Are you looking for a house? Then you probably already know what I’m about to say.
Inventory is low.
Like, Mariana Trench low. Like, the Cleveland Brown’s chances of winning the Super Bowl low. I mean low. Historically low. In fact, I haven’t seen inventory this low in my entire real estate career.
So what’s going on? What’s caused this dramatic shift in the market?
A Closer Look
Let’s take a closer look at the inventory levels in the urban core of Richmond.
If you want to see just how sharply inventory has declined in the past decade, check out this graph.
You could ride a luge down that slope.
How does such a densely developed area have such low inventory? Well, density is part of the problem. There just isn’t a lot of room to build in the city. Think of neighborhoods like The Fan and The Museum District, even Church Hill. Those homes are packed in tight, with maybe one empty lot in a 5 block radius.
Widen your focus a bit, and that argument gets a little trickier. Shockoe Bottom and Scott’s Addition are seeing what seems like new developments everyday. But when you take a closer look, you’ll find that nearly 99% of that development is apartment based.
So while we have been adding living spaces in the city, they are all rental units, with only a handful being offered for sale.
So is building apartments a problem? Not necessarily. The momentum gained from adding a stable tenant base into many of the formerly vacant neighborhoods has been a good thing.
Renters have rejuvenated this City in a huge way. Old warehouses and unused office spaces in Scott’s Addition have been given new life as trendy apartment complexes. Vacant parking lots in Shockoe Bottom and adjacent to VCU’s campus have come alive with new buildings of all shapes and styles. Thousands of apartments have been added to the city’s landscape in the past decade with more on the way.
As apartments sprout up in the urban core, so do new restaurants, shops, galleries, start-ups…you name it. Residents no longer want to drive out to Short Pump to shop or Innsbrook to work. They want a true live-work-play environment. The urban core has become the vibrant, thriving community city dwellers are looking for.
Now, the search for houses is on.
Anyone who has lived in Richmond long enough knows the typical rhythm of the Richmond family. Get married, settle in the city, have a few kids, and start looking to the suburbs once the kids reach their schooling years.
For a long time, Richmond City Schools were not drawing families. In fact, they were doing the opposite. The story of RPS is a complicated, uncomfortable one of poverty and policy, but lately passionate and dedicated community members and education professionals are looking to rewrite it. As confidence in the school rises, so does the number of young families choosing to stay in the city and send their kids to public schools.
As the school system trends, so does the City.
Inventory rates aren’t the only things hanging out near the bottom these days.
Just take a look at this chart:
Mortgage rates haven’t been consistently above 7% in nearly 30 years. Most homeowners are sitting pretty building equity in 4-5% rate mortgages. There’s not a whole lot of incentive to sell your house when your current financing is so comfortable. It’s getting tougher and tougher to find highly motivated sellers in the market with these kind of rates.
For years, when it came time for suburbanites to retire, they chose a low maintenance home in a planned community close to where they had been living for the past 20 years. It was safe and comfortable, with chain restaurants and strip malls galore just down the road. These planned neighborhoods usually had a section of “villas” targeted to the 55+ crowd, and for years, they sold very well.
As the city grows and changes, so have the attitudes of empty nesters looking to downsize. Instead of staying in the suburbs, many are looking to move into the city. The walkable neighborhoods, endless local retail and dining options, and proximity to the river are enticing people back into the urban core.
And who can blame them? Carytown is far more exciting than a strip mall.
The HGTV Factor
Who doesn’t love seeing a dilapidated home with “great bones” turned into the best house on the block with the addition of an open concept and a huge kitchen island?
No one, that’s who.
While we can argue the authenticity of its shows, there is no denying that HGTV is inspiring a new wave of urban renovators. These niche developers are snatching up neglected homes and turning them into something straight out of a magazine. And then there are those ambitious homebuyers who take on renovations themselves, looking to create their own dream home.
While this trend is doing wonders to breathe new life into forgotten neighborhoods, it’s also putting even more pressure on a market already strapped for inventory.
So, what you’re saying is…
There’s no one reason inventory is so low.
Renters want to stay (or even buy), current city dwellers don’t want to leave, and empty nesters want to come back. This bodes incredibly well for the rising reputation of Richmond, but not so well for those of you trying to find a house. It’s not impossible, but if you’re dreaming of living in the city, be prepared for higher prices and multiple bids.
My best advice? Get here fast, and get someone who knows the in’s and out’s of the city and the real estate biz to help you land your dream home.