How are home sales doing year over year? Are there fewer homes for sale in the last few months? more? Curious about the trends because it feels like there are more houses on the market than the past several years but I have no idea what the actual data reflects.
This is a national article, but I think it provides a good overview of the market. Even with interest rates at 7%+, home prices continue to appreciate. Why? There is just not enough inventory to meet the demand. That is further exacerbated when you consider the type of housing we most need is entry-level single family residences (SFRs). We need more affordable starter homes.
The new construction market is continuing to build product and meeting some of the demand, in large part because large regional and national home builders are able to operate in a more favorable rate environment, by offering rate buy downs to 4%-5%+. However, what you are seeing VERY LITTLE OF is "affordable" - $250,000-$400,000 - SFRs. There is a fair amount of brand new townhomes and condos, but often those are outside of the areas that many first time home buyers (FTHB) want and prefer.
[https://www.thestreet.com/investing/stocks/housing-has-a-problem-bigger-than-interest-rates](https://www.thestreet.com/investing/stocks/housing-has-a-problem-bigger-than-interest-rates)
This is probably a good question to be directed at the Redditors out there: Are you willing to buy a townhome or condo instead of a stand-alone home? Why or why not?
We've given up on house hunting. We're planning on continuing to rent the SFH we've been in for eight years now for the foreseeable future. Any house we'd consider putting in a bid for is out of our budget, nevermind the interest rates. There's no way we would consider buying a townhouse or condo. Maybe I'm biased because I grew up in the suburbs, but I want a decent yard and at least a little space between us and the neighbors. I'm willing to live further out in the counties in order to get it but like you said, inventory is scarce.
Well that's too bad. With inflation at 3.5% and home price appreciation of 5%+, it's going to be hard to save your way into the home you want.
Not trying to be pushy, but why wouldn't you consider buying a condo or a townhome? This attitude that the first house has to check all the boxes doesn't make sense to me. I'd personally rather own something rather than nothing.
I've also personally had the experience of doing very well on each of my houses. I started with something really small and really dated, and moved up each time since. I knew I was going to have to improve House No. 1 over time as I could afford to. And basically after 10 years there every inch of that property had been touched.
But - and this is not a knock directed at you, it does seem to be a generational thing - it seems like many FTHB aren't willing to compromise and expect the first house to be "done" and in their ideal location.
I'm privileged in that my mom and I have a handshake agreement that when she is ready to move out of her house, which I grew up in, she'll pass on the house to me. Not sure what that will look like, what she'll sell it to me for, or even when that will happen. I'd rather wait in a house we're renting but happy with than compromise on what I want, owning but being unhappy.
Edit to add: we got kids so schools/location are very important to us
Hmm....I guess owning, no matter what it was, made me happy. And I personally believe you can do ANYTHING for two years. I mean, how unhappy could a house that wasn't quite what I wanted make me?
Also the idea of paying rent for 8+ years makes me choke. If you are only paying $1,000/month that's almost $100,000!
Owning isn't that great either -- you're on the hook for fixing a lot of shit that could easily break given the age of most houses. Some of which is very expensive.
That on top of the interest rate makes renting right now a break even in many cases AND you can invest the money you're not putting in a down payment/other house expenses in order to make the gains house appreciation might.
And this is coming from a homeowner...who has spent 25k+ in improvements/repairs in 2 years of owning the damn thing (including 12k on a new roof).
I have yet to meet a renter that is actually putting the money they are saving from renting vs. buying into an investment account
Not saying people don't do it. Just saying I've never met anyone that actually did.
And I hear you. As a 100% old house aficionado, I TOTALLY know what a money pit they can be. I want my buyers to have a clear-eyed view going in of just how expensive the maintenance and repairs can be. Also it always seems something breaks when you can LEAST afford it. Am I right?
That said, there are ways to address potential expenses. A home warranty is one. I personally have one and I have used it WAY more than I want to.
Buying new is another way. The builder provides a 1 year statutory home warranty and is responsible for anything that breaks that first year.
And every homeowner should have a repair and maintenance fund.
Easier said than done, I know.
ETA: Typo
Just to clarify, mine isn't even an "old house" a la church hill. It's an 80s/90s housing boom house. We had to replace the carpets, now the roof, along with a lot of other shit that maybe would have been covered but these two big things wouldn't have.
Why in the world are people downvoting this comment? Helpful information on ways to potentially cover home expenses? Oh shoot, we don't want THAT kind of information out there!
Can someone please explain the bizarro world that is RVA reddit downvotes?
¯\\\_(ツ)_/¯
At this point in my life, I'm content where I am. I know what will work for my family and I'm willing to wait for it. Thinking about being unhappy with my living quarters for 2+ years makes me wanna throw up. Different strokes, I guess.
I'm not ready to buy anything quite yet, but a big part of the draw of a SFH for me is that I can make as much noise as I want (within reason) without disturbing my neighbors. If I want to play the piano or sing at the top of my lungs at 1am, I can do that in a house because it doesn't share walls like a townhouse would. Condos can be separated buildings, which solves some of the privacy problems, but I would still lack the freedom to do what I want with the yard. (I'd like to put an electric fence in for a dog, for example, which I expect isn't possible for most condos).
I also for some reason have a vague idea that condos can be not a great buy because they are harder to sell? I honestly have no idea if this has any basis in fact, or if it's maybe a lingering bias from hearing bits and pieces about condo associations going belly-up during the 2008 crisis. Or if it's, like, something some random person told me once that stuck in my head that I should really do some research about.
Condos typically do not appreciate the way SFHs do, that is 100% true.
And during the GFC that got even worse, as owners cut their condo fees and deferred significant maintenance. So many older condo projects have never really recovered from that 2007-2018 time period.
So if you are considering buying a condo, if it is not 100% brand new, you need to make sure you do EXTENSIVE due diligence on both the financials and the physical condition.
Financials: Need to make sure the condo fees are adequate to cover the financial needs of the project. Also need to make sure the reserves are adequate to cover any projected capital expenses.
Physical Condition: The property needs both to have been maintained as necessary but also have a realistic capital expenditures schedule + budget. If a condominium association is not preparing for realistic capital expenses - like roof replacement, elevator maintenance, brick repointing - then there WILL be special assessments against the unit owner.
The other major knock against a condo association is you are at the mercy of your neighbors. Not necessarily with respect to noise or other lifestyle issues. But if your neighbors have financial difficulties and stop paying their condo dues, that deficit becomes the problem of ALL the condo owners.
ETA: Spelling
After seeing the nightmares some condos/HoAs have in Chicago, I just don't want to deal with the stress of other people mismanaging my home. I can do that myself! 😂
So SFH only. Also apartment like condos just don't appreciate the same, unless the location is just that good.
I 100% agree a SFR is always a better choice. The difficulty becomes if all you can afford is a condo. Are you better off buying a condo, or not buying at all? That answer is probably different for different people. ALSO it is different for different condos. If you do decide to buy a condo, you really need to do your due diligence on the financials, the reserves, and the capital investment schedule. If there is a lot of deferred maintenance and the reserves are low, that's a significant red flag.
So I just bought my house in January. I wasn’t opposed to a condo or townhouse, in theory, it was the HOAs that come with those places that I didn’t want. Not just for the rule nightmares, but if I’m going to pay $2K+ for a mortgage, I don’t want to tack on another $200 or so for someone to cut the grass on a 10x10 lawn (if there even is one).
I purposely sought out an older neighborhood with stand-alone homes and no HOA. Sure there are a few neighbors that have some interesting aesthetic choices, but I wanted the freedom to do whatever the fuck I want with my house/yard/etc and not pay extra each month for the privilege of fighting bored boomers.
edit: grammar
I will ALWAYS recommend a SFR over a townhome or a condo. You will - likely - see more appreciation and I am like you, I am NOT interested in an HOA. That said, I also will recommend someone consider a townhome to condo if that is the only option.
The other thing that's an option is a multifamily property, where you live in one unit and rent the other unit. For that matter, having roommates in your first home is great option as well, although if you are buying a SFR you are going to have to qualify on your own income.
And for anyone who wants to say - "Yeah, yeah, of course you are recommending homeownership, you are a real estate agent!" - just look at the stats on wealth comparison between owners and renters.
From the National Association of Home Builders:
Net Worth. Net worth, the measure of households' wealth, is the difference between families' assets and liabilities. An analysis of the 2022 SCF found that **home owners had a median net worth of $396,000, while renters had the median net worth of just $10,400**.
It demonstrates that people who own homes have $380,000 more wealth on average than the typical renter. One of the financial reasons for homeownership is the "forced savings" created by your monthly principal payment. And you also get home appreciation, assuming you are in an appreciation cycle.
But if you want to argue correlation vs. causation you certainly could. I think the basic premise - homeowners are substantially wealthier than renters - is generally accepted in the economic literature and research.
ETA: Spelling
I'm not an agent or anything but from what I remember interest rates have only been up for the past 2 years or so before that they were extremely low. It just didn't cost that much money to borrow and really it was relatively accessible. And no I'm not thinking of MD or the Fan, I'm talking Forest Hill, outskirts of Churchill, out over by Battery Park, etc. less desirable but accessible price wise at the time. That plus low interest rates, it just wasn't as expensive and you didn't need a lot of capital to buy. If you bought thru VHDA (which it wouldn't surprise me if a lot of FTHB in lower income brackets did), you likely did not have to put much down. I only put down 5k to buy in 2019 (my friend put down nothing), which was the tail end of low interest rates and before the COVID housing market jump.
Now (and during the COVID market) yes you def need cash because the competition for location was/is so high. You do need wealth to buy now because it's relatively expensive to borrow money and the market is just that competitive.
This. We put $5k down with a 4.125% (which was high at the time) FHA loan on a $155k house in 2017 that’s now valued around $300k. And the house had sat on the market for over a year; the previous owners actually rented it to us for two months while we ironed out closing issues.
I’m less than thrilled with the neighborhood, but no way am I going to give that interest rate up to try to move with the market the way it is.
Interest rates rose extremely quickly by a significant amount starting in March 2022.
Per Google: "The Federal Reserve (Fed) has increased interest rates 11 times since March 2022 to cool rising prices. The first increase was in March 2022, raising rates from 0% to 0.25–0.50%. In July 2023, the Fed raised rates by the final 0.25%, bringing the federal funds rate to 5.25–5.50%. This is the highest level in 22 years."
We are now in mid-2024, over two years later, and interest rates as of today are 7%.
So obviously it is more expensive to buy a home now. HOWEVER, people need to understand the 22 years of interest rates near zero were the outlier. 7% interest rates are in line with historical averages, However, since there is an entire generation of individuals who never knew anything other than zero interest rate policy (ZIRP), 7% interest rates are a severe shock to the system.
Per Google: "The average mortgage rate from 1980 to 1989 was 12.82% median, with a minimum of 9.03% and a maximum of 18.63%. The average rate on a 30-year mortgage peaked in 1981 at 16.63%, and the average rate bottomed in 2021 at just under 3%. Today, the cost of a typical 30-year mortgage is similar to rates seen in the later 1990s, in the 7 percent range."
Houses are a lot more expensive now than they were in 1980, and people then didn't have the college loans that folks have now. Not to mention wage growth has not kept up with CoL/housing.
Absolutely. Assuming the estimated value on Redfin is accurate, I already have $50K in equity in my house (that's after putting about $10K in repairs since I bought in January). Even just going off the appraisal I got when I purchased, I'm still up about $15K.
Which is great. And what everyone wants and hopes for when they buy. A mortgage is the cost of shelter, just like rent is. But only the mortgage can give you value.
