First Quarter 2010 Richmond Housing Report

Now that the federal first time homebuyer's tax credit is officially expired everyone is wondering how the market will respond and if the housing market will continue to expand. I have included below the summary version of the Central Virginia Area Housing Market, First Quarter 2010 published by George Mason University for the Central Virginia MLS service.

This is based on the actual 1st quarter housing stats and their expert analysis. As for the coming quarter I am optimistic that sales will continue to be steady with some growth, but not strong growth until next year. I feel that the jobs market needs to stabilize more before people are more comfortable about making the jump into the housing market.

Here is the report:

National and Local Economic Overview

Nationally, a number of indicators suggest that the economy is recovering. For example,the U.S. Leading Economic Index has increased for eight consecutive months, Gross Domestic Product (GDP) was up 5.6% in the Fourth Quarter of 2009, and retail sales have improved since the first quarter of 2009.

In Central Virginia, despite significant job loss in 2008 and 2009, the unemployment rate in the Richmond Metropolitan Area was 8.6 percent as of February--1.8 percentage points below the national rate.

While the national and local economies appear to be improving, the question that
remains is how strong is the recovery and how long before the local housing market
sees sustained recovery.

Central Virginia Housing Market

The Central Virginia housing market is in a period flux and will likely remain so
throughout the next six months. While there are some signs that sales are improving
both nationally and regionally, it remains unclear how much of the progress is due to
federal government efforts, including the homebuyer tax credit, and how much is true
market stability. As the national and regional economies continue to improve, the still low interest rates and pent-up demand will eventually spur on the market.

Home Sales

In the Richmond area, the number of homes sold was up 7% in the first quarter of 2010A total of 1,988 homes were sold in the Central Virginia MLS area in the first quarter of 2010 compared with 1,855 sales in the first quarter of 2009. Sales were strongest in the larger jurisdictions in the Richmond Metro Area.

In the Richmond Metro Area, sales were up nine percent, increasing from 1,506 in the first quarter of 2009 to 1,643 in the first quarter of 2010. In the Tri Cities Area, the number of sales in the first quarter of 2010 was off slightly—down 11 units, from 177 in the first quarter of 2009 to 166 in the first quarter of this year.
Sales in Central Virginia began to pick up very slowly in the third quarter of 2009 but there was a dramatic jump up in sales in the fourth quarter of last year.

This unseasonable uptick in sales was driven primarily by the federal first-time homebuyer tax credit that was originally scheduled to expire at the end of November. The federal government extended and expanded the program, requiring buyers to execute a signed contract by April 30 and close by June 30 to qualify for the tax credit.

As a result, some of the current market activity (and next quarter’s activity) will consist of homebuyers who are accelerating their home purchases—that is, buyers who were looking to buy sometime in 2010 but pushed up their purchase in order to secure the credit. Accordingly, sales activity may fall off slightly in the third quarter of 2010 after two quarters of sales increases.


Home Prices
Despite increased sales activity and relatively stable prices in metro Richmond
(especially the City of Richmond which has experienced a 9% increase in average sale
price), home prices in the Central Virginia region as a whole continue to fall.

In some cases, prices are being forced down by market and economic conditions, such as an increase in the supply of foreclosures and short sales and a decrease in demand from potential buyers worried about the economy. Some of the decline in average and median prices reflects the different mix of home sales.

There has been an increase in the number of sales of lower-priced homes, for which buyers are more easily able to secure financing. For example, in the first quarter of 2009, a little more than 50 percent of homes sold in the region were priced below $200,000. In the first quarter of 2010, that share had increased to 55 percent.

The data on home sales and prices imply a stronger recovery underway in the City of
Richmond and the immediately surrounding counties (Chesterfield, Hanover and
Henrico) while there is more instability in the smaller jurisdictions of the region.

Pending Sales

Pending sales are often used as an indicator of the next quarter’s home sales figures.

There were 3,192 pending sales in the first quarter of 2010 in the Central Virginia MLS Area, which was up 19 percent over the first quarter of 2010. Again, the strongest movement in pending sales was in the Richmond Metro Area where the number of sales was up 22 percent. In the Tri Cities Area, pending sales were up two
percent.

Outlook for 2010

The Richmond area housing market has shown signs of improvement over recent
months.

Sales of existing homes were up at the end of 2009 and beginning of 2010.
While home prices continued to fall in a number of jurisdictions, they are holding
relatively steady in other localities. But improvements in the housing market have been uneven and unsteady.

While the regional housing market is poised for recovery in 2010
it will be relatively unsettled for the next few months. Several factors are responsible for the hesitant recovery, including the uncertain role of the federal government in the housing market and the presence of a shadow market of foreclosed properties.

Positive factors in the region include a pent up demand for housing and an economy set to recovery faster than many other parts of the country.