Please stand if this describes you — you have not bought a house in the last year. The rest of you who have bought in the last year can sit down and just nod your head as you read this. Why? Because you know what its like.
The Market is Bizarre
I am not sure if I can explain how truly bizarre this market is right now.
I have NEVER EVER EVER EVER seen conditions this extreme in my 25 years of being involved in real estate. I must admit, I thought 2015 was nuts … until I lived through 2016. And then I thought that 2016 was totally nuts … until I lived through 2017. And then 2017 was the year to end all years, until I saw what 2018 is turning into.
A Word to the Wise
So a word to the home buyers of 2018 — do not listen to anyone who bought prior to 2017 because they are giving you bad advice. And I don’t care whether or not it is a parent, sibling, grandparent, financial planner, economics professor, fortune teller, Swami, the Dali Lama, a Realtor buddy in another market or any other trusted advisor. They do not know what it is like.
So I am going to stop overselling and start explaining.
Some Really Mind Blowing Statistics
- For houses in the following four zip codes in Richmond (23220, 23221, 23222, 23223) if the house was on the market for 5 days or less, there is an 83% chance is sold for full price or greater. Oh, and the average sale was for 101.5% of the asking price.
- For houses on the market 6 to 10 days, you are highly likely to still pay full price, too (100.7%, to be exact)
- In Chesterfield north of Route 60 (zones 62 and 64 in Realtor speak), there is a 74% chance you will pay at or over asking price for a home on the market for 5 days of less.
- For houses on the market 6 to 10 days, you get a small break at only 99.5% of the asking price
- In Henrico’s Deep Run, Glen Allen, and Godwin Districts, 73% of the time a home is sold in 5 days or less, it goes for full price or greater (100.3%, to be exact)
- For houses on the market 6 to 10 days, sellers receive 99.1% of their asking prices.
- In 2015, 39% of the homes marketed in Richmond City sold in less than 10 days. In the last 6 months, that number has spiked to 52%.
Let Us Know
Want us to do a special study for your preferred area or neighborhood? E Mail us today at Kendall@RichmondVAMLS.net
We can not only do the research for you, but we can also do the analysis. Tell us your price and your area preference and we can do the rest. Knowing your market means understanding the best strategy to deploy when you are getting ready to pull the trigger on that perfect house.
As you can see, the old way of purchasing is no more.
- Bidding has replaced bargaining.
- Acting has replaced waiting.
- Conceding has replaced negotiating.
Now we have written extensively about some ways to help offset the seller’s market (like here, and here, and here), but the key is understanding. Just because buying a home USED to be a certain way, it isn’t anymore.
And a Few More Interesting Tidbits
Want to know another trend? Cash.
- In the City of Richmond, of the 1,500 or so most recent transactions, 294 were cash (that is 20%, if you want to know the math.) So if you are using debt (i.e. a mortgage) in your purchase, there is a pretty good chance you will be squaring off against a cash buyer.
- In Chesterfield, the number drops significantly. Cash transactions made up only 8% of the most recent transactions in Chesterfield.
- In the West End of Henrico, roughly 11% of the transactions were cash.
So when you bid, you need to take into account what your competition’s likely terms are going to be.
Scarcity Drives Pricing
The reasons are many for our upside down topsy turvy market, but at the end of the day, prices are set by supply and demand — and right now, it is about supply (or a lack thereof.)
When supply drops by roughly 75%, then yes, prices are going to rise.
- As a nation, we are undersupplying the housing market by anywhere from 300,000 to 500,000 homes per year — and we have been doing so since 2008. When you have created somewhere between a 3M and 5M unit housing deficit, you are going to experience a market like we have now.
- Richmond, as a region, is gaining popularity and new people are moving here every day. When more people seek fewer things, prices rise.
- Interest rates are low, still. Like waaaaayyyy low.
- The economy is doing better and people are making money.
- The cost of building houses is rising extremely quickly, compressing inventory even more at the entry point of the market.
- Rents are rising and thus making people want to buy.
- Seven, at least within the City limits, people are staying longer and holding onto properties. Where there used to be thousands of homes in a given year to choose from, there are now only hundreds.
Fix all of these problems and prices will stop rising. Until then, bidding wars will continue and waiting costs you money.
That about sums it up.
Please, do yourself a favor, and when someone who hasn’t been in the market in the last year offers you advice on what to pay, how to act, and/or what to say, just nod and thank them — but take whatever they say with a grain of salt. The market that they experienced is as different as apples are to station wagons.
The buyer in 2018 acts quickly and powerfully. Using old data to make a new decision will not work.
Let us help guide you through what is one of the most challenging markets in the last 25 years.