SUMMARY OF THE CENTRAL VIRGINIA AREA HOUSING MARKET ANALYSIS nd Quarter 2010 The national economy slowed in the second quarter of 2010 as many indicators decelerated from their growth rates in the last half of 2009 and the first quarter of this year. One of the reasons for the slowdown in the economic recovery was a growing concern about the financial stability of Western Europe.

Central Virginia Area Housing Market

http://toughmoneylove.com/2008/08/22/disturbia-in-suburbia-a-permanent-decline-in-residential-property-values/

Credit: TIMES-DISPATCH

Henrico County led the Richmond metro area in the boost in home sales.

Six Facts about Virginia’s real estate market:

1. Virginia Neighborhoods are in Better Shape. Statewide year-over-year foreclosures are down 2.4% from last year, and that means more stable prices for homes on the market today.
2. Market Activity is Up. Year over year, more homes were sold in six of Virginia’s seven regions in the first quarter of 2010. Buyers are seeing the current market as a great opportunity, and sellers (with the right price and representation), are benefiting from low interest rates and a recovering economy.
3. Virginia Home Values Jumped. The median price of a Virginia home was up 8.9% over the same quarter last year. This means last year’s home buyers have $19,500 more in equity.
4. More Virginians are at Work. Virginia continues to outperform the nation, with the 14th lowest unemployment rate: 7.4% (the lowest in the Mid-Atlantic). People with jobs can pay the mortgage, which keeps homes out of foreclosure, which helps protect the value of all homes.
5. We’re Still Building. In quarter one of 2010 construction jumped 23% over the same quarter of 2009. Smart Virginians are taking advantage of competitive pricing and low interest rates and making the dream of home ownership a reality.
6. Sellers Face a New Reality. Home values have changed. The start of 2010 marked the first time Virginia median home prices dropped year-over-year prior to 2005, reflecting the reality we all know. Homes aren’t selling for what they once were. Also, the federal tax credit expiration means sellers can’t expect peak-market pricing or timing. Today’s prices need to be realistic and listen to their Realtor’s advise: price it right, stage it well, and most importantly, be patient.

FHA or Federal Home Administration loans have been around since 1937 as a way to promote home ownership through a loan guarantee program administered by the  U. S. Department of Housing and Urban Development.

Basically, the federal government guarantees repayment of loans made by private lenders to qualifying individuals. The government acts as insurer on loans made under the program so the lenders have less risk and can allow just a 3 1/2 % down payment for a home mortgage.

This is the best deal around for anyone buying a home with little money to put down  and struggling to get into that first home, or move up buyers strapped for cash but can afford the monthly payment and have decent credit. The FHA loan program is eligible for home purchases up to $ 535,900 in the Richmond area.

Who’s eligible?

Those persons with a credit score of at least 600 or higher with a qualifying income to debt ratio of 29/41%. What does that mean? The total loan payment for the house including taxes and insurance can’t exceed 29% of your monthly gross income, and this total housing payment plus your loan payments (credit card, student loans, auto loan..etc) can’t exceed 41% of your monthly gross income.

What about credit and other qualifying?

Generally speaking your credit score should be at least a 600 or better and your credit report should show a good pattern of borrowing and repaying loans. If you have no established credit, FHA allows for alternative means of proving credit worthiness with things like utility bills and the like.

Bankruptcy Chapter 13 is okay subject to certain conditions, and a Chapter 7 liquidation is okay, if you are two years past the discharge date. Even a foreclosure is okay if you are three years past the settlement date. Note that in these cases you need to have reestablished credit and kept up a good credit history after these events.

Even late payments and collections can be okay if a good pattern of credit is evidenced by your credit report and letters of explanations of the circumstances surrounding bad credit (medical bills, illness, loss of job..etc). The exceptions are federal debts such as taxes and student loans. These must be in good standing.

What about loan fees and closing costs?

The borrower using an FHA loan can negotiate with the home seller to get a 3% contribution towards their closing cost. These are the costs associated with getting a new loan and paying for recordation, attorney’s fees, etc.  A 3% seller contribution should be sufficient to cover these costs.

A good strategy for negotiation in buying is to press the seller to pay the closing costs with a reasonable offer on their home. As long as the asking price is fair, as evidenced by a Realtors market analysis and an appraisal, it may be better to get a concession for the closing costs, then, the 3 1/2% down-payment would be all they need to close.

