2017 already — sure got here fast, didn’t it?
It seems like only a few short months ago, we were under 2 feet of snow and wondering if we would ever be able to get our cars out of the driveway. But the snow did melt — and then it got hot (like REALLY hot) and then, there we were with short sleeves on for Thanksgiving.
But it was an interesting year on a lot of levels, not just weather. Anyone notice the little election thing that just happened? Who wants to go through that again??
This past politial season was the most contentious I remember — it was insane. And I am not sure we are going to see anything resembling normalcy coming out of DC for the forseeable future. Political affiliation aside, the next several years will look different than the past several for sure. I think we are all still trying to figure out what that means — stay tuned.
And while the national election was one we will all remember for quite some time, the local elections were also pretty interesting. Did you know we also had more turnover at City Hall than in any year prior? Hopefully, some new blood will help take us where we need to go, but that’s another post for another day.
So in 2017, What Do We Expect?
At One South, we spend a lot of time not just helping our clients transact real estate, but trying to help them understand the strategies behind their decisions. And in doing so, we need to be looking out over the horizon and making sense of the thousands of inputs that drive our marketplace — local and national economic conditions, pricing, inventory, interest rates, government regulation, devleopment momentum — just to name a few. Simply put, we feel it is our duty to stay in touch with the goings on that impact our market.
Last year, we published our predictions for 2016 to give our clients the insight they needed to make the best decisions during calendar 2016. We are proud of both how well they were received and more importantly, how accurate they were. So we decided to do it again.
This year, we elected to put out our thoughts in audio form (with some bullet point highlights) to make them a little quicker and easier to absorb.
What are we expecting for pricing this year?
Cautiously optimistic with moderate gains, especially where inventory is constrained. Higher price points are probably less likely to see the same gains as lower price points.
- Pricing is likely headed up, but not as fast. Inventory and interest rates will be the ultimate arbiter of pricing.
- Resistance at higher price points in Richmond (we call these ‘Market Caps’ and you can read about them here)
- Some other markets are showing some weakness (NY, SF) at the uber-upper price points
(To learn more about how to navigate the spring market, read this)
What is the forecast for mortgage interest rates?
Rates are already rising a bit, but any substantial inflation still seems a ways off. The global economy is still somewhat sluggish and Brexit’s impact will be long lasting as they untangle the UK from the EU. Ironically, Europe’s uncertainty is probably decent for the US in the short run as investors look for safety.
- Uncertainty may be mistaken for inflation and part of the post-election bump in rates.
- Shorter term mortgage products will emerge as alternatives to the 30 year mortgage we are used to seeing in the middle to upper 3’s.
A quick note — all bets are off if the new administration chooses to restucture their relationsip with Fannie Mae or Freddie Mac as some have suggested they might. If these two entities are fundamentally modifed, the entire housing landscape will change considerably.
(And here is a good primer on how interest rates are determined)
The current inventory situation…
Inventory is still an issue and has caused increasingly active spring markets. The distribution of sales has become more and more centerned around the early and late spring.
- Inventory is still extremely tight, especially where new houses cannot be built
- Where new homes can be built, inventory is more in balance
- ‘Affordable’ is still lacking
The following graph shows the number of available homes for sale in any given month going back 10 years.
The number of available homes is off over 50% from its height in 2008/9.
Pretty crazy, isn’t it?
The following graph shows the number of houses ‘under contract’ during any given month going back 3 years.
From January to May, the number of homes under contract increases by 100% and then falls quickly once the summer hits. And each year the peak has increased.
You need to be prepared.
How will the political climate impact the industry?
I think we are all still guessing but most of the initial indicators are for a more ‘business-friendly’ mentality from DC.
- Think of the new administration as more likely to repeal rather than add more regulation
- Regulation tends to hurt the little guy and stifle competition
- Expect a more ‘business-friendly’ environment
What is up in the world of new houses?
home building remains healthy for the most part, but higher priced new homes are not as strong as those in the middle and lower price points. Oh, and we need more affordable new homes.
- A great deal of building on the rim
- A lot of higher price points
- Too little inventory at lower price points (And if you want to take a deep dive on Affordable Housing, here is an article for you…)
(for a little more on dealing with a new home builder, here are some of our thoughts)
How about new new projects within the city?
A lot of really good choice right now.
What to avoid doing as we head into 2017 ?
If you are entering the market for the first time in a while, it is not what you remember. The spring market is hyper-competitive.
- Waiting too late to get started/not being prepared
- Relying too heavily on Zillow
- Relying on one data point/anecdotal evidence rather than looking at the big picture
- Assuming that the fall market is similar to the spring one
Things to be cognizant of as we head into 2017?
Lots of development momentum in a lot of Richmond’s areas. Scott’s Addition is on fire and Manchester is poised to become its own city.
- Repeal versus new processes
- Broad Street has never been healthier
- Scotts Addition
(For more on some of the things we think are important in the future of Richmond, read this…)
Thanks for reading and if you have any other questions, please let us know and we will be more than happy to answer them!
Good luck to all in 2017 and if we can help in any way, reach out to us.
Sarah, Rick Jarvis, and Team