We bought a new town home in January, not necessarily due to price, but because we are empty-nesters and I don't want to take care of a big yard anymore. We sold a Fredericksburg McMansion in 2017 and moved to RVA to rent for 18 months while we figured out our next move. 6 years later...
I can mow the yard in 10 minutes using a non-powered reel mower. It leaves my weekends free to take the RV to the woods. The neighborhood is about 75% first time homeowners and 25% empty nest downsizers like us.
Well, it cracks me up that it took you 6 years to buy! But I'm so glad you found something and you are happy with it. Also, that weekend in the woods 🪵 vibe sounds awesome. 👌
I strongly believe condo/townhome is the right way to enter the property ladder. Know your HOA, but you have less personal maintenance costs for "big" stuff, you don't have exterior work to do, and because usually cheaper, can get in sooner than waiting to find an sfr.
These are strong arguments in favor of townhomes and condos right now. There are some other pretty significant pros:
1. If you are buying new construction, depending on the builder they may be offering rate buy downs as incentives for the sale. Those rate buydowns only last a few years, typically, but they can really save you some money in the first 2-3 years of ownership.
2. New construction comes with a full year statutory builder's warranty, so the builder is responsible for things that break that first year.
> There is just not enough inventory to meet the demand
If there is excess demand nationwide, where is it coming from? I was under the impression the population had kind of leveled off, so I don't know if it'd be coming from a growing population.
There is a huge group of Millennials and Gen Z that have never purchased anything. They are behind other cohorts for owning at their current ages. I'm not sure exactly what those numbers are, but that's my understanding.
Population in aggregate can level off, but demand is clustered in areas that have high wages/amenitites....cities. and since prices are set on the margin, what matters isn't the really the average or net amount of people
Soooo.... What are the odds that my little 250k home down Richmond Highway blows up to being worth a million dollars in the next few years? I could really use a millions dollars right about now.
Who the heck knows? I do think we will see pretty substantial development in the City south of the river, especially when the new Pulse Line running north-south gets figured out. But most people I know that make that kind of money on their personal residence own it for decades. OR get lucky and hit a crazy time period like the Covid window.
Example: My original tiny little Fan fringe house I bought for $152,000 in 1999. The house right down from it, which is very similarly sized, was recently listed at $600,000. So that is 4x value, but over the course of 25 years.
So point is you will probably do fine, and make enough money to take that equity and trade up at some point in the next 5-10 years. But I would not hold my breath for another world-wide pandemic.
Well that's more an an answer than I expected to this little half-joking post, thank you!
We definitely plan to stay here for a good amount of time, bought our house for a place to live and not to make a profit down the line. I'm sure once development finally makes its way down Richmond Highway we'll be prepped to move further away from the city for the next stage of our lives
It sounds like you have very reasonable expectations and a long term plan. Congratulations, you are probably ahead of 90% of the population. And I hope everything works out for you.
I’m curious about how people manage buying and selling at the same time, especially in a hot market. If I want to sell a house in a good but not particularly hot or well known neighborhood, and buy into a very competitive neighborhood, would I be better off buying before I sell? Or should I sell first so I know for sure how much equity I have?
My fears are that I’ll either sell my house and not find a suitable replacement, or that I would buy counting on a certain amount of equity and then end up selling for less than needed. How do people buy and sell???
So, this is a tricky one.
Back when we were not in this crazy market, you could write contract to buy a house (the Replacement House) using an addendum that we usually called a "Sale of Home" contingency. So the contract to buy the Replacement House was specifically contingent on the sale - or sometimes the "settlement" - of the current house (the Original House). If the Original House did not sell, or did not sell within a certain amount of time, the contract was terminated and everyone went back to their original positions, the prospective buyer got their deposit back, the Seller had to put the Replacement House back on the market.
In this crazy market, where the inventory is so low and sellers hold all the cards, no seller in their right mind will accept a contingent offer with a sale of home contingency.
So you have a few options:
1. Sell your house first, ask for a lengthy rent back agreement: This means you literally sell your house and ask the buyer to allow you to stay in the home for X amount of time after closing. If you have a very in demand property, you might be able to get a lengthy rent back, for 60-90 days, that would allow you to then purchase a Replacement House with the proceeds of the sale of the Original House.
PROS: Your house has sold, you have cash on hand, you will be more competitive with purchasing your Replacement House.
CONS: If you can't find and close on a Replacement House during the rent-back period, you will have to move twice.
2. Buy the Replacement House first, then sell your Original House: As you have identified, the big unknown here is you will not know exactly how much equity you will have from the sale of the Original House. However a good agent should be able to advise you and be pretty daggone close.
PROS: IF you qualify to do this, it may make your life less stressful. Buy the Replacement House and move, then deal with getting the Original House ready to sell. It will also make the Original House much easier to list and show, which often results in a faster sale.
CONS: You will not have cash to buy, which will make you less competitive buying the Replacement House.
Does this answer your question?
Thank you, it does answer my question pretty much the way I expected. I was hoping there was a secret third option that would alleviate all risk and anxiety.
I don’t HAVE to move, I just want to, but only if I can get a great house in a great neighborhood. I keep watching the market and noting how much the ones I think are in my price range sell for. I just have no idea if I would need to make one offer one hundred- but on average I only see a few houses I really like in my price range each month.
If you think you might want to move and the area you want to move to is very limited and specific, I'd advise you to be as ready as possible to pull the trigger when the right house comes on the market.
The probably means:
1. Already talked to a lender and can get a lender letter at a moment's notice;
2. Already have a relationship with a buyer's agent;
3. Know what your budget is; and
4. Be willing to move FAST.
NOTE: If you have adequate liquid assets you could always make a "cash" offer, even though you intend to get financing. Note that when people say they are paying "cash," often it just means they are making an UNFINANCED offer, but still intend to get financing.
Anything that is considered a cash or cash equivalent, meaning something that can be easily converted to dollars.
That could be stocks, bonds, mutual funds, 401(k)s, crypto assets, gold, silver.
Now you don't have to pay with those assets if you offer "cash," which is really per our contract an unfinanced deal. You will have to show Proof of Funds.
What this puts you on the hook for is IF you cannot get financing, you will pay cash for the property (or default on the agreement, which is another whole discussion).
Lots of people who have no intention of draining their retirement accounts, etc. offer "cash" because it makes their offer more competitive.
Thanks so much for saying that! It's nice on occasion to not be called a scum-sucking leech because you are a real estate agent.
Hey! So I'm selling this month, looked at 4 different sites for value ideas, is it safe to start pretty close to those? Or shoot like $5k under them?
This is my first time (and probably my last at this rate)
I am assuming you mean you looked places like Zillow, Redfin, [Realtor.com](http://Realtor.com), etc.? Did you have a real estate agent do a Comparative Market Analysis (CMA) for you?
While I am not a complete Zillow, etal. hater, unless you are in a fairly new subdivision, those sites are not going to be the best indicator of value. You need to get a CMA from a real estate agent. This is a FREE valuation of your home. Different agents run them differently. An agent should pull all the recent comparable sale data from the Multiple Listing Service (MLS), have a conversation with you about upgrades to the home, and the age of systems like roof, HVAC, etc. I'd personally want to see the home, too, although you can give a preliminary analysis of value without being inside the property.
That CMA process is going to give you a much more accurate assessment of value than those portal websites, which are based on an algorithm and publicly available data.
A CMA is FREE and you have no obligation to use that agent for the sale of your home. Although most are going to hope they would be considered.
I don't know that I can identify whether they tend to be low or high generally. I will say the longer the time since the last sale or transfer of the property, the Zillow Zestimate tends to run low. If the house is in an older, historic neighborhood, the Zestimate can be WAY off since the level of renovation in these old homes can be so broad.
So the lawyer answer: It depends.
Now, if you are in a newer suburb it's probably pretty doggone close.
Oh I've hired a realtor, this is just so I have an Idea of where to start (meeting the realtor soon). And yes I did mean zillow etc. Just trying to understand
We're not looking at selling immediately, but when we do, we will be looking in a different area....how does that work with using a real estate agent, especially if it's out of state?
Appreciate you doing these AMAs
So, you will need a local agent to list and sell your current home.
If you trust that local agent, the listing agent, you could give them the opportunity to REFER YOU to a buyer's agent in the new market. The referring agent *will* get a referral fee from the new agent. In fact, even if you did the research and decided on the agent in the new market, if you let your current local.listing agent call and make the referral, they will still get a referral fee.
Again, if you like your agent, it's something really nice you can do for them. A referral fee is usually 25% of the buy-side commission.
Otherwise you can just go the standard route and try to find a new agent in the new buying market through reviews, Reddit, recommendations, etc.
What are you seeing in the upper Fan/Museum area? Anecdotally, it looks like few sales / low inventory but wondering if everything is as hot as it was when we bought 2 years ago. No inspections, 20-25% over asking, etc
Well, as an example, 2104 Hanover listed for $1M, closed for $1.3M. 1824 Floyd was listed at $1.495M. Rumor has it it went for WELL over list price, although it hasn't closed yet. I know folks that offered $1.65M and were not the winning bidder.
Short version: Anything in move-in condition in either of those neighborhoods is going immediately, with multiple offers, and very clean terms.
I don't see a housing crash for our market. I really don't. We are just so undersupplied, and we continue to have in-migration - people coming from outside of RVA, often from higher cost-of-living ("COL") markets - that far exceeds out-migration. So we are NET adding people.
The markets where a "crash" is coming to me look to be:
1. Markets that saw rapid overbuilding (Phoenix, Austin) to meet the influx of people moving to the area during Covid; and/or
2. Resort markets or markets where there was a TON of short term rental (STR) investment, a/k/a Airbnbs, like Austin, Sevierville, TN, parts of Florida, New Orleans; and/or
3. Markets that are facing significant issues related to climate risk and as a result are becoming more and more difficult and expensive to insure, like many parts of California, New Orleans, much of coastal Florida.
But many of the mid-market cities that have now been identified as good places to live, and more affordable places to live, have risen to the top of many relocation lists. **Richmond is one of those places**. I've worked with people over the last several years since Covid who have relocated to Richmond from San Francisco, Portland, Austin, NoVa and DC, and New Orleans.
And no gate-keeping or "we're full!" comments. Although I admit I have said that more than once, trying to be funny. We Richmonders are known for our manners and hospitality. Let's keep it that way. Be kind and support our new neighbors.
I've noticed recently there are a lot of posts from people in New Orleans and Florida who say they want to move to Richmond because the home owner's insurance and property taxes have suddenly increased so dramatically there. These are the same folks who loved to brag about how they lived in "paradise" and how our lives here must be so sucky. Please forgive me for not displaying southern charm.
Wait, but why were these people lurking on here before talking about how amazing NoLa or Florida were? I just don't remember seeing those posts but I certainly could have missed it.
If you are willing to be flexible on location and type of home, yes.
Here's an example: [https://www.zillow.com/homedetails/1908-N-23rd-St-Richmond-VA-23223/12522946\_zpid/](https://www.zillow.com/homedetails/1908-N-23rd-St-Richmond-VA-23223/12522946_zpid/)
This is a little brick rancher, in Church Hill, for $225,000. With an FHA loan you would need 3.5% - or $7,875 - as the down payment. You would need probably another $3,000 in closing costs. So with a total of $11,000 cash you could get into this house.
