Housing market in Richmond is tough and getting tougher, especially for first-time buyers

First-time homebuyer Cammie Dare is happy with the house she recently bought in Richmond’s Northside neighborhood, but the process of getting it wasn’t easy.

Dare, a 29-year-old advertising and marketing professional, spent eight months looking for her first home. She made offers on six houses before finally getting one in December, albeit at more than the price she had initially hoped to pay.

“I knew how crazy the market competition was for housing, so it was not necessarily surprising, but it was definitely discouraging,” said Dare, who formerly rented in Richmond. “It is frustrating when you get rejection after rejection. Every single offer I made, I would waive inspection and appraisal and do whatever I had to do because I knew how tough the market was.”

Dare’s story isn’t unusual. Finding and buying a home in the Richmond region is a challenge these days, as prices continue to rise and the number of homes going on the market remains below the demand for housing.

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Industry experts say the imbalance is likely to remain for some time. The pace of new homes going on the market seems to have slowed for multiple reasons including the disruptions to construction caused by the pandemic and more retired people aging in place instead of selling homes.

The number of new single-family home listings in the Richmond metro area declined about 11% in the first three months of 2022 compared with 2021, while the average sale price for a single-family home jumped more than 11% to $397,000 in the same period, according to the Richmond Association of Realtors. 

That data does not include town homes or condominiums. New listings of those types of housing were down 26% in the first three months of 2022 compared with the same period last year, while the average sale prices was up almost 17% to nearly $338,000.

An analysis of home sales data by the Richmond Times-Dispatch found that since 2017, average sale prices across the city of Richmond and Chesterfield, Hanover and Henrico counties have shot up by more than $120,000, despite median household income increasing by less than $10,000 in that time period.

Furthermore, the traditional “starter home” price point is rapidly vanishing from the market. In 2017, over 30% of home sales in the area closed for $200,000 or less. Now, less than one of 10 houses sells below that threshold, while twice as many homes sell for over $500,000. 

“The situation we are in today is the situation we have been in for at least the last five-plus years, and that is demand is far outstripping supply,” said Laura Lafayette, chief executive officer of the Richmond Association of Realtors. “That is particularly true in the first-time homebuyer market. I am talking about anything under $300,000.

“It is very hard for new construction to come out of the ground below that price point,” Lafayette said. “We just see a lot of folks who are living in the first-time homebuyer inventory but are not moving out of it.”

Richmond’s hot housing market follows a national trend

Across the U.S., homes spent an average of 25 days on the market in February 2022, less than half as long as two years ago. And according to Bank of America, home prices are expected to increase 10% by the end of 2022.

Compounding the issue are high mortgage rates. U.S. mortgage rates have been rising for the past two months, climbing to their highest level in more than a decade.

The average rate on a 30-year mortgage is at 5.1% this week. The last time it went higher than recent weeks was in April of 2010 when it reached 5.21%. By contrast, a year ago the 30-year rate stood at 2.97%. The average rates in recent months are the fastest pace of increases since 1994, according to the Associated Press.

The market has been hot for years, but even during the pandemic, first-time homebuyers have had to be fast to make an offer in hopes of getting a home in their price range, said Jovan Burton, executive director of the Partnership for Housing Affordability.

The Times-Dispatch’s analysis found that prior to the pandemic, the average home was listed for slightly over a month before selling. But homes sold in 2022 have been on the market for an average of just 18 days.

“If you are looking, you are going to have to make a decision fairly quickly – almost immediately – upon seeing the property and pay well over asking price,” Burton said. “You may have to waive things like inspection and appraisals. What we are seeing is a lack of inventory, and sustained demand. The competition is being made more difficult by folks who are willing to pay for a property in cash and sight unseen.”

“I think that will deter some folks from pursuing home ownership for the time being,” he said. “This isn’t something that is just going to end or evaporate in the next few months or year or so. This is likely to be a sustained competitive market for a couple of years.”

Dare said she was looking for a house around or below $300,000, but she ultimately paid $342,000 for a 1,250 square-foot home with two beds and two baths. The asking price was $314,500.

“I had made offers for $370,000 for houses, and I am kind of relieved now that I did not get that,” Dare said. Her new home, “is on a big lot, and I have a huge backyard.”

Dare said her original preference was for a house in the Tuckahoe area near the University of Richmond, “but those houses were going for $80,000 to $100,000 over the asking prices with cash offers, “and I just could not compete with that,” she said.

Five years ago, less than one-third of buyers in the Richmond area paid above the asking price. Since the start of 2021, that figure has risen to nearly 65%.

Lafayette of the Realtors Association attributes the current housing market conditions to multiple factors, including the disruptions caused to construction by the COVID-19 pandemic.

Seniors also are choosing to stay in their homes rather than move into a retirement communities, she said.

“We have seniors that are aging in place and not moving,” she said. “Some of them are not moving by choice and some are doing it because they do not know what their next affordable step is going to be.  We live in a region with a profound lack of affordable, professional care facilities.”

“They [seniors] are saying put, because at the very least they do not have a mortgage on their house,” she said.

“We have to think about a greater variety of products that allow people to build equity,” Lafayette said. “We have to think more strategically about design. We have to understand that you can have more dense development with quality housing that in no shape or way affects the property values around them.”

Dare, the first-time homebuyer, said she feels lucky to have had a good realtor to help her. For new homebuyers, “I feel like we are competing with so many people that have New York City salaries and are working remotely and have moved back here during the pandemic, and other people that just want to rent out and have these all-cash offers.”

She has two pieces of advice to homebuyers:

“Find a good realtor that you enjoy working with,” Dare said. “That really just made the process so much better for me.”

“My other advice is be patient that the right house will come around,” she said. “Easier said than done.”

jblackwell@timesdispatch.com

(804) 775-8123

smcgoey@timesdispatch.com

(804) 649-6012

Twitter: @SeanMcGoey

With additional reporting from the Associated Press

John Reid Blackwell Follow John Reid Blackwell

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