And frankly, the City's deal with Bon Secours is just flat out a bad deal.

Why do I think it's a bad deal?  Bon Secours is ponying up $6.4M for the new training facility, and in return it is getting naming rights and the ability to use the facility for its own programming.  Okay, maybe that is fair and reasonable;  Buy naming rights for recognition plus the opportunity to use the facility to provide your own services the vast majority of the time.  $6.4M seems like a fair price.   IF the deal stopped there. 

But Bon Secours also got the Westhampton School campus at Libbie and Patterson for a ridiculously below market long-term lease of $5,000 per year for 60 years, a whopping grand total of $300,000.  No word on whether or not there is at least a rent escalator in the lease.  [NOTE:  Real estate professionals estimate the property is worth between $20M-$30M dollars.]

THEN, apparently the City is also kicking in some additional land near Richmond Community Hospital for Bon Secours to develop for additional medical services.

Wow.  Who knew nuns could be so Machiavellian?  Or that the City was such a terrible negotiator.

Can I just say my objective evaluation of the deal is the City got screwed.  I mean yes, the City ends up with the Redskins training facility here in town beginning in 2013, for at least eight (8) years, but by giving away the proverbial farm.  And if they had enough money in Economic Development Authority bonds to fund the thing to start with, why not just go that route, take Bon Secours' $6.4M in naming rights/anchor tenant money, and raise the other $3.6M through other sponsorship opportunities, or leases for use of the facility?

For $6.7M investment, Bon Secours gets:

• Naming rights for the facility;
• Position as the "anchor tenant" at the facility, including the development of its own sports medicine and rehabilitation facility, which will presumably generate profits for Bon Secours;
• 60 year lease of Westhampton School  [NOTE:  Propererty value estimated to be $20M-$30M on the open market]; and
• Additional land from the City of Richmond to expand services at Richmond Community Hospital.

Looks to me like getting the Westhampton School property alone would have been a super deal for Bon Secours, without all the rest of the sweeteners.  Bon Secours has been eyeing that site since the School Board moved Richmond Community High School.  So have all kinds of developers who recognized what a prime piece of real estate the City was sitting on.  But whoever ended up with the property was going to have to go 10+ rounds with the neighborhood associations for the very affluent surrounding neighborhoods, who all had varying opinions on what should or shouldn't be done with the property. 

Bon Secours managed to get the dirt absurdly cheap, and present the entire deal as a fait accompli, effectively eviscerating any community opposition to the project.  Done deal, presented all wrapped up with a bow.  Nuns 1, neighborhood 0.

Of course the folks involved in negotiating this deal are pushing it as "good for the whole City."  See this opinion piece by Michael Frazier, the Chair of the committee that was responsible for site selection, and presumably somewhat involved in the Bon Secours/City of Richmond negotiations.

Others have commented on the rush to lionize this deal, such as Terry Rea on his SlantBlog.  This Richmond Times-Dispatch article details many of the objections and many of the objectors, including Bruce Tyler, Marty Jewell, Manoli Loupassi, Paul Goldman, and others.  The scary reality:  City Council is set to vote on the deal tonight, and I suspect it will get rubber stamped, no matter how cr*ppy a deal it really is. 

At the same time, the lame duck City of Richmond School Board is set to vote tonight to "surplus" several parcels of property, including the Arthur Ashe Center on Boulevard and the Arlington Road warehouse site, both very proximate to the site of the Redskins training facility.  Chris Dovi writes a great blog post for Richmond Magazine about why such a step is, at the least, concerning.  Taking the step of declaring the properties surplus means the City of Richmond administration then gets to manage the sale of the properties, with the proceeds going back to the City of Richmond School Board, not to the City of Richmond coffers.  In light of the cr*ppy deal the City cut with Bon Secours, I can't help being very concerned about the implications of this move, especially when seven (7) of the nine (9) School Board members are immune from any type of political fallout, since they won't be returning to the Board.

What if the City decides to enter into a long-term below-market rate lease with some developer for the Arthur Ashe  property, rather than selling it on the open market for fair market value?  What if the City decided to pursue its own economic development agenda, using these "surplus" properties as bargaining chips with the private sector development world in behind-closed-doors meetings?  What if big deal economic development decisions that will impact the City for generations to come were negotiated in secret, then packaged and presented as "done deals," with no opportunity for public input?  Could never happen, right?  

Oh, yeah, right.  It just did. 

YEA! The Richmond Real Estate Market Is Better Than the National Market

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.

1. 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.
2. 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.
3. 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.
4. 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. 
5. 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.

On The Eve of the Election, What Is Happening with Richmond Real Estate?

It's 5:30 P.M. on the Monday before the Presidential election.  I, for one, am just going to be happy when it is all over and done with.  Tomorrow, I'm going to vote, work, and avoid TV and radio.  I just want to wake up on Wednesday morning and find out who was elected from the newspaper.  And then maybe life can get back to normal.