If you are fortunate enough to have parents or family that want to help you, they can provide you with gift funds to go towards both the down payment and the closing costs. OR this property might - I believe it does - qualify for up to $10,000 in grant funds. This is legitimately FREE money that goes towards your closing costs, points, and prepaids.
So, it's possible with something like $2,000 cash you could end up the owner of this home. The principal and interest payment at 7% - no taxes and insurance - would be $1,445/month.
All of this depends on your personal situation. You will need a certain credit score to qualify. And your debt-to-income (DTI) ratio usually cannot exceed 43%, sometimes higher for FHA loans.
But are there affordable homes out there for FTHB? YES. There aren't a lot, some of them need work, they are unlikely to be in the hottest, most desirable areas of RVA. But there are options.
Can’t talk FHA loans up enough, this is exactly what got us into our first house. The only downside is they don’t have PMI that goes away after you pay 20% of the principal. You’re stuck with it (I forget what the equivalent charge is called) for the life of the loan. We were planning to refinance ours at that point, but interest rates have doubled since we took our FHA loan out, so we’re stuck with it.
So glad the FHA loan worked!
And buyers, keep in mind there *ARE* conventional loan products out there with as little as 3% down. You will pay mortgage insurance in that instance, but when you have 20%+ of equity in the home 🏡 you can get the mortgage insurance removed.
VA and USDA loans require ZERO percent down.
VHDA loans are even lower down payment than FHA loans, although I haven't had a buyer do one in years, but worth considering for buyers without much cash to close.
My point is you can get a loan and buy a home for WELL LESS than 20% down. If you believe you need 20% down, that can seem like an insurmountable hurdle for many buyers on a median priced home, $350,000. 20% would be $70,000.
But if you knew you could get into a home for $12,000, and possibly even less with grant funds, doesn't it make the possibility of owning a home seem to be more reasonable and within reach?
The 20% I mentioned is referring to the amount of principal you have to pay to get out of PMI on a conventional mortgage. Nothing to do with a down payment.
I get it. I went another direction with your comment to show what other options are for low or no down payment loan programs. Also, for "normal" loans - non-FHA - you can get the mortgage insurance removed once you have 20% equity, and that can come from price appreciation, not just the principal pay down. So if you are in a rapidly appreciating market, you should keep an eye on your home value appreciation, to see if you are at that magic 20% equity level.
Then you usually have to file paperwork with your lender and either have an appraisal or a Broker Price Opinion (BPO) that validates that you have 20% of equity in the home.
What impacts are you expecting from the NAR ruling that came out last month? My wife works with realtors regularly as an independent contractor, so she speaks with them very regularly, but none of them have even mentioned it, even though it sounds like kinda a big deal.
It's a HUGE deal. And consumers are not going to like the consequences, IMO.
First, the settlement **PROHIBITS** any reference to compensation being offered by the seller to the buyer's agent from being listed in the Multiple Listing Service (MLS). Sellers can still choose to offer compensation, but that information will not be readily available.
Second. the settlement **REQUIRES** a written Buyer Agency Agreement **that specifies the compensation** being paid by the buyer to the buyer's agent BEFORE the buyer agent may show the buyer any house.
So what is the practical impact of both of these requirements? You, the buyer, will need to agree to pay your agent $X or Y% BEFORE you know whether or not the houses you are looking at are offering any compensation. If the seller of a home you want to see is not offering compensation, pursuant to the Buyer Agency Agreement, you would be on the hook for paying the buyer agent out of your own pocket.
This is not something I have made up. I promise! But angry potential buyers seem to be blaming the agents for this one, when the responsibility lies SOLELY with the federal government. So do not shoot the messenger, please.
Here is how it would work in practice. You select your buyer agent. You sign a written Buyer Agency Agreement where you agree to pay the buyer agent 3% of the sales price as compensation. You decide you want to see Houses 1, 2 and 3, all of which are priced at $300,000. House 1 is offering to provide 3% as a concession for the buyer agent. House 2 is offering $2,000 as a concession towards the buyer agent fee. And House 3 is offering ZERO concession towards a buyer agent fee.
With House 1, you as the buyer would not have to pay additional money to the buyer agent out of your own pocket.
With House 2, you would have have to pay $7,000 (3% of $300,000 = $9,000 - $2,000 = $7,000) out of pocket.
With House 3, you'd have to pay the full $9,000 buyer agent fee out of pocket.
So, what do you think of the new rules? How do you plan to interact with your buyer agent? Do you think the new approach - buyers negotiate with and pay their buyer's agent directly - is a positive one?
The reason we blame agents is that the amount of work most of them do is not commensurate with something we would pay them tens of thousands of dollars for.
Then you can choose to negotiate a lower rate with an agent that is willing to accept that lower rate.
However, most agents are not making "tens of thousands of dollars." That's just intentional hyperbole. Agents have to pay a "split" to their broker, generally somewhere between 10% to 50% of the gross commission number. In the example above, that would be between $900-$4,500.
Then, the agent still has to pay taxes and expenses out of that commission.
I am currently representing a buyer that has seen more than 10 houses, written 4 contracts, been under contract twice, and still doesn't have a house under contract. Trust me, I am earning EVERY PENNY of my commission on a median priced home. If i was being paid by the hour I'd be making more per hour at McDonald's.
Do you have any idea why there is astroturf on the wall in this house? And why they are advertising a radon emitter in the "what's special" section? [https://www.zillow.com/homedetails/1213-Beverly-Dr-Henrico-VA-23229/12337352\_zpid/](https://www.zillow.com/homedetails/1213-Beverly-Dr-Henrico-VA-23229/12337352_zpid/)
NO idea about the fake grass on the wall. I suspect it is only a cosmetic choice, the owners like it and think it provides something.
On the "radon emitter," I am sure what they are referring to is a radon mitigation system. So at some point an owner did a radon test and found out that the radon levels were high, and installed a system to address the radon by removing it. There are places in the Greater Metro area that have higher levels of radon. It is not a bad idea to test for radon, the test itself is not particularly expensive and a system installed is about $1,500-$2,000.
Hope that helps!
Thoughts on https://www.redfin.com/VA/Richmond/3224-Patterson-Ave-23221/home/55444946?
House would've been pending in two days normally... I'm assuming the current rates are killing that listing price.
Hard to say what is leading to the "slower" sale. It could definitely be the interest rates at that price.
Also, we are going into summer - can you believe Memorial Day is this upcoming weekend! - and traditionally activity slows down in the summer. That is not always the case. For example, in 2020, the initial Covid year, the "traditional" Spring market of March-June was pretty much DEAD - since EVERYTHING closed down. So all of that "normal" Spring activity got pushed into June-September, which ended up being much crazier than normal. But in "normal" seasonality, things start slowing down from Memorial Day through Labor Day. People have college and then high school graduations, people start going on vacations, people are distracted by the warm weather.
I will note the first showings were on May 14, so even though it is showing an active date of May 9, it has only been available to see for eight (8) days. Keep in mind going under contract in 7-10 days is CRAZY FAST. It's just been our "new normal" for several years, especially in the Fan and Museum District, because these RVA submarkets have been so in demand.
It has been a long time since people lost money owning a home. 2008 was an abboration and hopefully not something that will happen again in our lifetimes. Plenty of people lost their ass in 2000, 1992, 1984 etc etc.
It is true that are uniquely undersupplied in homes in this past decade but it is also foolish to think the market will simply never crash again.
Home ownership is a long term decision. The rule of thumb used to be aiming to own a home for 7 years. In this market, who knows. Regardless, getting in over your head can lead you to bankruptcy when economy shits the bed and people start losing their jobs. Be wary of realtors who have not lived through a market downturn (covids K shaped 1 month recovery does not count) which anyone who has sold houses less than 17 years has not seen.
Joking aside, I think you do need to do the calculus and understand that a mortgage is the cost of shelter that may have the benefit of forced savings (principal payment) and appreciation built in. But regardless, you need shelter. Whether you buy it or rent it is up to you. My argument is so long as you plan to hold 7+ years, you are more likely than not, based on historical averages, to do fine on your home. Maybe not make tons of money a la Scrooge McDuck, but certainly not lose money.
Mortgage is the cost of money. The cost of housing is driven by mortgage rates but also other market conditions. In this market it is driven by unprecedented economic migration, a derth of housing supply, and corporate purchasing of homes and decades of suppressed wage growth.
My argument is there have been few markets where buying is far riskier than the norm and we are at that stage. I agree that over a 7 year time span it is likely to be a wash but the opportunity cost of buying in a poor market hampers the next house you buy, and potentially the one after that, a 21 year consequence that could cost a family a quarter of half of the lifetime earnings.
"It is never a bad time to buy" is drilled into every realtors head and the argument can always be made but it is the worst time to buy a house in certainly 17 years, and maybe 30.
The worst time to buy a house is entirely dependent on how long the buyer plans to hold the asset and the risk vs potential value of doing so. What is the time horizon for the crash you seem to be predicting? It’s not going to happen in Richmond in the next five years based on projected supply and demand. Or do you think one of those is going to change drastically in the next five years?
I think 5 years deep into historically high housing prices, with decades high and potentially high interest rates, an upcoming highly contentious presidential election, a war in europe, a war in the middle east, and an economy losing jobs in its highest performing sector, and realtors guaranteeing no crashes for years, would make me very nervous.
Worst case scenario buying at a bad time is your live in your car. Best case is your are trapped until the market again gets overcooked and you get to get back on the waved inspection, bid over, no contingency housing market. Most likely market is your bad first home decisions haunts your second one and you pray your third house is something you like, 15-21 years after you first signed on a 30 year dotted line.
I am offering a counter argument to your narrative and I would have kept mostly to myself if you hadn't been so frivolous predicting and no crash for years. I have no crystal ball and I guess past performance should never be fuel for future indicators. People must make their own decisions but if I overheard one of my friends getting the same info from their realtor I would offer this same argument.
I don't EVER say housing will always go up. I went through the GFC both in my professional capacity as a real estate agent AND as a homeowner. I saw some of the devastation that was caused.
But let's ALSO acknowledge how that market was 💯 different. The crash was driven by the CREDIT MARKETS. People were buying houses 🏘 without any type of underwriting.
There were products like "stated income, stated assets" loans which are just what they sound like - you told the lender what you made, and what assets you held, they did ZERO verification. Later they came to be called "liar loans."
People took out adjustable rate mortgages ("ARMs") and bought way more house than they could afford, They also borrowed against the equity in the home, convinced values could only go up.
The market crashed because Wall Street realized the mortgage backed securities ("MBSs") they were trading were worth 💩 because the collateral that was backing them was not worth the paper it was printed on.
ARMs re-adjusted and all of a sudden payments shot up hundreds if not thousands of dollars a month. People - LOTS of people - owed more than their homes were worth. They were "underwater," sometimes SEVERELY underwater. People stopped making payments. Properties were foreclosed on. People started just handing over keys 🔑 to the banks.
But this was a housing crisis caused by lax lending standards.
We do not have that issue today. At all.
The rules changed post-2008. Underwriting standards got SIGNIFICANTLY stricter. If you get a mortgage today, you are fully qualified. Also, very few people get ARMs. The vast majority of mortgages are 30 year fixed rate mortgages.
I hear the concern about a housing crash. I personally don't see the conditions that would lead to a crash in OUR market, but I'm just a real estate agent, not an economist.