This strategy is only good in a market where sellers are willing to pay a concession for closing costs. Now is a good time for buyers to negotiate as inventory levels are still high and sellers are more competitive. This will not always be the case.

So, if you are renting or want to move up, set your monthly goal to save enough to cover 3 1/2% of your dream home’s value. For example: if you could save around $ 8,000, and negotiate to have the seller pay the closing costs, you could get a home in the $220,000 to $ 230,000 range, and have a payment around $ 1,200 to $ 1,400 per month.

If you are already paying rent in that range, then what are you waiting for. FHA also allows for gift funds to cover the down-payment. Be extra nice to that rich uncle at the next family picnic.

Interested? Check out the government’s webpage at HUD.org and follow the links for FHA loans for all the details, and check with your local lender and Realtor.

Indications so far are good. Everyone in the office is busy two weeks after the deadline has expired. Personally, I am busy with investor clients that want to take advantage of good deals out there in both residential multi-family and commercial property. Even without the tax credit there is this trifecta of opportunity that still exists.

The intersection of historically low interest rates, a still abundant inventory of homes for sale, and sellers willing to negotiate with buyers closing cost make for a great opportunity for those with the liquidity and credit to buy now.

When people ask me today “How are things going” I tell them that we are chugging along at a much slower rate than the heady times of lore, but steady and incrementally moving towards a normal market.

The good news is that we are still busy after the tax credit is gone and breathing a sigh of relief that we aren’t seeing the market dropping off now that its gone. I plan on checking in here every other week with market updates and a read of the demand and supply of homes in the Richmond real estate market.

I have definitely seen evidence of this in the City of Richmond. We have seen net gains in the population in the City reversing a twenty year trend of shrinking population size.

We Realtors keep a finger on the pulse of housing trends and real estate market changes. Certainly in the City of Richmond we have seen lots of gentrification of older, run-down neighborhoods and home buyers “discovering” city living.

Incidentally, I had a recent sale where a young couple bought in the city after looking and saying that they only wanted the West End suburbs. In the end they said that the outer suburbs did not “feel right” and moved to the city.

Here is a re-post from the Huffington post which cites the Brookings Institution report:

WASHINGTON – White flight? In a reversal, America’s suburbs are now more likely to be home to minorities, the poor and a rapidly growing older population as many younger, educated whites move to cities for jobs and shorter commutes.

An analysis of 2000-2008 census data by the Brookings Institution highlights the demographic “tipping points” seen in the past decade and the looming problems in the 100 largest metropolitan areas, which represent two-thirds of the U.S. population.

The findings could offer an important road map as political parties, including the tea party movement, seek to win support in suburban battlegrounds in the fall elections and beyond. In 2008, Barack Obama carried a substantial share of the suburbs, partly with the help of minorities and immigrants.

The analysis being released Sunday provides the freshest detail on the nation’s growing race and age divide, which is now feeding tensions in Arizona over its new immigration law.

Ten states, led by Arizona, surpass the nation in a “cultural generation gap” in which the senior populations are disproportionately white and children are mostly minority.

This gap is pronounced in suburbs of fast-growing areas in the Southwest, including those in Florida, California, Nevada, and Texas.

“A new metro map is emerging in the U.S. that challenges conventional thinking about where we live and work,” said Alan Berube, research director with the Metropolitan Policy Program at Brookings, a nonpartisan think-tank based in Washington. “The old concepts of suburbia, Sun Belt and Rust Belt are outdated and at odds with effective governance.”

Story continues below

Suburbs still tilt white. But, for the first time, a majority of all racial and ethnic groups in large metro areas live outside the city. Suburban Asians and Hispanics already had topped 50 percent in 2000, and blacks joined them by 2008, rising from 43 percent in those eight years.

Suburbs are home to the vast majority of baby boomers age 55 to 64, a fast-growing group that will strain social services after the first wave of boomers turns 65 next year.

Analysts attribute the racial shift to suburbs in many cases to substantial shares of minorities leaving cities, such as blacks from New Orleans in the aftermath of Hurricane Katrina in 2005. Whites, too, are driving the trend by returning or staying put in larger cities.

