Changes in Local housing market

Local housing market improving?
September 18, 2009 by Al Harris
Move over, McMansion.
The home-building industry is starting to emerge from deep hibernation. And some builders around town say it’s the smaller homes that people will want to buy.
Between June and August, Chesterfield County issued 236 permits for single-family homes, only three less than was issued during the same three months in 2008.
That is in stark contrast to the previous three months, March through May, when activity was half of what it was in 2008, suggesting that the market might be starting to turn.
Still, for the year to date (excluding September) Chesterfield issued 456 single-family permits, compared with 691 issued through the same time last year, or a 34 percent decline.
And for the most recent months, new home permits in Chesterfield fell from 93 in July to 75 in August. Both months were better than 2008, when 77 permits were issued in July and 61 in August. That is still way off from three years ago, when 155 new home permits were issued in August 2006.
Across the river in Henrico, there were 51 single-family permits issued in August, down 29 percent from July, when 72 permits were issued.
Both months were a vast improvement from April, when only 37 were issued.
And yesterday the U.S. Department of Commerce released improved figures for the nation — in August, new construction of homes and apartments rose 1.5 percent nationwide from July, a total of 598,000 homes, the highest level in nine months.
But the construction of single-family homes fell in August, reaching a total of 479,000. Compared with last August, single-family home construction is down more than 29 percent.
So what’s behind the new activity?
David Reel, the executive vice president of the Home Building Association of Richmond, said that it got so bad it really had no where else to go but up.
“Inventory had been drawn down, nothing was being built for the longest time,” said Reel. “Eventually the supply and demand curve started catching up with itself.”
He said housing is poised to make a comeback, but he envisions major changes in how and where homes are built.
“What people will be building and developing will change dramatically,” said Reel. “You’ve got the tail end of the baby boom generation downsizing, and you have echo boomers coming in who either don’t have children may not ever have children. Both of those groups are simultaneously looking for much different housing than we have seen in the past.”
Reel anticipates a mix of housing that has smaller floor plans, single stories and locations closer to the urban core.
Vernon McClure, owner of Main Street Homes, said he is starting to see some of that shift.
“We’ve had to bring out the 2,400-square-foot plans and dust them off and not build as many of the 4,000-square-foot plans,” McClure said.
Building smaller houses has shaved about $100,000 from the average sales price of McClure’s homes. He said the demand for smaller houses is also tied to consumers being thriftier since the economic downturn began.
“Homebuyers are asking ‘Do I need five bedrooms, or is four enough?’ or thinking, ‘Maybe I don’t need a study and a living room,” McClure said.
McClure, who estimates building about 70 homes in Chesterfield this year, said several factors are leading sales including low interest rates, lower prices, and the federal $8,000 first time buyer tax credit.
The credit expires at the end of the year, McClure said about 10 percent of his homes sales this year have been driven by the tax incentive. But now that program is drawing to an end, McClure and other homebuilders are concerned that demand could fall again.
“There is concern that it may have pulled some of the demand forward. If it goes that way, we’ll hit another slow period,” said McClure.

Time Running Out on Buying with Federal Tax Credit

To be eligible for a tax credit of up to $8,000, first-time homebuyers have until the end of business on November 30, 2009, to close their loans. There has been discussion that some members of Congress want to extend and increase the homebuyer tax credit. It remains to be seen if an extension or enhancements will be made.
Historically, it has taken 45 to 60 days to close a loan. However, new appraisal and disclosure requirements that recently took effect may add extra time to the closing process. To be certain homebuyers can take advantage of the tax benefit – as the law stands today – interested buyers should apply for their loan no later than the beginning of October to be able to close the loan prior to the deadline.

Kerry Riley
Kerry@kerryriley.com

Encouraging signs in the housing market

It's nice to finally be able to report some concrete good news about the sales trend in the housing market. The National Association of Realtors reported that there pending housing update was up for the fifth straight months in a row.

This is an index of how many homes have gone under contract in a given month. They reported a gain over the previous month's sales for five consecutive months. Just one or two months is not a reliable predictor, but five months is a solid indicator.