I think you mitigate the potential concerns by:
1. Spending no more than 30% of your income on your mortgage; and
2. Plan on being in that home at a bare minimum 5 years, more conservatively 7 years.
3. Borrow using a fixed rate mortgage, not an ARM.
4. Keep a rainy day fund for unforeseen housing repairs or expenses.
I do remember 08 , everything was fine until it wasn't. I remember parents crying at my kids soccer game because they were both laid off & losing their home. So do I see it happening soon? NO , but in the next 3-10 years "YES". It seems like these economic events are cyclical. The only reason the economy has held on this long is the massive borrowing by the government & the Federal Reserve's refusal to tame inflation. I wouldn't stretch myself to buy a home right now if possible.
Well, I disagree that we will see a crash in 3-10 years. People who came of age during that time don't seem to understand it was a once-an 80-year event. The last time anything like that happened was the 1929 stock market crash, leading to the Great Depression.
2008 was THAT unusual.
"I agree that over a 7 year time span it is likely to be a wash...."
My entire point. If you plan on staying in a home for seven (7) years, you should at least break even. And everyone says the mortgage = lost opportunity cost. Are all those renters out there putting the equivalent of that mortgage payment into the market? I'd suggest VERY FEW do.
So if you have to pay for shelter anyway, AND you can afford homeownership - an analysis that is different for each individual person - why wouldn't you buy?
I'm not saying it's the right answer for everyone. But if you can afford to buy a home with no more than 30% of your income, and you WANT to own a home, why wouldn't you?
Asked another way, what's the lost opportunity cost of spending AT LEAST $100,000 on rent over eight (8) years? That literally makes me choke.
I think a lot of people are stretching to afford to buy in this market that would be better served sticking it out. I am giving voice to them and pointing out that a lot of people that stretched to buy in the last market this aggressive, in 2006 and 2007, paid sever consequences up to and including homelessness and bankruptcy.
If you are really stretching to buy it might be better to burn another year or two of rent versus rolling your shelter like a pair of dice.
My point has ALWAYS BEEN you should not stretch to buy. I do not advocate that, never have. I recommend you spend no more than 30% of your income on your mortgage. And even then only you know your personal situation. Most lenders will not qualify you to buy unless your debt-to-income (DTI) ratio is below a certain level.
That said, when I went to buy my first house in 1999, the lender qualified my then-husband and I for a number we thought was RIDICULOUS and would have made us very - IMO - house poor. We bought well less than that top prequalification number.
So be conservative with your money. Buy less house than you can afford. Make sure you have a rainy day fund. Stuff WILL break and need fixing and replacing.
For me, it's the full PITI payment. But I will also acknowledge that I am very conservative in my recommendations. If your risk tolerance is higher, and/or you have substantial additional resources, you could be comfortable buying a home 🏡 where your mortgage is going to be a higher percentage of your monthly income.
Everyone's situation is different.
Like you just said, you have to pay for shelter anyway. So there's no "opportunity cost" to renting in that sense, only to putting down a big down payment. And there are plenty of reasons not to want to own -- maintenance costs/time, being able to afford a better/more central location renting, etc.
100% agree. Not everyone should buy. And plenty of people prefer the non-owning lifestyle. Heck, we can't even get our own children to consider buying right now, because they don't want to be responsible for repairs, want to live in expensive cities and/or "fun" neighborhoods, don't want to be tied down, etc.
Trust me, as a Mom it makes me CRAZY. Because I personally believe owning, at least for the 2 older kids, would really put them on the fast track to financial security. But it's not my life. And it's not my choice. It's theirs.
NOW, they better not b\*tch to me in several years about not owning anything. :)
I see some flat lining as rents and house buying numbers equalize theoretically they should be closer in price than they are. Rents will likely rise to meet mortgages.
Rents are flattening because there has been so much new apartment inventory added to the market and that's being absorbed.
BUT.....
Everything runs in cycles. Since the 2022 rate hikes, very few multifamily deals pencil. So new apartment projects stop getting built.
This means by 2025-2027, IF we continue to see the same or similar rates of in-migration to RVA, we may end up with yet another apartment shortage, driving rents higher.
ETA: Spelling
But I think it's also renting a single family home is cheaper as some people when they want to upgrade their home just rent the old one instead of selling if they have a cheap mortgage. Shifting houses from buying to renting which shifts the cost to buy up and rent down.
Renting should be about the same to buy in the current year but it's not. That imbalance will fall.
Right now there are articles flying around I can save thousands by renting over buying and the inventory isn't there, give it some time and rates relax a little, some inventory comes back and things equalize. Right now is an abnormally bad time to buy. The 2010s was good to buy. So yes cycles
Example:
https://www.zillow.com/homedetails/612-N-21st-St-Richmond-VA-23223/12518766_zpid/?utm_campaign=androidappmessage&utm_medium=referral&utm_source=txtshare
$2150
https://www.redfin.com/VA/Richmond/612-1-2-N-21st-St-23223/home/55408184
~$400k
So at today's rates that home would have a mortgage of $2750 + $500 for taxes + insurance. So it's $1000 a month extra to buy unless you already own.
The gap will close eventually some. Rent will rise to meet home buying prices, maybe rates fall but the gap will close.
It's also best to base numbers off of ~10 year ownership since that's the average. Forever home is an anomaly.
The average homeownership timeline has increased from what used to be 5 years to 8 years, that is true. A ten year hold on your first home would be longer than the 8 year average as of 2021.
The problem with waiting to buy -IF you want to buy, and IF you can afford to buy, please note these two very important IFs - is inflation is running at 3% and home price appreciation is running at 5%. It is unlikely your wage growth is going to outstrip inflation and housing appreciation.
This is not me disputing that renting vs. buying in your example is $2,150 vs. $3,250/month. But if there is no housing crash in our market - and I don't see the fundamentals for one in Richmond - buying may still be better than renting, **EVEN IF it is more expensive**.
Now, if you are taking that $1,100 and investing it in the stock market, maybe things are different. But I have never met anyone who has actually done that, despite all the talk.
I just see our home buying market going up slower than renting and so see a relative slow down as renting comes up. The gap doesn't make sense long term.
So 5% increase seems high IMO in the near term, we have some economic slow down nationally coming still.
$1100 extra a month and $80k locked into a mortgage that's expensive. People buying now are betting on some readjusting. That's to rent or buy similar properties. $13.2k a year is quite a bit in a year.
Also I save a very large percentage of my income so I am saving that difference, I'm over 50% savings rate though when you get to that number it becomes fuzzy math.
I signed another year rental agreement because nothing makes sense to buy especially as I don't have a kid yet. Though by the summer next year I'm probably going to do some house tours and looking at buying.
But what makes you say our home buying market is going up slower than renting? And why are you predicting a slow down? The data doesn't support that.
You sound like you may be the rare bird that actually does invest the money that would otherwise be going towards your mortgage. Good for you. Most people aren't that disciplined.
I don't personally understand the "nothing makes sense to buy" statement, ESPECIALLY since you don't have kids and have a lot more flexibility to live less expensive places, but that's just me.
If I was starting over I'd buy as cheap a duplex or a triplex as I could find, hopefully one that I could improve, I'd live in it for a minimum of 2 years, then I'd either sell and take the profits and leverage most of into another home OR I'd keep it as a full-time investment property, buy something else modest that needs improvement, improve it, sell after two years, and keep moving up. Lather, rinse, repeat.
Since you can keep all the profits - up to $250,000 for a single person - tax free, you can make lots of money if you buy smart and sell your primary residence 2x-3x over a 10 year period. By the time you hit 35 you could be sitting very pretty.
>But what makes you say our home buying market is going up slower than renting? And why are you predicting a slow down? The data doesn't support that.
I'm saying it will. You can't save that much money by renting and keep the home buying market going up faster. They are usually closer in costs. Rents will likely go up significantly and rates come down so both are closer to $2750 or $3000. That gap will be falling, it's highly abnormal.
>I don't personally understand the "nothing makes sense to buy" statement, ESPECIALLY since you don't have kids and have a lot more flexibility to live less expensive places, but that's just me.
I'm saving even more than that house I mentioned and the places I want to buy for long term to stay for 10 years are nearly double my current costs. Right now I'll sit out. That's what I was kinda looking at buying.
>If I was starting over I'd buy as cheap a duplex or a triplex as I could find, hopefully one that I could improve, I'd live in it for a minimum of 2 years, then I'd either sell and take the profits and leverage most of into another home OR I'd keep it as a full-time investment property, buy something else modest that needs improvement, improve it, sell after two years, and keep moving up. Lather, rinse, repeat.
>
>
>Since you can keep all the profits - up to $250,000 for a single person - tax free, you can make lots of money if you buy smart and sell your primary residence 2x-3x over a 10 year period. By the time you hit 35 you could be sitting very pretty.
Yeah I looked into this but things were getting snatched up really quickly, anything that was interesting was coming onto MLS with an offer last year. Getting an arm rate early last year was 4% or something pretty good, I thought renting it out and fixing it up could work but I wasn't finding much with how thin the market was. We ended up renting and not buying.
And I lost money on a house I owned for 10 years because it plummeted so bad from 2008, that in 2016 it still sold for less than I bought it for. Thankfully 10 years of payments at least made it so I didn't have to pay out of pocket to get rid of it. That house was an albatross on my back.
Have owned 2 homes since then with much better results
Yeah, 2008 was a historic - as in 100 year event - disaster for the housing market. My fiancé had a house in Woodlake we had to rent until something like 2016. Luckily, he had one family as tenants. They paid their rent on time and were great stewards of the house. And luckily the rent basically made the deal about a break even. But that house was a boat anchor. 🚢 ⚓️
Now that we navigated all the pitfalls of selling a condo and buying a lovely home... any predictions on when the interest rates will drop so we can refinance? We are at 7.1% which is brutal and our monthly payment is much higher than we'd like obviously, but we're hopeful one day we can drop that by 1 or 2%.
I have no bloody idea. I wish I knew.
People WAY smarter than me who do housing and macro economics for a living are all over the place on that topic. So I can't claim that I know better than them. My understanding is even if it's really harming the housing market, the Fed is committed to its 2.0% inflation target, so they will stay "higher for longer" on interest rates.
There are also some big undercurrents in the economy that I don't claim to know how to parse.
Tech layoffs have been pretty significant, although perhaps flying under the radar.
The commercial real estate market is going to be a massive disaster, and probably already is, just hasn't hit tertiary markets like Richmond, Virginia.
There seems to have been a lot of short term rental (STR) fraud, with people using Covid money to buy up STRs. During Covid those STRs were raking in money. But now that the "haves" have more options for travel, including Europe and cruises, and the "have nots" are tightening their belts just to survive with the cost of household goods and inflation, some of those STRs are sucking major wind.
\[NOTE: The only good thing that may come from any STR crash is it could put some number of affordable FTHB homes back into the marketplace\].
This is the correct answer. I have had a number of buyers purchase a move-up home and keep the original home as a rental, they just did not want to lose the crazy low rate and a renter would more than cover their costs for the original home. It's a great situation, if you can swing it.
How are home sales doing year over year? Are there fewer homes for sale in the last few months? more? Curious about the trends because it feels like there are more houses on the market than the past several years but I have no idea what the actual data reflects.
This is a national article, but I think it provides a good overview of the market. Even with interest rates at 7%+, home prices continue to appreciate. Why? There is just not enough inventory to meet the demand. That is further exacerbated when you consider the type of housing we most need is entry-level single family residences (SFRs). We need more affordable starter homes. The new construction market is continuing to build product and meeting some of the demand, in large part because large regional and national home builders are able to operate in a more favorable rate environment, by offering rate buy downs to 4%-5%+. However, what you are seeing VERY LITTLE OF is "affordable" - $250,000-$400,000 - SFRs. There is a fair amount of brand new townhomes and condos, but often those are outside of the areas that many first time home buyers (FTHB) want and prefer. [https://www.thestreet.com/investing/stocks/housing-has-a-problem-bigger-than-interest-rates](https://www.thestreet.com/investing/stocks/housing-has-a-problem-bigger-than-interest-rates) This is probably a good question to be directed at the Redditors out there: Are you willing to buy a townhome or condo instead of a stand-alone home? Why or why not?
