April 28th, 2010
Richmond Real Estate Results Jan-Mar
George Mason University has just released the first quarter real estate report for Central Virginia. Positive News! At Skye Bruce Properties we are also seeing marked improvements in the market. We are seeing homes sell faster, limited inventory in some areas and more and more buyers moving up. Signs are pointing towards a recovery in the Richmond area. See report below!
Central Virginia Area Housing Market, First Quarter 2010
National and Local Economic Overview
Nationally, a number of indicators suggest that the economy is recovering. For example, the U.S. Leading Economic Index has increased for eight consecutive months, Gross Domestic Product (GDP) was up 5.6% in the Fourth Quarter of 2009, and retail sales have improved since the first quarter of 2009. In Central Virginia, despite significant job loss in 2008 and 2009, the unemployment rate in the Richmond Metropolitan Area was 8.6 percent as of February–1.8 percentage points below the national rate. While the national and local economies appear to be improving, the question that remains is how strong is the recovery and how long before the local housing market sees sustained recovery.
Central Virginia Housing Market
The Central Virginia housing market is in a period a flux and will likely remain so throughout the next six months. While there are some signs that sales are improving both nationally and regionally, it remains unclear how much of the progress is due to federal government efforts, including the homebuyer tax credit, and how much is true market stability. As the national and regional economies continue to improve, the still- low interest rates and pent-up demand will eventually spur on the market.
Home Sales
In the Richmond area, the number of homes sold was up 7% in the first quarter of 2010. A total of 1,988 homes were sold in the Central Virginia MLS area in the first quarter of 2010 compared with 1,855 sales in the first quarter of 2009. Sales were strongest in the larger jurisdictions in the Richmond Metro Area. In the Richmond Metro Area, sales were up nine percent, increasing from 1,506 in the first quarter of 2009 to 1,643 in the first quarter of 2010. In the Tri Cities Area, the number of sales in the first quarter of 2010 was off slightly—down 11 units, from 177 in the first quarter of 2009 to 166 in the first quarter of this year. Sales in Central Virginia began to pick up very slowly in the third quarter of 2009 but there was a dramatic jump up in sales in the fourth quarter of last year (Figure 3). This unseasonable uptick in sales was driven primarily by the federal first-time homebuyer tax credit that was originally scheduled to expire at the end of November. The federal government extended and expanded the program, requiring buyers to execute a signed contract by April 30 and close by June 30 to qualify for the tax credit. As a result, some of the current market activity (and next quarter’s activity) will consist of homebuyers who are accelerating their home purchases—that is, buyers who were looking to buy sometime in 2010 but pushed up their purchase in order to secure the credit. Accordingly, sales activity may fall off slightly in the third quarter of 2010 after two quarters of sales increases.
Home Prices
Despite increased sales activity and relatively stable prices in metro Richmond (especially the City of Richmond which has experienced a 9% increase in average sale price), home prices in the Central Virginia region as a whole continue to fall. In some cases, prices are being forced down by market and economic conditions, such as an increase in the supply of foreclosures and short sales and a decrease in demand from potential buyers worried about the economy. Some of the decline in average and median prices reflects the different mix of home sales. There has been an increase in the number of sales of lower-priced homes, for which buyers are more easily able to secure financing. For example, in the first quarter of 2009, a little more than 50 percent of homes sold in the region were priced below $200,000. In the first quarter of 2010, that share had increased to 55 percent. The data on home sales and prices imply a stronger recovery underway in the City of Richmond and the immediately surrounding counties (Chesterfield, Hanover and Henrico) while there is more instability in the smaller jurisdictions of the region.
Pending Sales
Pending sales are often used as an indicator of the next quarter’s home sales figures. There were 3,192 pending sales in the first quarter of 2010 in the Central Virginia MLS Area, which was up 19 percent over the first quarter of 2010. Again, the strongest movement in pending sales was in the Richmond Metro Area where the number of pending sales was up 22 percent. In the Tri Cities Area, pending sales were up two percent.
Outlook for 2010
The Richmond area housing market has shown signs of improvement over recent months. Sales of existing homes were up at the end of 2009 and beginning of 2010. While home prices continued to fall in a number of jurisdictions, they are holding relatively steady in other localities. But improvements in the housing market have been uneven and unsteady. While the regional housing market is poised for recovery in 2010, it will be relatively unsettled for the next few months. Several factors are responsible for the hesitant recovery, including the uncertain role of the federal government in the housing market and the presence of a shadow market of foreclosed properties. Positive factors in the region include a pent up demand for housing and an economy set to recovery faster than many other parts of the country.
Questions about the current market in a specific neighborhood? Contact Skye Bruce Properties for a free analysis of any Richmond area neighborhood.
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