But on the eve of the election, I thought it might be interesting to share a little bit of insight into what is going on in the world of Richmond real estate, right now.  I don't know that it is all - or even somewhat - attributable to the election.  But I've had several people who have been in the business a long time say this happens every four (4) year cycle.

First, in the plain vanilla residential real estate market, it got really, really quiet all of a sudden.  Traffic slowed or came to a stop on my listings.   My RE/MAX colleagues have been telling me the same thing.  Are people waiting to buy until the election is over, and this much heralded "certainty" shows up?  I don't know.  But it does seem that owner-occupant buyers have put their home searches on hold.

Which leads to a second observation:  The investors are back in force, and there seem to be a goodly number of them.  Why is that?  I really don't know.  But it seems like there is a much bigger portion of the population than we have seen in the last five (5) years that has the money to invest in income-producing real estate.

I've got investor buyers that are ready, willing and able to buy right this minute, with cash.  But there isn't enough - or any - attractive inventory to buy.  We're looking, and we're looking, but it seems like the same group of buyers is chasing a very small pool of  properties.  The "deals" that come on the market are going under contract in just days, often with multiple offers and escalation provisions.  Witness 817 Pepper Avenue this past week, in Area 20.  If you blinked, you missed it.

With these investors, where does the money come from?  Well, it seems to come from one of a few different places:

• Cash on hand savings.  Some people have done very well in the downturn, and have enough cash to finance their own deals.
• Investment portfolios.  I've seen people using their retirement money to purchase income-producing real estate, because the return on the investment is substantially more than they can get in the market.
• Banks.  Typically, the banks that lend speculatively do it only in a few situations.  Usually it is a community or a regional bank, and it's doing "relationship lending," where it is lending to an existing customer with a very deep relationship with the bank, and/or experience doing the kind of rehabilitation project they are trying to get financed.
• Hard money lenders.  These are the guys that charge a substantial interest rate to lend to a riskier borrower. 
• Friends and family money.  Needs no explanation.  Mom or Dad or Grammy or Granddad is willing to underwrite the investment.

It sure seems like all kinds of people are viewing real estate as one of the best places to park investment money right now.  That's not just the guys who are flipping houses again, or professional investors.  It's also Mom and Pop folks who are investing in income-producing real estate for the first time ever.  It's also the guys who are financing the flipping.  If you can get a minimum of 10%+ doing hard money lending, have a first position lien on a tangible asset, and are working with someone with a track record with investment real estate, where else are you going to get that kind of return, with that kind of certainty?

Third observation:  For a ready, willing and able owner-occupant buyer, this could be the best possible time for you to buy a house.  But you need to move fast, and close before 2013.  The reason:  You will have leverage with certain sellers, who want to avoid the increased tax hit that they will take in 2013.  Not all sellers will care - owner-occupants can still shield up to $250,000 as individuals, $500,000 as married couples, of profit from the sale of a primary residence from any income tax.  But people who are selling second homes, or investment properties, or estate sales, are likely going to take a substantial tax hit if they do not close a sale transaction by December 31, 2012.  And time is running out to make that happen.

So my conclusions: 

1.  Owner-occupant sales will, I hope, pick up after tomorrow, when there is more "certainty" and the 2012 Election is over. 

2.  Investors will continue to enter the market in increasing numbers, as real estate continues to perform better than other asset classes and money remains stupid cheap.

3.  Buyers savvy enough to buy between now and the end of the year should see the opportunity for deep discounts, as sellers rush to avoid major tax increases that are anticipated in 2013.  I believe in retrospect, as we get into 2013 and can look back, we'll find this leverage, combined with the historically low interest rates, will make 4Q 2012 one of the best times in recent memory to buy real estate.

So, other real estate professionals, what do you think of these predictions?  Comments are always appreciated.

Notorious R.O.B. on Magical Thinking OR How Realtors Get Marketing Wrong

I wrote this post back on July 24, 2012 and never posted it.  It's still relevant, but the good news - knock on wood! - is the market appears to be picking up, at least in the urban Richmond neighborhoods where I work.  AND on a purely personal note, I have hired an assistant, which has been AWESOME.  Should have done it ages ago.

But, it is still the case that deals are stupid hard to get closed, leaving anyone with several active transactions going on at one time, way less time to market.  The main culprits, in my opinion?  The large banks.  The underwriting criteria are ridiculous.  The appraisal requirements are ridiculous. They suck.  No ifs, ands, or buts about it.   Something has to change.

********

I just read Rob Hahne's newest blog posting, "Magical Thinking vs. Boring Reality."  His point:  real estate agents quite often get it wrong when it comes to marketing, focusing on the hot, the new, the cutting edge, rather than just doing the boring old stuff that has proven results, like...oh...staying in touch with your past clients?  Returning phone calls within a reasonable amount of time?

You know what?  He is exactly right.  And I resemble those remarks.  But in defense of myself, and of real estate agents everywhere, let me provide a little insight into that behavior.  And let me link some of my, at least, personal failings in this area to the vagaries and realties of the current market.