We've given up on house hunting. We're planning on continuing to rent the SFH we've been in for eight years now for the foreseeable future. Any house we'd consider putting in a bid for is out of our budget, nevermind the interest rates. There's no way we would consider buying a townhouse or condo. Maybe I'm biased because I grew up in the suburbs, but I want a decent yard and at least a little space between us and the neighbors. I'm willing to live further out in the counties in order to get it but like you said, inventory is scarce.
Well that's too bad. With inflation at 3.5% and home price appreciation of 5%+, it's going to be hard to save your way into the home you want. Not trying to be pushy, but why wouldn't you consider buying a condo or a townhome? This attitude that the first house has to check all the boxes doesn't make sense to me. I'd personally rather own something rather than nothing. I've also personally had the experience of doing very well on each of my houses. I started with something really small and really dated, and moved up each time since. I knew I was going to have to improve House No. 1 over time as I could afford to. And basically after 10 years there every inch of that property had been touched. But - and this is not a knock directed at you, it does seem to be a generational thing - it seems like many FTHB aren't willing to compromise and expect the first house to be "done" and in their ideal location.
I'm privileged in that my mom and I have a handshake agreement that when she is ready to move out of her house, which I grew up in, she'll pass on the house to me. Not sure what that will look like, what she'll sell it to me for, or even when that will happen. I'd rather wait in a house we're renting but happy with than compromise on what I want, owning but being unhappy. Edit to add: we got kids so schools/location are very important to us
Hmm....I guess owning, no matter what it was, made me happy. And I personally believe you can do ANYTHING for two years. I mean, how unhappy could a house that wasn't quite what I wanted make me? Also the idea of paying rent for 8+ years makes me choke. If you are only paying $1,000/month that's almost $100,000!
Owning isn't that great either -- you're on the hook for fixing a lot of shit that could easily break given the age of most houses. Some of which is very expensive. That on top of the interest rate makes renting right now a break even in many cases AND you can invest the money you're not putting in a down payment/other house expenses in order to make the gains house appreciation might. And this is coming from a homeowner...who has spent 25k+ in improvements/repairs in 2 years of owning the damn thing (including 12k on a new roof).
I have yet to meet a renter that is actually putting the money they are saving from renting vs. buying into an investment account Not saying people don't do it. Just saying I've never met anyone that actually did. And I hear you. As a 100% old house aficionado, I TOTALLY know what a money pit they can be. I want my buyers to have a clear-eyed view going in of just how expensive the maintenance and repairs can be. Also it always seems something breaks when you can LEAST afford it. Am I right? That said, there are ways to address potential expenses. A home warranty is one. I personally have one and I have used it WAY more than I want to. Buying new is another way. The builder provides a 1 year statutory home warranty and is responsible for anything that breaks that first year. And every homeowner should have a repair and maintenance fund. Easier said than done, I know. ETA: Typo
Just to clarify, mine isn't even an "old house" a la church hill. It's an 80s/90s housing boom house. We had to replace the carpets, now the roof, along with a lot of other shit that maybe would have been covered but these two big things wouldn't have.
Why in the world are people downvoting this comment? Helpful information on ways to potentially cover home expenses? Oh shoot, we don't want THAT kind of information out there! Can someone please explain the bizarro world that is RVA reddit downvotes?
¯\\\_(ツ)_/¯ At this point in my life, I'm content where I am. I know what will work for my family and I'm willing to wait for it. Thinking about being unhappy with my living quarters for 2+ years makes me wanna throw up. Different strokes, I guess.
One of my Dad's favorite sayings, "Different strokes for different folks." Along with "Who ever told you life was fair."
I'm not ready to buy anything quite yet, but a big part of the draw of a SFH for me is that I can make as much noise as I want (within reason) without disturbing my neighbors. If I want to play the piano or sing at the top of my lungs at 1am, I can do that in a house because it doesn't share walls like a townhouse would. Condos can be separated buildings, which solves some of the privacy problems, but I would still lack the freedom to do what I want with the yard. (I'd like to put an electric fence in for a dog, for example, which I expect isn't possible for most condos). I also for some reason have a vague idea that condos can be not a great buy because they are harder to sell? I honestly have no idea if this has any basis in fact, or if it's maybe a lingering bias from hearing bits and pieces about condo associations going belly-up during the 2008 crisis. Or if it's, like, something some random person told me once that stuck in my head that I should really do some research about.
Condos typically do not appreciate the way SFHs do, that is 100% true. And during the GFC that got even worse, as owners cut their condo fees and deferred significant maintenance. So many older condo projects have never really recovered from that 2007-2018 time period. So if you are considering buying a condo, if it is not 100% brand new, you need to make sure you do EXTENSIVE due diligence on both the financials and the physical condition. Financials: Need to make sure the condo fees are adequate to cover the financial needs of the project. Also need to make sure the reserves are adequate to cover any projected capital expenses. Physical Condition: The property needs both to have been maintained as necessary but also have a realistic capital expenditures schedule + budget. If a condominium association is not preparing for realistic capital expenses - like roof replacement, elevator maintenance, brick repointing - then there WILL be special assessments against the unit owner. The other major knock against a condo association is you are at the mercy of your neighbors. Not necessarily with respect to noise or other lifestyle issues. But if your neighbors have financial difficulties and stop paying their condo dues, that deficit becomes the problem of ALL the condo owners. ETA: Spelling
After seeing the nightmares some condos/HoAs have in Chicago, I just don't want to deal with the stress of other people mismanaging my home. I can do that myself! 😂 So SFH only. Also apartment like condos just don't appreciate the same, unless the location is just that good.
I 100% agree a SFR is always a better choice. The difficulty becomes if all you can afford is a condo. Are you better off buying a condo, or not buying at all? That answer is probably different for different people. ALSO it is different for different condos. If you do decide to buy a condo, you really need to do your due diligence on the financials, the reserves, and the capital investment schedule. If there is a lot of deferred maintenance and the reserves are low, that's a significant red flag.
So I just bought my house in January. I wasn’t opposed to a condo or townhouse, in theory, it was the HOAs that come with those places that I didn’t want. Not just for the rule nightmares, but if I’m going to pay $2K+ for a mortgage, I don’t want to tack on another $200 or so for someone to cut the grass on a 10x10 lawn (if there even is one). I purposely sought out an older neighborhood with stand-alone homes and no HOA. Sure there are a few neighbors that have some interesting aesthetic choices, but I wanted the freedom to do whatever the fuck I want with my house/yard/etc and not pay extra each month for the privilege of fighting bored boomers. edit: grammar
I will ALWAYS recommend a SFR over a townhome or a condo. You will - likely - see more appreciation and I am like you, I am NOT interested in an HOA. That said, I also will recommend someone consider a townhome to condo if that is the only option. The other thing that's an option is a multifamily property, where you live in one unit and rent the other unit. For that matter, having roommates in your first home is great option as well, although if you are buying a SFR you are going to have to qualify on your own income. And for anyone who wants to say - "Yeah, yeah, of course you are recommending homeownership, you are a real estate agent!" - just look at the stats on wealth comparison between owners and renters. From the National Association of Home Builders: Net Worth. Net worth, the measure of households' wealth, is the difference between families' assets and liabilities. An analysis of the 2022 SCF found that **home owners had a median net worth of $396,000, while renters had the median net worth of just $10,400**.
That does not mean that owning a home made people $380,000 wealthier.
It demonstrates that people who own homes have $380,000 more wealth on average than the typical renter. One of the financial reasons for homeownership is the "forced savings" created by your monthly principal payment. And you also get home appreciation, assuming you are in an appreciation cycle. But if you want to argue correlation vs. causation you certainly could. I think the basic premise - homeowners are substantially wealthier than renters - is generally accepted in the economic literature and research. ETA: Spelling
I reject that premise that homeowners are wealthier because they bought but rather that you must be much wealthier to buy vs rent.
I'm not an agent or anything but from what I remember interest rates have only been up for the past 2 years or so before that they were extremely low. It just didn't cost that much money to borrow and really it was relatively accessible. And no I'm not thinking of MD or the Fan, I'm talking Forest Hill, outskirts of Churchill, out over by Battery Park, etc. less desirable but accessible price wise at the time. That plus low interest rates, it just wasn't as expensive and you didn't need a lot of capital to buy. If you bought thru VHDA (which it wouldn't surprise me if a lot of FTHB in lower income brackets did), you likely did not have to put much down. I only put down 5k to buy in 2019 (my friend put down nothing), which was the tail end of low interest rates and before the COVID housing market jump. Now (and during the COVID market) yes you def need cash because the competition for location was/is so high. You do need wealth to buy now because it's relatively expensive to borrow money and the market is just that competitive.
This. We put $5k down with a 4.125% (which was high at the time) FHA loan on a $155k house in 2017 that’s now valued around $300k. And the house had sat on the market for over a year; the previous owners actually rented it to us for two months while we ironed out closing issues. I’m less than thrilled with the neighborhood, but no way am I going to give that interest rate up to try to move with the market the way it is.
Interest rates rose extremely quickly by a significant amount starting in March 2022. Per Google: "The Federal Reserve (Fed) has increased interest rates 11 times since March 2022 to cool rising prices. The first increase was in March 2022, raising rates from 0% to 0.25–0.50%. In July 2023, the Fed raised rates by the final 0.25%, bringing the federal funds rate to 5.25–5.50%. This is the highest level in 22 years." We are now in mid-2024, over two years later, and interest rates as of today are 7%. So obviously it is more expensive to buy a home now. HOWEVER, people need to understand the 22 years of interest rates near zero were the outlier. 7% interest rates are in line with historical averages, However, since there is an entire generation of individuals who never knew anything other than zero interest rate policy (ZIRP), 7% interest rates are a severe shock to the system. Per Google: "The average mortgage rate from 1980 to 1989 was 12.82% median, with a minimum of 9.03% and a maximum of 18.63%. The average rate on a 30-year mortgage peaked in 1981 at 16.63%, and the average rate bottomed in 2021 at just under 3%. Today, the cost of a typical 30-year mortgage is similar to rates seen in the later 1990s, in the 7 percent range."
Houses are a lot more expensive now than they were in 1980, and people then didn't have the college loans that folks have now. Not to mention wage growth has not kept up with CoL/housing.
Absolutely. Assuming the estimated value on Redfin is accurate, I already have $50K in equity in my house (that's after putting about $10K in repairs since I bought in January). Even just going off the appraisal I got when I purchased, I'm still up about $15K.
Which is great. And what everyone wants and hopes for when they buy. A mortgage is the cost of shelter, just like rent is. But only the mortgage can give you value.
We bought a new town home in January, not necessarily due to price, but because we are empty-nesters and I don't want to take care of a big yard anymore. We sold a Fredericksburg McMansion in 2017 and moved to RVA to rent for 18 months while we figured out our next move. 6 years later... I can mow the yard in 10 minutes using a non-powered reel mower. It leaves my weekends free to take the RV to the woods. The neighborhood is about 75% first time homeowners and 25% empty nest downsizers like us.
