The Richmond region’s housing market is strong, but it really needs a mix of more affordable options, several real estate industry professionals said last week.
A housing affordability problem affecting both first-time homebuyers and older homeowners looking to downsize was one of the main themes that emerged Tuesday at the sixth Metro Business Live forum presented by the Richmond Times-Dispatch. About 110 people attended.
A growing economy and low unemployment have kept demand for housing healthy, and the panelists said they see no signs of a major slowdown soon.
“What we have been seeing over the last few months is really a continued strong housing market, particularly here in the central Virginia market,” said Lisa Sturtevant, chief economist at the Virginia Realtors organization.
Sales in the Richmond region were up 6% in May compared to the same month last year. Statewide, the median sales price was $309,900 in May, up 5% from last year.
At the same time, the inventory of homes for sale was down 10% from the same time last year, said Sturtevant, one of four panelists from the real estate industry who spoke during the forum.
“The number of homes that are available to that first-time homebuyer segment is particularly low,” Sturtevant said.
A combination of low inventory and rising prices has created a “crisis” in affordability, said Daniel Schmitt, president and chief operating officer of HHHunt Corp., the parent company of one of the largest residential builders in the Richmond area.
“Year over year, since 2012, we have had an increase in sales, strong sales and price appreciation,” Schmitt said. “Things have just gone up and up. There’s a real affordability issue across the nation, and there is a real affordability issue here in Richmond.”
Both affordability and shifting lifestyle desires are factors in several trends the industry professionals identified, such as a shift in preferences for the size and location of homes.
While there is still a market for large McMansion-type suburban homes, the panelists also said they see more buyers looking for smaller residences such as town homes or homes and condos located in mixed-use age-restricted developments that can offer multiple nearby amenities.
Town homes and these low-maintenance communities are particularly appealing to retiring baby boomers looking to downsize, but also for millennials in their 20s and 30s, the panelists said.
“They both want the same things, just at different hours of the day,” Schmitt joked. “They want nice places to live with social connections. They want amenities.”
He predicted that millennials, many of whom were teenagers during the last housing crash and may be skeptical of big mortgages, will increasingly look to rent single-family homes.
Millennials “want a mix of the modern and maybe a few of the traditional items” in housing, said Dawn Bradley, vice president and managing broker at the Grove Avenue office of Long & Foster, the region’s largest residential real estate firm.
“They want new construction,” Bradley said. “They do not want to move into an older house that they have to take care of all weekend. They are busy.”
Both Schmitt and Wayne A. Chasen, president and CEO of Henrico County-based Gumenick Properties, described the town home market as “exploding.”
Chasen said one of his company’s developments, Libbie Mill-Midtown in Henrico, is a case in point. The 80-acre development includes town homes, condominiums, apartments, retail and office space, walking trails and a lake.
“We consider Libbie Mill a live, work, learn and play community, where you can walk from one end of the community to the other in a 15-minute period of time,” Chasen said.
Schmitt said his company is “seeing people flocking to town homes, because we can deliver those more affordably than any other product. So if we get the zoning for more town homes, we will sell more town homes.”
This year, 60 percent of HHHunt’s home closings are expected to be town homes, he said. In 2018, it was 40 percent, and five years ago, it was nearly nonexistent. “It’s a big change to our business model.”
Financing is also a “huge factor” for town homes, Bradley said.
“It is much easier to finance now than it was, say, 10 years ago,” she said.
Bradley said the Scott’s Addition and Manchester areas of Richmond continue to be hot rental markets.
“The single-family markets that continue to thrive are certainly North Side, Barton Heights, Church Hill and the Libbie-Grove area,” she said. “Those seem to be just on fire.
“The folks in my office see multiple contracts on a daily basis. It is a good market, and I hope it continues.”