Economics 101: With supply exceeding demand, the local housing market adopts new, competition-driven traits

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According to Integra Realty Resources in Richmond, other areas in the region saw a massive year-over-year increase in home closures as of this March — at least on a percentage basis — with Chesterfield County’s volume of activity dominating Central Virginia .

In 2021, 2,037 homes were sold for the year ending in March, and volumes were relatively unchanged this year, barely sticking to 2,044 new home closures.

According to Integra, the top five subdivisions in the county, with new home closures, are Harper’s Mill, Routray, Foxcreek, Magnolia Green and Silverleaf.

The basic geography – the size of Chesterfield – and its ever-growing population have led to continued new home opening and resale activity in the county, says Tom Tyler, director of housing markets at Integra.

“Obviously, it has more inventory, and it also benefits from the master planned communities there, like Magnolia Green and Harper’s Mill, which were developed years ago,” Tyler says. “So, new sections of those communities keep coming online, and maintaining that kind of inventory helps a little bit. Conversely, I think if you asked a homeowner: does the county have a substantial amount of inventory, they would probably say no.

Ash Daniels, CEO of the Richmond Association of Realtors, Laura Lafayette

Ash Daniels, CEO of the Richmond Association of Realtors, Laura Lafayette

It is precisely the supply and demand equation that is the story of local real estate in Central Virginia, says Laura Lafayette, CEO of the Richmond Association of Realtors.

“We’ve had insufficient inventory for several years, so that’s a trend we’ve seen,” Lafayette says. She adds: “Since the housing recession of 2008, ’09, ’10, we haven’t seen an adequate supply of housing begin to recover the way we need them.”

Throw in the paradigm-shifting effects of the COVID-19 pandemic, remote job growth, inflationary pressures related to supply, and your parent’s real estate market long gone.

The degree of difficulty has increased for both the new home start and resale market, Lafayette explains.

“It’s hard to get new construction off the ground,” she says, “and it’s certainly harder to bring it down in any way, shape or form that’s affordable. Labor shortages, supply chain issues, material costs All have increased the cost of new construction.

“On the resale side, there are a number of reasons we’re not seeing people market their homes,” Lafayette continues. “You know, there are a lot of people who have refinanced — they’re sitting on a very low interest rate, so they may be able to sell higher, but they have to buy higher.”

This and more, she says, further complicates the demand for household inventory.

“Now, if you’re selling your home and making quite a bit — or you’re at a point in your life where you want to sell your home and move to a senior community or something like that — you may have a high selling price. But when people know they have to sell higher and buy higher, it can give them pause, especially if they are sitting on a really low interest rate.”

Anyone shopping for a new home with family or friends in the past two years has heard a list of real estate specialties.

And when so many economic variables are in play, what is really creating demand?

For those working in the market, there is one major factor driving the real estate numbers in Central Virginia: quality of life.

Catherine Oti, a realtor at the regional Ruskin Saunders & Co., says it’s not so much a problem as it is a challenge driving the current housing market. “It’s very easy to live here,” she says, explaining that she’s seeing a strong interest in the local area from outside buyers and even buyers from outside the United States.

One reason this matters, OT notes, is the rise of work-from-home jobs, allowing people to move from anywhere in DC to a place where compared to DC, for example, non-existent. Homebuyers coming from larger markets can get higher prices and deals than anywhere else.

She adds that remote-working trends have also been found to be more in the design preferences of homebuyers.

“Generally speaking, home offices are very large. So many people have been sent home from work, and in many cases, I think it’s permanent. …Most of the people I’m showing home to — even single people — want a home office,” Otti says. “They want some space they can work in. And I think one The home office used to be an unusual thing, and is now almost mandatory for most people.

The changing economy has focused buyers on affordability, she says, but gambling is out of the cards for most buyers, given how competitive the market has become. OT, who has worked in real estate for nearly a decade, says the homebuying market is by far the most competitive, and general buyer trends and requirements have changed significantly.

“People have done all kinds of crazy things,” Oti says. “The buyers offered to cover the seller’s closing costs. I just sold a house, and the buyer gave the seller free rent back so they could stay in the house for a while after closing.

She says the tendency for buyers to skip home inspections has normalized, and they are now offering to waive the appraisal by a lender, an option available to most buyers and to close the deal. More budget available.

Tight inventory in the housing market, Lafayette says, has slowed some activity, and the jet-fuel pace of home sales since the pandemic has been in the rearview mirror.

“This will be the first year since 2011 that we haven’t experienced year-on-year growth in sales,” she says. “Despite the pandemic, [2020] It was a phenomenal year for real estate – the best of the century – and then 2021 really surpassed 2020. But we don’t think that’s going to happen this year. … So, it’s been an extraordinary run.”

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