Washington, D.C., and Atlanta posted the largest increases in white share since 2000, each up 5 percentage points to 44 percent and 36 percent, respectively. Other white gains were seen in New York, San Francisco, Boston and cities in another seven of the nation’s 100 largest metro areas.

“A new image of urban America is in the making,” said William H. Frey, a demographer at Brookings who co-wrote the report. “What used to be white flight to the suburbs is turning into ‘bright flight’ to cities that have become magnets for aspiring young adults who see access to knowledge-based jobs, public transportation and a new city ambiance as an attraction.”

“This will not be the future for all cities, but this pattern in front runners like Atlanta, Portland, Ore., Raleigh, N.C., and Austin, Texas, shows that the old urban stereotypes no longer apply,” he said.

The suburbs now have the largest poor population in the country. According to the analysis, between 1999 and 2008, the suburban poor grew by 25 percent; five times the growth rate of the poor in cities. During that same time period, the median household income in the U.S. declined by $2,241.

Of the top 100 metro areas, 42 experienced a drop in the size of their middle class, according to the Brookings analysis. Of those 42 cities, 10 saw the middle class decline by at least 5 percentage points.

The size of the middle class (households earning between 80 and 150 percent of median income) dropped almost 30 percent between 1999 and 2008.

The findings are part of Brookings’ broad demographic portrait of America since 2000, when the country experienced the attacks of Sept. 11, 2001, a historic boom in housing prices and the worst economic downturn since the Great Depression.

Calling 2010 the “decade of reckoning,” the report urges policymakers to shed outdated notions of America’s cities and suburbs and work quickly to address the coming problems caused by the dramatic shifts in population.

Among its recommendations: affordable housing and social services for older people in the suburbs; better transit systems to link cities and suburbs; and a new federal Office of New Americans to serve the education and citizenship needs of the rapidly growing immigrant community.

Other findings:

_About 83 percent of the U.S. population growth since 2000 was minority, part of a trend that will see minorities become the majority by midcentury. Across all large metro areas, the majority of the child population is now nonwhite.

_ City residents are more likely to live in “deep” poverty, while a higher share of suburban residents have incomes just below the poverty line.

_For the first time in several decades, the population is growing at a faster rate than households, due to delays in marriage, divorce and births as well as longer life spans. People living alone and nonmarried couple families are among the fastest-growing in suburbs.
Posted by Richmond Homes Information by Kerry Riley

On the economy, the report points to improvement nationally citing:

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.

Regarding the economy here in 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.

Regarding the outlook for the housing market, the big open question is whether the recent uptick in sales is tax-credit driven:

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.

The report goes on to cite a mixed-bag of home sales and pricing statistics:

- In the Richmond area, the number of homes sold was up 7% in the first quarter of 2010.
- Despite increased sales activity and relatively stable prices in metro Richmond (especially the City of Richmond which has experienced a 9% increase in average saleprice), home prices in the Central Virginia region as a whole continue to fall
- 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.

Overall, George Mason interprets the data to come to the following conclusion:

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.
…..

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.

There is considerably more detail and nuance in the full report, which we recommend to our readers.

What do you think? Are we out of the woods here in Richmond?

For more information, see Richmond VA Houses.

Housing economists have long held that the housing rebound, when it comes, will be uneven. The markets that benefit first will be the ones with the strongest core dynamics; places where house prices never got out of hand, cities where a diverse and progressive employment base drives job creation, towns that continue to draw population despite the economic recession.

Richmond comes in at #12 out of the top twenty markets in this survey!

Specifically, they say the following about Richmond:

Market Health Indicator: 37.3

2009 Total Building Permits: 3,042

2010 Building Permit Forecast: 3,329

Richmond is another market on the mend. The city of 1.24 million is a state capital and home to several universities. The median price of a home here, $198,000, fell only 5% last year. Now, the region, which boasted a below average unemployment rate of 8.4% at year end, is poised to start adding jobs again. Market Intelligence expects employment to rise 0.3% in 2010. Permit levels are expected to rise by roughly 10%, though they won’t come close to 2008′s level of 4,970.

You can read the entire article here.

What do you think? Are we poised to see a better-than-average real estate market here in Richmond?

For more information, see Richmond VA Houses.

First Time Homebuyer Testimonial 1 from Tony Woolcott on Vimeo.

What do you think?

For more information, see Richmond VA MLS.