September 22nd, 2008
Housing Bust? Not in Richmond!!!
Every time you open the paper or turn on the television, you are provided information about the possible Recession and the Housing Crisis. With the constant flow of bad news, it is no wonder the Richmond Region is facing a Consumer Confidence Crisis – NOT A HOUSING CRISIS.
With the National Media’s continual spin of information and statistics lumping the entire country and all house price sectors into one lump sum – as if all homes are valued the same and all region’s business climates are the same – is well, frustrating! Are all homes the same? Are all business region’s the same? Can you really compare Detriot to Richmond? Florida to Charlotte? That’s what the National Media is doing – and the National Media is affecting Consumer Confidence in the Richmond Region.
The NEWS IS GOOD! Home values in the Richmond Region are stable. According to a recent analysis by Drs. Fowler and McClain from the George Mason University Center for Regional Analysis, the “Central Virginia and Richmond area housing market continues to weather the current downturn better than most of the rest of Virginia and the nation in terms of price stabilization.” Better yet, “the average price of homes sold in the Richmond Metro area was 2% lower in the second quarter of 2008, compared to other parts of Virginia where prices have fallen 20% or more in some jurisdictions.” Additionally, in some Richmond areas such as Chesterfield County and Colonial Heights, home prices were up for the second quarter of 2008 compared to the second quarter of 2007! So, is a 2% price decline a Housing Bust? No, it’s merely a consumer confidence issue.
The Richmond Region Unemployment Rate Remains Well Below the National Average. According to the George Mason report, the unemployment rate in Richmond is 4%, well below the national average of 5.5%. “Since 2002, the Richmond economy has expanded by an average of 10,200 jobs per year, and for the 12-month period of May 2007 to May 2008, there were 6,900 new jobs created in the metropolitan area.” This low unemployment rate in Richmond leads us directly to the next GOOD NEWS.
Business Relocation is Driving our Real Estate Market. Recently names by Forbes Magazine as “one of the nation’s 10 best places for business and careers (rated 7th among the 200 largest metro areas)”, Richmond continues to attract new and growing businesses. According to Greg Wingfield, president and chief executive officer of the Greater Richmond Partnership, the Richmond area is better positioned to weather economic downturns than most areas because of its business diversity. “When a recession rolls through, we’re not going to feel it very much,” Wingfield told the Greater Richmond Technology Council at a breakfast meeting at Innsbrook. Wingfield’s bottom line: “We are doing better than most.”
How do we BOOST CONSUMER CONFIDENCE?
Economic Recover Act! Thanks to the recent legislation signed by President Bush on July 29, 2008, First Time Home Buyers will be back in the market. The Federal Government has approved a $7500 TAX CREDIT to all first time home buyers (someone that has not bought a home in 3 years qualifies) who meet the income guidelines ($150,000 a year filing jointly, $75,000 filing individually). Anyone that purchases a home between April 8, 2008 and July 1, 2009 will receive this TAX CREDIT. This is just what we needed to get the first time home buyers in the Richmond region out of their rental units and into their first home. What will this lead to: Trade Up Buyers.
The Return of the Trade Up Buyer. The largest segment of buyers that is currently missing in the Richmond area is the Trade Up Buyer. Consumers, lacking in confidence, have decided it is a poor time to try to sell their home and trade up to a large, better investment. First Time home buyers taking advantage of the Housing Stimulus Bill will help shake this sentiment by buying homes from people that are looking to move locally (if you have a house valued under $350,000 – you should be listening!!!) There is a “trickle affect” that will take place when a first time home buyer purchases a home from someone staying local.
Long Term Investment Focus It is important to not get caught up in the short term news and to remain optimistic due to the long term benefits of home ownership. Aside from the tax advantages, the long term financial benefits of home ownership can not be ignored. The National Home Price Index has increased from 62.03 in the first quarter of 1987 to 81.82 in the first quarter of 1997. It then increased from 81.82 in the first quarter of 1997 to 185.4 in the first quarter of 2007. Despite the fact that it is down from then until now, all economic indicators point to the benefit of home ownership over the long run. Simply put, if you bought a house for $100,000 in 1997, it would be worth $194,549 today (not including inflation).
The NEWS in Richmond is GOOD, all we need is a boost to consumer confidence. It is the national media spin that is causing a decline in consumer confidence. This confidence will rise as First Time Homebuyers enter the market, as Trade Up Buyers reemerge and as people remember the long term benefits of home ownership. Happy Home Buying!
Skye Bruce, REALTOR (Skye Bruce Properties/REMAX Action)
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