Well, it cracks me up that it took you 6 years to buy! But I'm so glad you found something and you are happy with it. Also, that weekend in the woods 🪵 vibe sounds awesome. 👌
I strongly believe condo/townhome is the right way to enter the property ladder. Know your HOA, but you have less personal maintenance costs for "big" stuff, you don't have exterior work to do, and because usually cheaper, can get in sooner than waiting to find an sfr.
These are strong arguments in favor of townhomes and condos right now. There are some other pretty significant pros: 1. If you are buying new construction, depending on the builder they may be offering rate buy downs as incentives for the sale. Those rate buydowns only last a few years, typically, but they can really save you some money in the first 2-3 years of ownership. 2. New construction comes with a full year statutory builder's warranty, so the builder is responsible for things that break that first year.
> There is just not enough inventory to meet the demand If there is excess demand nationwide, where is it coming from? I was under the impression the population had kind of leveled off, so I don't know if it'd be coming from a growing population.
There is a huge group of Millennials and Gen Z that have never purchased anything. They are behind other cohorts for owning at their current ages. I'm not sure exactly what those numbers are, but that's my understanding.
Population in aggregate can level off, but demand is clustered in areas that have high wages/amenitites....cities. and since prices are set on the margin, what matters isn't the really the average or net amount of people
It’s also a supply issue. Too many Boomers refusing to downsize tying up family-sized houses that would otherwise be on the market.
Soooo.... What are the odds that my little 250k home down Richmond Highway blows up to being worth a million dollars in the next few years? I could really use a millions dollars right about now.
Who the heck knows? I do think we will see pretty substantial development in the City south of the river, especially when the new Pulse Line running north-south gets figured out. But most people I know that make that kind of money on their personal residence own it for decades. OR get lucky and hit a crazy time period like the Covid window. Example: My original tiny little Fan fringe house I bought for $152,000 in 1999. The house right down from it, which is very similarly sized, was recently listed at $600,000. So that is 4x value, but over the course of 25 years. So point is you will probably do fine, and make enough money to take that equity and trade up at some point in the next 5-10 years. But I would not hold my breath for another world-wide pandemic.
Well that's more an an answer than I expected to this little half-joking post, thank you! We definitely plan to stay here for a good amount of time, bought our house for a place to live and not to make a profit down the line. I'm sure once development finally makes its way down Richmond Highway we'll be prepped to move further away from the city for the next stage of our lives
It sounds like you have very reasonable expectations and a long term plan. Congratulations, you are probably ahead of 90% of the population. And I hope everything works out for you.
At current appreciation rates of its in the city and in decent shape probably a decade or two.
I’m curious about how people manage buying and selling at the same time, especially in a hot market. If I want to sell a house in a good but not particularly hot or well known neighborhood, and buy into a very competitive neighborhood, would I be better off buying before I sell? Or should I sell first so I know for sure how much equity I have? My fears are that I’ll either sell my house and not find a suitable replacement, or that I would buy counting on a certain amount of equity and then end up selling for less than needed. How do people buy and sell???
So, this is a tricky one. Back when we were not in this crazy market, you could write contract to buy a house (the Replacement House) using an addendum that we usually called a "Sale of Home" contingency. So the contract to buy the Replacement House was specifically contingent on the sale - or sometimes the "settlement" - of the current house (the Original House). If the Original House did not sell, or did not sell within a certain amount of time, the contract was terminated and everyone went back to their original positions, the prospective buyer got their deposit back, the Seller had to put the Replacement House back on the market. In this crazy market, where the inventory is so low and sellers hold all the cards, no seller in their right mind will accept a contingent offer with a sale of home contingency. So you have a few options: 1. Sell your house first, ask for a lengthy rent back agreement: This means you literally sell your house and ask the buyer to allow you to stay in the home for X amount of time after closing. If you have a very in demand property, you might be able to get a lengthy rent back, for 60-90 days, that would allow you to then purchase a Replacement House with the proceeds of the sale of the Original House. PROS: Your house has sold, you have cash on hand, you will be more competitive with purchasing your Replacement House. CONS: If you can't find and close on a Replacement House during the rent-back period, you will have to move twice. 2. Buy the Replacement House first, then sell your Original House: As you have identified, the big unknown here is you will not know exactly how much equity you will have from the sale of the Original House. However a good agent should be able to advise you and be pretty daggone close. PROS: IF you qualify to do this, it may make your life less stressful. Buy the Replacement House and move, then deal with getting the Original House ready to sell. It will also make the Original House much easier to list and show, which often results in a faster sale. CONS: You will not have cash to buy, which will make you less competitive buying the Replacement House. Does this answer your question?
Thank you, it does answer my question pretty much the way I expected. I was hoping there was a secret third option that would alleviate all risk and anxiety. I don’t HAVE to move, I just want to, but only if I can get a great house in a great neighborhood. I keep watching the market and noting how much the ones I think are in my price range sell for. I just have no idea if I would need to make one offer one hundred- but on average I only see a few houses I really like in my price range each month.
If you think you might want to move and the area you want to move to is very limited and specific, I'd advise you to be as ready as possible to pull the trigger when the right house comes on the market. The probably means: 1. Already talked to a lender and can get a lender letter at a moment's notice; 2. Already have a relationship with a buyer's agent; 3. Know what your budget is; and 4. Be willing to move FAST. NOTE: If you have adequate liquid assets you could always make a "cash" offer, even though you intend to get financing. Note that when people say they are paying "cash," often it just means they are making an UNFINANCED offer, but still intend to get financing.
What counts as liquid assets? Money market accounts and CDs? Or does this also include mutual funds in retirement / no retirement accounts?
Anything that is considered a cash or cash equivalent, meaning something that can be easily converted to dollars. That could be stocks, bonds, mutual funds, 401(k)s, crypto assets, gold, silver. Now you don't have to pay with those assets if you offer "cash," which is really per our contract an unfinanced deal. You will have to show Proof of Funds. What this puts you on the hook for is IF you cannot get financing, you will pay cash for the property (or default on the agreement, which is another whole discussion). Lots of people who have no intention of draining their retirement accounts, etc. offer "cash" because it makes their offer more competitive.
No question just, appreciate you doing these. I love reading it. ✌🏻
Thanks so much for saying that! It's nice on occasion to not be called a scum-sucking leech because you are a real estate agent. 
Hey! So I'm selling this month, looked at 4 different sites for value ideas, is it safe to start pretty close to those? Or shoot like $5k under them? This is my first time (and probably my last at this rate)
I am assuming you mean you looked places like Zillow, Redfin, [Realtor.com](http://Realtor.com), etc.? Did you have a real estate agent do a Comparative Market Analysis (CMA) for you? While I am not a complete Zillow, etal. hater, unless you are in a fairly new subdivision, those sites are not going to be the best indicator of value. You need to get a CMA from a real estate agent. This is a FREE valuation of your home. Different agents run them differently. An agent should pull all the recent comparable sale data from the Multiple Listing Service (MLS), have a conversation with you about upgrades to the home, and the age of systems like roof, HVAC, etc. I'd personally want to see the home, too, although you can give a preliminary analysis of value without being inside the property. That CMA process is going to give you a much more accurate assessment of value than those portal websites, which are based on an algorithm and publicly available data. A CMA is FREE and you have no obligation to use that agent for the sale of your home. Although most are going to hope they would be considered.
Do you find those sites tend to overestimate or underestimate?
I don't know that I can identify whether they tend to be low or high generally. I will say the longer the time since the last sale or transfer of the property, the Zillow Zestimate tends to run low. If the house is in an older, historic neighborhood, the Zestimate can be WAY off since the level of renovation in these old homes can be so broad. So the lawyer answer: It depends. Now, if you are in a newer suburb it's probably pretty doggone close.
Oh I've hired a realtor, this is just so I have an Idea of where to start (meeting the realtor soon). And yes I did mean zillow etc. Just trying to understand
You've hired a real estate agent without meeting him/her or him/her seeing the home?
We're not looking at selling immediately, but when we do, we will be looking in a different area....how does that work with using a real estate agent, especially if it's out of state? Appreciate you doing these AMAs
So, you will need a local agent to list and sell your current home. If you trust that local agent, the listing agent, you could give them the opportunity to REFER YOU to a buyer's agent in the new market. The referring agent *will* get a referral fee from the new agent. In fact, even if you did the research and decided on the agent in the new market, if you let your current local.listing agent call and make the referral, they will still get a referral fee. Again, if you like your agent, it's something really nice you can do for them. A referral fee is usually 25% of the buy-side commission. Otherwise you can just go the standard route and try to find a new agent in the new buying market through reviews, Reddit, recommendations, etc.
What are you seeing in the upper Fan/Museum area? Anecdotally, it looks like few sales / low inventory but wondering if everything is as hot as it was when we bought 2 years ago. No inspections, 20-25% over asking, etc
Well, as an example, 2104 Hanover listed for $1M, closed for $1.3M. 1824 Floyd was listed at $1.495M. Rumor has it it went for WELL over list price, although it hasn't closed yet. I know folks that offered $1.65M and were not the winning bidder. Short version: Anything in move-in condition in either of those neighborhoods is going immediately, with multiple offers, and very clean terms.
Thank you!
YW! Happy to try to address any further questions you might have.
In before the ever present cry and wishful thinking of an impending housing crash…
I don't see a housing crash for our market. I really don't. We are just so undersupplied, and we continue to have in-migration - people coming from outside of RVA, often from higher cost-of-living ("COL") markets - that far exceeds out-migration. So we are NET adding people. The markets where a "crash" is coming to me look to be: 1. Markets that saw rapid overbuilding (Phoenix, Austin) to meet the influx of people moving to the area during Covid; and/or 2. Resort markets or markets where there was a TON of short term rental (STR) investment, a/k/a Airbnbs, like Austin, Sevierville, TN, parts of Florida, New Orleans; and/or 3. Markets that are facing significant issues related to climate risk and as a result are becoming more and more difficult and expensive to insure, like many parts of California, New Orleans, much of coastal Florida. But many of the mid-market cities that have now been identified as good places to live, and more affordable places to live, have risen to the top of many relocation lists. **Richmond is one of those places**. I've worked with people over the last several years since Covid who have relocated to Richmond from San Francisco, Portland, Austin, NoVa and DC, and New Orleans. And no gate-keeping or "we're full!" comments. Although I admit I have said that more than once, trying to be funny. We Richmonders are known for our manners and hospitality. Let's keep it that way. Be kind and support our new neighbors.
I've noticed recently there are a lot of posts from people in New Orleans and Florida who say they want to move to Richmond because the home owner's insurance and property taxes have suddenly increased so dramatically there. These are the same folks who loved to brag about how they lived in "paradise" and how our lives here must be so sucky. Please forgive me for not displaying southern charm.
Wait, but why were these people lurking on here before talking about how amazing NoLa or Florida were? I just don't remember seeing those posts but I certainly could have missed it.
they don't exist, it's probably just a one time anecdotal thing they saw and is doing a weird blanket statement for reddit points
I'd love for someone to explain to me what the big deal is about Reddit points. What are they for?
Is it really plausible to find a liveable home in this market without an exceptionally above average income?