Inventories are still at higher levels, but the buying activity is picking up especially with first time buyers taking advantage if the $8,000 federal tax credit.

Kerryriley.com, kerry@kerryriley.com, Riley Real Estate of Richmond

Buying a Condo in the Richmond Market

In the current Richmond market lenders have become more conservative in lending for condos. Most lenders are requiring a minumum of ten percent down on condo loan because of the gut of units available.

The best way to finance a condo is using an FHA loan which only requires a three and one-half percent downpayment. Not all condos are eligible for FHA. Only those that have sold over fifty percent of the units and meet other requirements are eligible.

The link below details all of the Richmond area condos that are currently eligible for an FHA loan: https://entp.hud.gov/idapp/html/condo1.cfm. Enter Richmond or any city that interests you.

Buying a home using an FHA loan is a great deal in this market. If you can put down just 3 1/2%, get the seller to pay your closing costs, and get an $ 8,000 tax credit for first time buyers (must close before 11/30/09) you could actually buy with no net cash out of pocket and own your own home instead of renting.

Kerry Riley. http://kerryriley.com/. Kerry@kerryriley.com.

How walkable is your nieghborhood

I found this great site that was listed in the latest issue of Fanfare newsletter about Walkable Neighborhoods. I was attracted to my current neighborhood for this every reason. I drive so much as a real estate agent it's so nice to just park the car and be able to walk during my time off from work.

Check out this site http://walkscore.com to see how you address score as "walkable". Great selling point for home. Also it lists all nearby grocery stores, restaurants, coffee shops, movie theaters, schools, parks, libraries, book stores, fitness centers, drug stores, hardware stores, and clothing & music stores.

Below is an excerpt from Walkscore.com's definition of what is "walkable":

Picture a walkable neighborhood. You lose weight each time you walk to the grocery store. You stumble home from last call without waiting for a cab. You spend less money on your car—or you don't own a car. When you shop, you support your local economy. You talk to your neighbors.
What makes a neighborhood walkable?

A center: Walkable neighborhoods have a discernable center, whether it's a shopping district, a main street, or a public space.

Density: The neighborhood is compact enough for local businesses to flourish and for public transportation to run frequently.

Mixed income, mixed use: Housing is provided for everyone who works in the neighborhood: young and old, singles and families, rich and poor. Businesses and residences are located near each other.

Parks and public space: There are plenty of public places to gather and play.
Pedestrian-centric design: Buildings are placed close to the street to cater to foot traffic, with parking lots relegated to the back.

Nearby schools and workplaces: Schools and workplaces are close enough that most residents can walk from their homes.

Streets Designed for Everyone
Complete Streets are roads are designed for everyone who uses them, including bicyclists, pedestrians of all ages and abilities, and people getting on and off transit vehicles.

These streets are:
Accessible: There are wheelchair ramps, plenty of benches with shade, sidewalks on all streets, etc.
Well-connected: Streets form a connected grid that improves traffic by providing many routes to any destination.

Built for the right speed:
Lanes are narrow or traffic calming is in place to control speed.

Comfortable: Pedestrian medians at intersections, count-down crosswalk timers, bicycle lanes, protected bus shelters, etc. make the street work better for those outside of a car.

Kerry Riley can be found at www.kerryriley.com.

Absorbtion Rates for Richmond (i.e. how are houses selling?)

I am including the absorbtion rate numbers for the first half of 2009 (developed by Jackie Theil of Long and Foster Realtors) in this blog entry. These are important numbers to watch because they predict the strength of the market and whether we are in an environment of rising or falling prices.

We professionals use the absorbtion rate as the most important information in gauging the real estate market. It basically answers the questions; How are homes selling? and how long will it take the existing home inventory to sell off given the rate of sales over the past six months?

The resulting number is "Months of supply of home inventory". Six months supply is ideal. At that level the housing market is stable. A number lower than six months would indicate more demand than supply and home prices rise. The opposite is true with a number greater than six months supply indicating supply greater than demand and prices fall.

