Low inventory, high demand and low interest rates are driving home sales across the Richmond region.
“The market is like the temperature: steaming,” said real estate agent Joan Peaslee with Berkshire Hathaway Home Services. “Houses come and go in a flash.”
“We just don’t have enough inventory to satisfy the demand,” said Laura Lafayette, CEO of the Richmond Association of Realtors.
Right now, metro Richmond has a 1.2 month supply of inventory, which breaks down to 0.8 in Henrico County, 2.3 in Hanover County, 1.3 in Chesterfield County and 1 in the city of Richmond. Experts say that a three-month inventory is a sign of a healthy market.
“It’s unheard of,” real estate agent Kristin Beran Krupp said. “It’s almost like a desert. There are no listings. When a home is priced right and in good condition, it gets gobbled up. Plus the interest rates are historically low, driving up demand.”
Kathleen Petroziello and her husband, Jason Burkett, have been looking for a new home in Richmond since the fall. They originally set their sights on North Richmond, Forest Hill and Stratford Hills — they both work downtown and wanted to be close to the city’s core — but found it an extremely competitive market.
They had a budget up to $350,000, but they struggled to compete. The average sales price of a home in central Virginia is now $310,914, according to the Richmond Association of Realtors, an increase of about $14,000 from last year. Home sales in central Virginia have been on the rise since 2011, according to the Realtors group.
“Anything at $350,000 was going far over asking,” Petroziello said.
“We found a place in Bellevue that we really loved. It was listed at $330,000. We put an offer on it for $345,000, but somebody came in over $40,000 and waived the appraisal. It sold at $375,000. That was really difficult. The same thing happened in Forest Hill,” she added.
Lack of inventory, multiple offers
Lack of inventory is the biggest issue facing buyers right now, according to Realtor Daphne MacDougall.
“If you want to make an offer on a property, you are almost guaranteed to be competing. Even though list prices might feel inflated already, they’re going even higher because there are multiple offers. I’m telling my clients to buckle up and hang in there. They will need to make more offers,” MacDougall said.
“This was my busiest spring ever,” real estate agent Jane Vick said. “Nearly everything I have sold had multiple offers on it.”
Petroziello and her husband made six offers before they realized that they needed to put their Powhatan County home on the market because no one was accepting contingent offers.
They listed their Powhatan home and sold it at the beginning of April. Then the pressure was on and they had to start making more offers.
They saw more homes, put in more offers, but couldn’t get anything accepted.
Finally, they decided to broaden their search and fell in love with a home in North Chesterfield’s Shenandoah neighborhood.
It wasn’t exactly what they were looking for — it was bigger than what they needed and not the neighborhood they were hoping for — but Petroziello said, “We saw it and really fell in love with it.”
The 2,600-square-foot colonial was listed for $285,000. Petroziello and her husband put in an offer over asking pricing — at $290,000 and with an escalation clause — and were finally able to move into their new home in late July.
Low interest rates help spur interest
Interest rates are extraordinarily low, with some homebuyers locking in rates under 3% at 2.99% or 2.87%.
“It’s the lowest rate I’ve ever seen,” MacDougall said. “I remember when 4% was a great rate. Interest rates are so low it’s creating some urgency in the market because people don’t know how long it will last.”
With low interest rates, some renters are finding that it’s more economical to buy than to rent.
“People are seeing that they can get a mortgage approximate to their rent. A percentage of those renters say, ‘I might as well build some equity while putting in that kind of money,” Lafayette said.
That kind of interest also drives up demand.
Buyers are using many methods to make their offers more attractive: offering cash, forgoing the first $2,500 on inspections, writing personal letters and basically doing anything to set themselves apart from other buyers.
Appraisals have to keep up with rising prices. Some agents are seeing clients waive appraisals to get the house they want. In some cases, houses aren’t appraising for the sales price.
If a buyer waives the appraisal and the house doesn’t appraise for what the buyer offered, the buyer will often make up the difference in cash.
Realtor Wes Atiyeh said, “In 25 years I’ve only had three or four appraisal issues. And I had two in Chesterfield in the last two weeks.”
Conditions deliver a seller’s market
Lacey Meeks, a first-grade teacher, listed her house on Defense Avenue in the Sandston area of Henrico County at $165,000. The house was listed on a Friday at 9 p.m.; six people viewed it over the weekend and by Sunday, Meeks had received four offers.
“I was super surprised it went that fast. I did not know it would go in two days,” she said.
At 1,000 square feet with three bedrooms and one bathroom, the well-maintained house was priced for a first-time homebuyer, Meeks added.
She accepted an offer above asking and expects to close in late August. She and her fiancé are buying a bigger home at Patriot’s Landing in New Kent County.
That kind of selling experience has become the norm.
Shannon Webster listed her ranch-style rental house in North Chesterfield for sale for $168,000 on a Thursday in late May and sold it by Sunday. It was three bedrooms, two baths and roughly 1,260 square feet.
“I was surprised at the short amount of time it took,” Webster said. “We sold it ‘as is.’”
Working remotely brings new residents
With the ability to work remotely, many agents are seeing interested buyers from nearby big cities.
Lewis Muller has lived and worked in Washington for the past 12 years.
He had an 800-square-foot apartment in a luxury building in the heart of D.C. He could walk to restaurants and museums and enjoy the rooftop at his building or the in-house gym.
But when the pandemic hit, it made him rethink his living situation. Everything shut down: the bars, the restaurants, his building’s gym and rooftop.
“I got really anxious and depressed. It was this feeling of being locked within the four walls of your apartment,” Muller said. “The only way to get outside was to walk the streets and go to a park, but those were packed and felt unsafe.”
As a vice president of public affairs at a small advertising agency, Muller began working remotely, like most of his colleagues. And he began thinking: If I can work remotely here, why not work remotely somewhere with more space and access to the outdoors?
He talked to the company’s CEO and got the go-ahead to move to Richmond.
He found a house in the heart of the Fan District with a backyard, an outdoor patio and off-street parking, where he’ll live with his brother, who’s currently renting in the Fan.
“It’s got the right vibe: a cool old historic home with tall ceilings and an open living area. It has outdoor space, all these things I’d love to have in D.C., but would cost double,” Muller said.
The cost of living in Richmond is especially attractive to big city dwellers.
At $695,000, the mortgage on his new 2,800-square-foot Fan house will still be less than his 800-square-foot apartment in D.C., Muller said.
“Richmond is in such close proximity to D.C. When things open up again, I plan to make trips to D.C. once or twice a month to meet with clients,” Muller said. “But this has definitely been a silver lining for me.”
Making adjustments in the age of COVID-19
As the threat of the coronavirus continues, shopping for homes has changed in the past few months.
Visitors wear masks, gloves and shoe coverings while touring occupied homes. Clients no longer ride with agents to see a home. There are more phone and videoconference meetings.
“I do a lot of video tours with people from out of town. I might also have them on a Facetime call,” MacDougall said.
Agents expect the real estate market will continue to be hot through the fall before it slows down again in December.
What comes next is anyone’s guess.
“The first quarter of 2021 will probably be bumpy,” Lafayette said. “We’ll have had a presidential election. Consumer confidence may change. But there’s nothing to suggest the demand is going to change.”