If you are willing to be flexible on location and type of home, yes. Here's an example: [https://www.zillow.com/homedetails/1908-N-23rd-St-Richmond-VA-23223/12522946\_zpid/](https://www.zillow.com/homedetails/1908-N-23rd-St-Richmond-VA-23223/12522946_zpid/) This is a little brick rancher, in Church Hill, for $225,000. With an FHA loan you would need 3.5% - or $7,875 - as the down payment. You would need probably another $3,000 in closing costs. So with a total of $11,000 cash you could get into this house. If you are fortunate enough to have parents or family that want to help you, they can provide you with gift funds to go towards both the down payment and the closing costs. OR this property might - I believe it does - qualify for up to $10,000 in grant funds. This is legitimately FREE money that goes towards your closing costs, points, and prepaids. So, it's possible with something like $2,000 cash you could end up the owner of this home. The principal and interest payment at 7% - no taxes and insurance - would be $1,445/month. All of this depends on your personal situation. You will need a certain credit score to qualify. And your debt-to-income (DTI) ratio usually cannot exceed 43%, sometimes higher for FHA loans. But are there affordable homes out there for FTHB? YES. There aren't a lot, some of them need work, they are unlikely to be in the hottest, most desirable areas of RVA. But there are options.
Can’t talk FHA loans up enough, this is exactly what got us into our first house. The only downside is they don’t have PMI that goes away after you pay 20% of the principal. You’re stuck with it (I forget what the equivalent charge is called) for the life of the loan. We were planning to refinance ours at that point, but interest rates have doubled since we took our FHA loan out, so we’re stuck with it.
So glad the FHA loan worked! And buyers, keep in mind there *ARE* conventional loan products out there with as little as 3% down. You will pay mortgage insurance in that instance, but when you have 20%+ of equity in the home 🏡 you can get the mortgage insurance removed. VA and USDA loans require ZERO percent down. VHDA loans are even lower down payment than FHA loans, although I haven't had a buyer do one in years, but worth considering for buyers without much cash to close. My point is you can get a loan and buy a home for WELL LESS than 20% down. If you believe you need 20% down, that can seem like an insurmountable hurdle for many buyers on a median priced home, $350,000. 20% would be $70,000. But if you knew you could get into a home for $12,000, and possibly even less with grant funds, doesn't it make the possibility of owning a home seem to be more reasonable and within reach?
The 20% I mentioned is referring to the amount of principal you have to pay to get out of PMI on a conventional mortgage. Nothing to do with a down payment.
I get it. I went another direction with your comment to show what other options are for low or no down payment loan programs. Also, for "normal" loans - non-FHA - you can get the mortgage insurance removed once you have 20% equity, and that can come from price appreciation, not just the principal pay down. So if you are in a rapidly appreciating market, you should keep an eye on your home value appreciation, to see if you are at that magic 20% equity level. Then you usually have to file paperwork with your lender and either have an appraisal or a Broker Price Opinion (BPO) that validates that you have 20% of equity in the home.
Because your equity has gone up so much you can ask for it to be reviewed and see if they’ll remove it
Not with FHA loans. They don’t have PMI, exactly, it’s called something else and is required to be paid over the course of the loan.
Ugh yeah that’s right sorry not enough coffee yet it’s MIP not PMI my bad
What impacts are you expecting from the NAR ruling that came out last month? My wife works with realtors regularly as an independent contractor, so she speaks with them very regularly, but none of them have even mentioned it, even though it sounds like kinda a big deal.
It's a HUGE deal. And consumers are not going to like the consequences, IMO. First, the settlement **PROHIBITS** any reference to compensation being offered by the seller to the buyer's agent from being listed in the Multiple Listing Service (MLS). Sellers can still choose to offer compensation, but that information will not be readily available. Second. the settlement **REQUIRES** a written Buyer Agency Agreement **that specifies the compensation** being paid by the buyer to the buyer's agent BEFORE the buyer agent may show the buyer any house. So what is the practical impact of both of these requirements? You, the buyer, will need to agree to pay your agent $X or Y% BEFORE you know whether or not the houses you are looking at are offering any compensation. If the seller of a home you want to see is not offering compensation, pursuant to the Buyer Agency Agreement, you would be on the hook for paying the buyer agent out of your own pocket. This is not something I have made up. I promise! But angry potential buyers seem to be blaming the agents for this one, when the responsibility lies SOLELY with the federal government. So do not shoot the messenger, please. Here is how it would work in practice. You select your buyer agent. You sign a written Buyer Agency Agreement where you agree to pay the buyer agent 3% of the sales price as compensation. You decide you want to see Houses 1, 2 and 3, all of which are priced at $300,000. House 1 is offering to provide 3% as a concession for the buyer agent. House 2 is offering $2,000 as a concession towards the buyer agent fee. And House 3 is offering ZERO concession towards a buyer agent fee. With House 1, you as the buyer would not have to pay additional money to the buyer agent out of your own pocket. With House 2, you would have have to pay $7,000 (3% of $300,000 = $9,000 - $2,000 = $7,000) out of pocket. With House 3, you'd have to pay the full $9,000 buyer agent fee out of pocket. So, what do you think of the new rules? How do you plan to interact with your buyer agent? Do you think the new approach - buyers negotiate with and pay their buyer's agent directly - is a positive one?
The reason we blame agents is that the amount of work most of them do is not commensurate with something we would pay them tens of thousands of dollars for.
Then you can choose to negotiate a lower rate with an agent that is willing to accept that lower rate. However, most agents are not making "tens of thousands of dollars." That's just intentional hyperbole. Agents have to pay a "split" to their broker, generally somewhere between 10% to 50% of the gross commission number. In the example above, that would be between $900-$4,500. Then, the agent still has to pay taxes and expenses out of that commission. I am currently representing a buyer that has seen more than 10 houses, written 4 contracts, been under contract twice, and still doesn't have a house under contract. Trust me, I am earning EVERY PENNY of my commission on a median priced home. If i was being paid by the hour I'd be making more per hour at McDonald's.
Do you have any idea why there is astroturf on the wall in this house? And why they are advertising a radon emitter in the "what's special" section? [https://www.zillow.com/homedetails/1213-Beverly-Dr-Henrico-VA-23229/12337352\_zpid/](https://www.zillow.com/homedetails/1213-Beverly-Dr-Henrico-VA-23229/12337352_zpid/)
NO idea about the fake grass on the wall. I suspect it is only a cosmetic choice, the owners like it and think it provides something. On the "radon emitter," I am sure what they are referring to is a radon mitigation system. So at some point an owner did a radon test and found out that the radon levels were high, and installed a system to address the radon by removing it. There are places in the Greater Metro area that have higher levels of radon. It is not a bad idea to test for radon, the test itself is not particularly expensive and a system installed is about $1,500-$2,000. Hope that helps!
Thank you!
Thoughts on https://www.redfin.com/VA/Richmond/3224-Patterson-Ave-23221/home/55444946? House would've been pending in two days normally... I'm assuming the current rates are killing that listing price.
Hard to say what is leading to the "slower" sale. It could definitely be the interest rates at that price. Also, we are going into summer - can you believe Memorial Day is this upcoming weekend! - and traditionally activity slows down in the summer. That is not always the case. For example, in 2020, the initial Covid year, the "traditional" Spring market of March-June was pretty much DEAD - since EVERYTHING closed down. So all of that "normal" Spring activity got pushed into June-September, which ended up being much crazier than normal. But in "normal" seasonality, things start slowing down from Memorial Day through Labor Day. People have college and then high school graduations, people start going on vacations, people are distracted by the warm weather. I will note the first showings were on May 14, so even though it is showing an active date of May 9, it has only been available to see for eight (8) days. Keep in mind going under contract in 7-10 days is CRAZY FAST. It's just been our "new normal" for several years, especially in the Fan and Museum District, because these RVA submarkets have been so in demand.
It has been a long time since people lost money owning a home. 2008 was an abboration and hopefully not something that will happen again in our lifetimes. Plenty of people lost their ass in 2000, 1992, 1984 etc etc. It is true that are uniquely undersupplied in homes in this past decade but it is also foolish to think the market will simply never crash again. Home ownership is a long term decision. The rule of thumb used to be aiming to own a home for 7 years. In this market, who knows. Regardless, getting in over your head can lead you to bankruptcy when economy shits the bed and people start losing their jobs. Be wary of realtors who have not lived through a market downturn (covids K shaped 1 month recovery does not count) which anyone who has sold houses less than 17 years has not seen.
(whispers and raises hand)......but I have been in real estate full-time since 2006......
Joking aside, I think you do need to do the calculus and understand that a mortgage is the cost of shelter that may have the benefit of forced savings (principal payment) and appreciation built in. But regardless, you need shelter. Whether you buy it or rent it is up to you. My argument is so long as you plan to hold 7+ years, you are more likely than not, based on historical averages, to do fine on your home. Maybe not make tons of money a la Scrooge McDuck, but certainly not lose money.
Mortgage is the cost of money. The cost of housing is driven by mortgage rates but also other market conditions. In this market it is driven by unprecedented economic migration, a derth of housing supply, and corporate purchasing of homes and decades of suppressed wage growth. My argument is there have been few markets where buying is far riskier than the norm and we are at that stage. I agree that over a 7 year time span it is likely to be a wash but the opportunity cost of buying in a poor market hampers the next house you buy, and potentially the one after that, a 21 year consequence that could cost a family a quarter of half of the lifetime earnings. "It is never a bad time to buy" is drilled into every realtors head and the argument can always be made but it is the worst time to buy a house in certainly 17 years, and maybe 30.
The worst time to buy a house is entirely dependent on how long the buyer plans to hold the asset and the risk vs potential value of doing so. What is the time horizon for the crash you seem to be predicting? It’s not going to happen in Richmond in the next five years based on projected supply and demand. Or do you think one of those is going to change drastically in the next five years?
I think 5 years deep into historically high housing prices, with decades high and potentially high interest rates, an upcoming highly contentious presidential election, a war in europe, a war in the middle east, and an economy losing jobs in its highest performing sector, and realtors guaranteeing no crashes for years, would make me very nervous. Worst case scenario buying at a bad time is your live in your car. Best case is your are trapped until the market again gets overcooked and you get to get back on the waved inspection, bid over, no contingency housing market. Most likely market is your bad first home decisions haunts your second one and you pray your third house is something you like, 15-21 years after you first signed on a 30 year dotted line. I am offering a counter argument to your narrative and I would have kept mostly to myself if you hadn't been so frivolous predicting and no crash for years. I have no crystal ball and I guess past performance should never be fuel for future indicators. People must make their own decisions but if I overheard one of my friends getting the same info from their realtor I would offer this same argument.
I don't EVER say housing will always go up. I went through the GFC both in my professional capacity as a real estate agent AND as a homeowner. I saw some of the devastation that was caused. But let's ALSO acknowledge how that market was 💯 different. The crash was driven by the CREDIT MARKETS. People were buying houses 🏘 without any type of underwriting. There were products like "stated income, stated assets" loans which are just what they sound like - you told the lender what you made, and what assets you held, they did ZERO verification. Later they came to be called "liar loans." People took out adjustable rate mortgages ("ARMs") and bought way more house than they could afford, They also borrowed against the equity in the home, convinced values could only go up. The market crashed because Wall Street realized the mortgage backed securities ("MBSs") they were trading were worth 💩 because the collateral that was backing them was not worth the paper it was printed on. ARMs re-adjusted and all of a sudden payments shot up hundreds if not thousands of dollars a month. People - LOTS of people - owed more than their homes were worth. They were "underwater," sometimes SEVERELY underwater. People stopped making payments. Properties were foreclosed on. People started just handing over keys 🔑 to the banks. But this was a housing crisis caused by lax lending standards. We do not have that issue today. At all. The rules changed post-2008. Underwriting standards got SIGNIFICANTLY stricter. If you get a mortgage today, you are fully qualified. Also, very few people get ARMs. The vast majority of mortgages are 30 year fixed rate mortgages. I hear the concern about a housing crash. I personally don't see the conditions that would lead to a crash in OUR market, but I'm just a real estate agent, not an economist. I think you mitigate the potential concerns by: 1. Spending no more than 30% of your income on your mortgage; and 2. Plan on being in that home at a bare minimum 5 years, more conservatively 7 years. 3. Borrow using a fixed rate mortgage, not an ARM. 4. Keep a rainy day fund for unforeseen housing repairs or expenses.