Here are the numbers for June 30, 2009 stratified by price range:

Sales price range: Absorbtion rate:
< $150,000 8.48 month(s) $150,000-$300,000 10.30 month(s) $300,001-$450,000 12.47 month(s) $450,001 - $600,000 17.85 month(s) > $600,000 26.36 month(s)

In looking at these numbers you can tell that homes in the lower prices ranges are selling much better than higher priced homes. We are seeing this as a result of more first time buyers entering the market and taking advantage of the $ 8000 first time buyer tax credit.

This is good news for home sellers that what to move up to a higher priced home because the first time buyers are buying their homes and in turn those higher priced home sellers that selling to them and on up the chain.

Although the numbers indicate a greater than six month supply of homes in all price ranges, this is a marked improvement over prior periods. Some parts of the country have rates as high as 25 to 30 months of inventory overall.

It is a relief to see the numbers improving. Note that the buyers market will not last, so get out there and buy a home while prices are still affordable, especially if you are a first time buyer. Remember the tax credit expires December 1, 2009 and it could take more that sixty days to close, so get a home under contract before the end of September or earlier!

Kerry@kerryriley.com
http://www.kerryriley.com/
Kerry Riley of Long and Foster Realtors
409 Strawberry Street, Richmond VA 2322o
(804) 432-2688

Redevelopment at GRTC Maintenance Site in Fan District

This is a reprint of the Times Dispatch article today
WILL JONES AND MICHAEL MARTZ TIMES-DISPATCH STAFF WRITERPublished: July 15, 2009
Richmond Mayor Dwight C. Jones wants the city to buy the coveted site of GRTC Transit System next to the Fan District and to guide private development of the property.
Tammy D. Hawley, press secretary to Jones, confirmed the city's interest in the property, currently assessed at $3 million, and said the issue is being discussed by the boards of GRTC and the Richmond Redevelopment and Housing Authority. She said it is unclear what type of development might be planned and whether a sale to the city will occur.
"As I understand it, the idea would be . . . you'd go through a process of issuing a [request for proposals] for a particular type of development," she said. "No RFPs have been shaped for the type of development that would be pursued."
Officials at the housing authority did not return repeated calls for comment.
John M. Lewis Jr., chief executive officer of GRTC, deferred questions about a potential sale and development to the city, which is half owner of the transit system with Chesterfield County. However, he said any deal ultimately would have to satisfy the federal government, which has a financial stake in the transit system property.
"I must get market value," said Lewis, who expects the transit system to move to its new headquarters and operations center in South Richmond at the end of this year.
The Fan-area property, almost 7 acres along West Cary Street between Robinson Street and Stafford Avenue, has been viewed as a prime development site for a mixture of residences, businesses and offices ever since GRTC announced more than two years ago its plan to move.
"Even with today's difficult economy . . . it's still going to be a high demand for that site," said C. Lee Warfield, executive director of Thalhimer/Cushman & Wakefield, a commercial real estate brokerage in Richmond.
Warfield said the best option for making the most of the site would be a sale to a private developer.
"The best opportunity to get the highest quality project . . . would be to have an open process to look at all development opportunities instead of having the public sector develop it," he said.
Hawley emphasized that the city would be seeking private development of the property. She also said the city believes it should play an active role in the process because the site has significant potential.
"The mayor has said he wants the city to grow by design, not by default," she said.
The RRHA's potential involvement would not necessarily be a sign that low-income housing is envisioned, Hawley said. The authority manages public-housing units and a subsidized housing program, but it also routinely holds property for the city, including the Miller & Rhoads building downtown before it was developed as a Hilton Garden Inn and condominiums.
"It's not a foregone conclusion that it's low-income housing when RRHA is involved," Hawley said.
Second District Councilman Charles R. Samuels, whose district includes the Fan, said whatever happens to the property will have a major influence on surrounding neighborhoods. He expects to work closely with Councilman E. Martin Jewell, whose adjoining 5th District includes the GRTC site.
"That's a huge parcel of land, and there's a lot of potential for what may come out of it," Samuels said.
The Fan District Association hasn't been briefed on any potential sale or plan for development of the property, President Barbara Hartung said.