And might I say, this current market has been dragging on, and on, and on, since 2007.  I got into real estate sales full time in February 2006, so almost my entire real estate career has been during the worst overall economic conditions since the Great Depression.  So all of us that do this as our sole source of financial support have been hampsters in a wheel for a very long time now,  And I personally am just overwhelmed and exhausted by it.  Can it PLEASE end?

So, here are my defenses.  Most of them come down to the simple combination of needing time and/or money.  Here goes:

1.  Every Deal Is Harder.  Every deal requires twice as much effort to keep it all together.  Getting the client under contract is not, in my opinion, the difficult piece.  The difficult piece is getting a transaction from contract to closing.  There are inspection issues.  OR appraisal issues.  OR financing issues.  None of these things are our fault.  These are just the realities of the market.  But if you are spending twice as much time on a single deal to keep the wheels on the bus, then the available time that might be spent on marketing is substantially less.

2.  You Have to Work Harder to Get Buyers and Sellers, Who Are Fewer and Father Between.  Every working agent, except for those lucky enough to have established brands and stable books of business that are more than adequate to support them and their loved ones, is having to work harder to generate enough business.  

3.  There Is Less Time and Money to Invest in the Business.  Client appreciation programs take time.  And money.  If all my time is spent keeping the active transactions I have moving forward, and if I have to count on a substantially higher percentage of deals falling apart for stupid, unreasonable reasons, I don't have that extra time.  So my solution would be to get some help.  Having additional help has been, for me, the chicken and the egg scenario.  You need an assistant to make more money, BUT you need more money to hire an assistant. 

 So, not a comprehensive explication of all the reasons agents may not be marketing the time tested and proven ways - keeping in touch with past clients, actively seeking referrals from those past clients, maintaining and actively working a client appreciation program.  But hopefully a glimmer of insight into the rationale of at least one full-time working agent. 

 

Baseball in the Bottom - AGAIN! And Was Anyone Else at the Same VCU Real Estate Trends Conference?

Okay, so I haven't blogged in forever.  And I am still digging out from the work pile-up from attending the VCU Real Estate Trends Conference yesterday.  But I am fired up enough about the newspaper coverage and the post-conference scuttlebutt that I am taking 20 minutes out to blog on the topic.

So, one of the three break out sessions was titled "Economic Impact of Sports and Entertainment."  Of course, being weeks away from the national election, none of the three sessions dealt with the potential implications of the national election on the housing and commercial real estate market.  Sports and entertainment is clearly more pressing.  This is a real shocker when you consider the private market forces + Venture Richmond are pushing for a baseball stadium in Shockoe Bottom.  Again.  And of course, don't forget that VCU has its eyes on the former University of Richmond/City Stadium property, a choice urban core 19-acre developable parcel of real estate, for the as-yet-t0-be-announced VCU football program.  Of course the ** positive** impacts of sports and entertainment development are more important than who is President.

But my sarcasm is showing, and I digress. 

Based on the newspaper coverage I read today, the reporters attended a different conference than I did.  Here is the Richmond Times-Dispatch's coverage, "Richmond Urged to Build a Stadium Downtown."  According to the reporter, and consistent with the remarks of both the introducer and the panel moderator, "Downtown" equals Shockoe Bottom.  What the intended conclusion is, I believe, and not-too-subtly advanced one at that - Richmond really needs, four years after the SAME battle over location, a new Double A baseball stadium in Shockoe Bottom.

Huh?

I've heard Tom Murphy, the former Mayor of Pittsburgh, speak multiple times now. He is a dynamic speaker and clearly a visionary thinker.   His relevance to Richmond:  During his tenure as Mayor of Pittsburgh, he spearheaded the development of new professional football and baseball stadiums, and the re-genesis of a downtown area into a "cultural arts district," in a similarly sized town, all at the same time, and with no money.  

Here's what I don't get.  Every time I've heard Mayor Murphy speak, he talks about the mistake that was made with Three Rivers Stadium, because it did not take advantage of Pittsburgh's greatest asset, the rivers.  He talks about the mistake of allowing surface parking to take over prime riverfront real estate.  He describes incorporating the river as the backdrop and creating parks and green space between the facilities and the river, to allow, and indeed encourage, the public to take advantage of the river.  Mayor Murphy speaks passionately about how the sports and arts facility development succeeded in Pittsburgh because the DESIGN was intentional. 

If you listen to Mayor Murphy speak, I have no idea how anyone could conclude that a successful Richmond baseball stadium should be located in....Shockoe Bottom.  If you track the story of Pittsburgh's success, and try to copy the formula as best you can here, the baseball stadium should be....in Manchester.

I know, I know, I've talked about baseball in Manchester before.  But it makes a hell of a lot more sense to me there than Shockoe Bottom.  The former Reynolds Metals South Plant property, anyone?

More tomorrow, when I'm less fired up, about why Shockoe Bottom is a terrible idea, why Manchester could really work, and how I interpret the model of the "urban dumbells" of sports and entertainment development, applied to Richmond's current landscape.  Let's just say in no model that I come up with does a baseball stadium in Shockoe Bottom make sense.  Ever.