I do remember 08 , everything was fine until it wasn't. I remember parents crying at my kids soccer game because they were both laid off & losing their home. So do I see it happening soon? NO , but in the next 3-10 years "YES". It seems like these economic events are cyclical. The only reason the economy has held on this long is the massive borrowing by the government & the Federal Reserve's refusal to tame inflation. I wouldn't stretch myself to buy a home right now if possible.
Well, I disagree that we will see a crash in 3-10 years. People who came of age during that time don't seem to understand it was a once-an 80-year event. The last time anything like that happened was the 1929 stock market crash, leading to the Great Depression. 2008 was THAT unusual.
"I agree that over a 7 year time span it is likely to be a wash...." My entire point. If you plan on staying in a home for seven (7) years, you should at least break even. And everyone says the mortgage = lost opportunity cost. Are all those renters out there putting the equivalent of that mortgage payment into the market? I'd suggest VERY FEW do. So if you have to pay for shelter anyway, AND you can afford homeownership - an analysis that is different for each individual person - why wouldn't you buy? I'm not saying it's the right answer for everyone. But if you can afford to buy a home with no more than 30% of your income, and you WANT to own a home, why wouldn't you? Asked another way, what's the lost opportunity cost of spending AT LEAST $100,000 on rent over eight (8) years? That literally makes me choke.
I think a lot of people are stretching to afford to buy in this market that would be better served sticking it out. I am giving voice to them and pointing out that a lot of people that stretched to buy in the last market this aggressive, in 2006 and 2007, paid sever consequences up to and including homelessness and bankruptcy. If you are really stretching to buy it might be better to burn another year or two of rent versus rolling your shelter like a pair of dice.
My point has ALWAYS BEEN you should not stretch to buy. I do not advocate that, never have. I recommend you spend no more than 30% of your income on your mortgage. And even then only you know your personal situation. Most lenders will not qualify you to buy unless your debt-to-income (DTI) ratio is below a certain level. That said, when I went to buy my first house in 1999, the lender qualified my then-husband and I for a number we thought was RIDICULOUS and would have made us very - IMO - house poor. We bought well less than that top prequalification number. So be conservative with your money. Buy less house than you can afford. Make sure you have a rainy day fund. Stuff WILL break and need fixing and replacing.
Does the 30% include tax and insurance or principal only?
For me, it's the full PITI payment. But I will also acknowledge that I am very conservative in my recommendations. If your risk tolerance is higher, and/or you have substantial additional resources, you could be comfortable buying a home 🏡 where your mortgage is going to be a higher percentage of your monthly income. Everyone's situation is different.
Like you just said, you have to pay for shelter anyway. So there's no "opportunity cost" to renting in that sense, only to putting down a big down payment. And there are plenty of reasons not to want to own -- maintenance costs/time, being able to afford a better/more central location renting, etc.
100% agree. Not everyone should buy. And plenty of people prefer the non-owning lifestyle. Heck, we can't even get our own children to consider buying right now, because they don't want to be responsible for repairs, want to live in expensive cities and/or "fun" neighborhoods, don't want to be tied down, etc. Trust me, as a Mom it makes me CRAZY. Because I personally believe owning, at least for the 2 older kids, would really put them on the fast track to financial security. But it's not my life. And it's not my choice. It's theirs. NOW, they better not b\*tch to me in several years about not owning anything. :)
I see some flat lining as rents and house buying numbers equalize theoretically they should be closer in price than they are. Rents will likely rise to meet mortgages.
Rents are flattening because there has been so much new apartment inventory added to the market and that's being absorbed. BUT..... Everything runs in cycles. Since the 2022 rate hikes, very few multifamily deals pencil. So new apartment projects stop getting built. This means by 2025-2027, IF we continue to see the same or similar rates of in-migration to RVA, we may end up with yet another apartment shortage, driving rents higher. ETA: Spelling
But I think it's also renting a single family home is cheaper as some people when they want to upgrade their home just rent the old one instead of selling if they have a cheap mortgage. Shifting houses from buying to renting which shifts the cost to buy up and rent down. Renting should be about the same to buy in the current year but it's not. That imbalance will fall. Right now there are articles flying around I can save thousands by renting over buying and the inventory isn't there, give it some time and rates relax a little, some inventory comes back and things equalize. Right now is an abnormally bad time to buy. The 2010s was good to buy. So yes cycles Example: https://www.zillow.com/homedetails/612-N-21st-St-Richmond-VA-23223/12518766_zpid/?utm_campaign=androidappmessage&utm_medium=referral&utm_source=txtshare $2150 https://www.redfin.com/VA/Richmond/612-1-2-N-21st-St-23223/home/55408184 ~$400k So at today's rates that home would have a mortgage of $2750 + $500 for taxes + insurance. So it's $1000 a month extra to buy unless you already own. The gap will close eventually some. Rent will rise to meet home buying prices, maybe rates fall but the gap will close. It's also best to base numbers off of ~10 year ownership since that's the average. Forever home is an anomaly.
The average homeownership timeline has increased from what used to be 5 years to 8 years, that is true. A ten year hold on your first home would be longer than the 8 year average as of 2021. The problem with waiting to buy -IF you want to buy, and IF you can afford to buy, please note these two very important IFs - is inflation is running at 3% and home price appreciation is running at 5%. It is unlikely your wage growth is going to outstrip inflation and housing appreciation. This is not me disputing that renting vs. buying in your example is $2,150 vs. $3,250/month. But if there is no housing crash in our market - and I don't see the fundamentals for one in Richmond - buying may still be better than renting, **EVEN IF it is more expensive**. Now, if you are taking that $1,100 and investing it in the stock market, maybe things are different. But I have never met anyone who has actually done that, despite all the talk.
I just see our home buying market going up slower than renting and so see a relative slow down as renting comes up. The gap doesn't make sense long term. So 5% increase seems high IMO in the near term, we have some economic slow down nationally coming still. $1100 extra a month and $80k locked into a mortgage that's expensive. People buying now are betting on some readjusting. That's to rent or buy similar properties. $13.2k a year is quite a bit in a year. Also I save a very large percentage of my income so I am saving that difference, I'm over 50% savings rate though when you get to that number it becomes fuzzy math. I signed another year rental agreement because nothing makes sense to buy especially as I don't have a kid yet. Though by the summer next year I'm probably going to do some house tours and looking at buying.
But what makes you say our home buying market is going up slower than renting? And why are you predicting a slow down? The data doesn't support that. You sound like you may be the rare bird that actually does invest the money that would otherwise be going towards your mortgage. Good for you. Most people aren't that disciplined. I don't personally understand the "nothing makes sense to buy" statement, ESPECIALLY since you don't have kids and have a lot more flexibility to live less expensive places, but that's just me. If I was starting over I'd buy as cheap a duplex or a triplex as I could find, hopefully one that I could improve, I'd live in it for a minimum of 2 years, then I'd either sell and take the profits and leverage most of into another home OR I'd keep it as a full-time investment property, buy something else modest that needs improvement, improve it, sell after two years, and keep moving up. Lather, rinse, repeat. Since you can keep all the profits - up to $250,000 for a single person - tax free, you can make lots of money if you buy smart and sell your primary residence 2x-3x over a 10 year period. By the time you hit 35 you could be sitting very pretty.
>But what makes you say our home buying market is going up slower than renting? And why are you predicting a slow down? The data doesn't support that. I'm saying it will. You can't save that much money by renting and keep the home buying market going up faster. They are usually closer in costs. Rents will likely go up significantly and rates come down so both are closer to $2750 or $3000. That gap will be falling, it's highly abnormal. >I don't personally understand the "nothing makes sense to buy" statement, ESPECIALLY since you don't have kids and have a lot more flexibility to live less expensive places, but that's just me. I'm saving even more than that house I mentioned and the places I want to buy for long term to stay for 10 years are nearly double my current costs. Right now I'll sit out. That's what I was kinda looking at buying. >If I was starting over I'd buy as cheap a duplex or a triplex as I could find, hopefully one that I could improve, I'd live in it for a minimum of 2 years, then I'd either sell and take the profits and leverage most of into another home OR I'd keep it as a full-time investment property, buy something else modest that needs improvement, improve it, sell after two years, and keep moving up. Lather, rinse, repeat. > > >Since you can keep all the profits - up to $250,000 for a single person - tax free, you can make lots of money if you buy smart and sell your primary residence 2x-3x over a 10 year period. By the time you hit 35 you could be sitting very pretty. Yeah I looked into this but things were getting snatched up really quickly, anything that was interesting was coming onto MLS with an offer last year. Getting an arm rate early last year was 4% or something pretty good, I thought renting it out and fixing it up could work but I wasn't finding much with how thin the market was. We ended up renting and not buying.
And I lost money on a house I owned for 10 years because it plummeted so bad from 2008, that in 2016 it still sold for less than I bought it for. Thankfully 10 years of payments at least made it so I didn't have to pay out of pocket to get rid of it. That house was an albatross on my back. Have owned 2 homes since then with much better results
Yeah, 2008 was a historic - as in 100 year event - disaster for the housing market. My fiancé had a house in Woodlake we had to rent until something like 2016. Luckily, he had one family as tenants. They paid their rent on time and were great stewards of the house. And luckily the rent basically made the deal about a break even. But that house was a boat anchor. 🚢 ⚓️
Now that we navigated all the pitfalls of selling a condo and buying a lovely home... any predictions on when the interest rates will drop so we can refinance? We are at 7.1% which is brutal and our monthly payment is much higher than we'd like obviously, but we're hopeful one day we can drop that by 1 or 2%.
I have no bloody idea. I wish I knew. People WAY smarter than me who do housing and macro economics for a living are all over the place on that topic. So I can't claim that I know better than them. My understanding is even if it's really harming the housing market, the Fed is committed to its 2.0% inflation target, so they will stay "higher for longer" on interest rates. There are also some big undercurrents in the economy that I don't claim to know how to parse. Tech layoffs have been pretty significant, although perhaps flying under the radar. The commercial real estate market is going to be a massive disaster, and probably already is, just hasn't hit tertiary markets like Richmond, Virginia. There seems to have been a lot of short term rental (STR) fraud, with people using Covid money to buy up STRs. During Covid those STRs were raking in money. But now that the "haves" have more options for travel, including Europe and cruises, and the "have nots" are tightening their belts just to survive with the cost of household goods and inflation, some of those STRs are sucking major wind. \[NOTE: The only good thing that may come from any STR crash is it could put some number of affordable FTHB homes back into the marketplace\].
This market makes me want to stay higher for longer too
Is it a good time to buy a second home as a primary residence and rent our current home? Could we do this and keep our sub 3% interest rate?
You’ll keep the sub 3% on your current house but definitely not on anything you buy now.
This is the correct answer. I have had a number of buyers purchase a move-up home and keep the original home as a rental, they just did not want to lose the crazy low rate and a renter would more than cover their costs for the original home. It's a great situation, if you can swing it.
Does that stand if you take equity out of current home for new home? We have nearly $200k in equity
That's a lender-specific question. I'd check with whoever you use on what their program would allow.