"There's not much on the market", "low inventory is driving up prices", and "it's a seller's market" are likely three of the most common sayings from real estate agents in Richmond. And it's not a surprise why: according to the National Association of Realtors the first quarter of 2017 has seen homes sell in the quickest period in 10 years time! In some cases a home comes on the market and is gone within 48 hours. And yes, this is true for Richmond and not just cities with larger markets and more population growth.
But there's a lot more to this 'low inventory' story. Let's start with the question of 'how did we get here?' To answer, we first must understand who is the driving factor in the story. For those of you that love talking about generations and sociology this should should catch your attention: the new-comers to the real estate buying scene are MILLENNIALS. Statistically they are marrying later, having kids later, and many struggled to find work as they left college during the economic collapse while struggling with school debt. So it's been only in the past couple years that many are equipped and in the right position to be buying. Millennials have been fueling a strong rental market and now there has been a recent shift where this group has begun to buy.
According Harvard's Joint Center for Housing Studies there has not been a visible increase in starter homes being constructed so that's an additional challenge to the lack of supply for homes. Builders have reportedly been focusing on the upper end of the market where profits are higher with both labor and lending easier to acquire. And like many industries, the recession caused some builders to leave the industry and seek elsewhere. The home builder world was visibly rocked by the recession and we can see the consequences with the low supply nationwide.
In 2016, the Richmond Times Dispatch reported the Richmond area outpacing the nation and state in job growth. From February 2015 to 2016 the fastest growing sector in the area was professional and business services. It grew almost 10%! Richmond is attracting business professionals and increased activity in the real estate world is a byproduct. Job growth is easily linked to a strong housing market with lots of activity and interest. For those of you thinking back to your high school economics class this is a strong reminder that it really is all about supply and demand. In other words Richmond is experiencing high demand with low inventory.
So if you're a seller, it really IS a great time to sell as your property is more likely to sell and in a faster time period. For many, the days of home ownership of 40+ years have passed as many see their home as part of their investment and retirement. And just like in the stock market, it can be important to move investments around as the market shifts. Selling your home and reinvesting can be a great way to help guarantee a strong financial future. And there are ways to help insulate oneself from capital gains taxes if you are reinvesting. If there is even the slightest of interest in learning more about why it's a good time to sell please reach out! I would be happy to sit down for a few minutes and review your property and how it might sell for.
If you're a buyer, it's arguably still a a great time to buy. The oldest of the millennials are in their early/mid 30's and there is a giant wave of new comers that will be entering the market over the course of the next 5 years. These are people that didn't experience the impact of the economic collapse as significantly and many had no problem finding a job out of high school or college the same way that their immediate predecessors have. And if you bought your home many years ago it's likely appreciated at a much higher rate these past few years providing another good reason to sell: it's time to cash out, make a different investment, or simply upgrade from one home to another.
This is the tip of the iceberg on understanding why we have low inventory so if you're interested in reading more be sure to check out the National Association of Realtors and Harvard's Joint Center for Housing Studies.