Multiple offers. Waiving inspections. All cash offers. The "I love your house" letters. In the City of Richmond and older parts of Henrico, this is the new normal. You are starting to see rumblings of a bubble, and a coming correction.
Do I think we're in a bubble? I'm not an economist, and I don't play one on TV. But personally, I don't think we are in a bubble. I think we are in a market where there are winners and losers.
Who are the winners? Anyone who owns a home in the City or close-in older parts of Henrico County, like Westham and the River Road corridor.
Who are the losers? Anyone with a newish - but not new - home in a subdivision in the counties.
Why do I think this? In my opinion, you have seen and are seeing a paradigm shift. Who are the people who want to live in the City? The same folks who always wanted to live in the City: (i) architecture buffs; (ii) single young professionals; and (iii) families with elementary age or younger kids who are choosing a few select public elementary schools.
But now people who **NEVER** would have considered living in the City are moving into the urban core in droves. Many of these are downsizing Baby Boomers coming from the suburbs, who as the article notes, have cash to buy and don't have to sell.
And RVA has been discovered. We are making all kinds of "Best of" lists, and people are noticing. We are seeing people coming from other high cost urban markets, like Northern Virginia/D.C., Brooklyn, even the West Coast. I have a number of active buyers right now that fit this profile. I also have a number of investors from Northern Virginia who are looking to buy here in RVA, as a more affordable option to the D.C. metropolitan area.
So what does all of that mean? Increasing demand for ever-more-limited supply.
And how do you get more supply in the City and older neighborhoods of the counties? By creating it, either with renovation and rehab of older homes, or urban infill development. We are even starting to see tear downs in certain neighborhoods of Richmond, which has been a phenomenon in big cities for decades, but not so much here.
Why do I think the older suburbs are going to be the losers? For two reasons: (i) These houses are a commodity product, meaning there are multiples, sometime hundreds, of them that are very, very similar, built at the same time, with similar floor plans, and the same general finishes; and (ii) existing homes in these areas are competing with new construction. Why would you buy a 10-15 year old house, if you can buy a new one? Well, the older home is going to have to be a better value, so less expensive. As a result, you will not see the same rate of appreciation in places like Chesterfield and Short Pump as you will in the City and older parts of the counties. The other reality is because of the construction materials and construction methods, these subdivision homes, particularly in the entry and median price points, ultimately become functionally obsolete after 25-30 years.
So, I don't have rosy predictions for folks who own in Woodlake, or Twin Hickory, or other similar places. You will be able to sell your home if it is priced correctly and has been well maintained. But you are not going to see the year-over-year double digit appreciation you are seeing in places like the Fan and Bellevue and Manchester. Your home won't be the wealth accumulation vehicle it has been in the more desirable areas.
So I don't think it's a bubble. I think it is a simple matter of supply and demand. I'd love to hear your thoughts on the matter.
Nest Realty Richmond
221 S. Robinson Street
Richmond, Virginia 23220
Cell: (804) 986-3993
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