January 1, 2009 - 400+ condos for sale in Zone 10
December 20, 2009 - 180 condos for sale in Zone 10
Didn't see that one coming, did you? I am not sure anyone did.
What happened? Who bought all these condos? What does this mean for the future? We will talk about each of these one by one.
1. What Happened? Sometime in late April, after the market had literally been dormant for about 9 months, the first wave of people began to stick toes in the water. The development community finally found the holy grail of financing, FHA, and began to get their projects approved by the federal agency. This provided the most important aspect of recovery, available AND realistic financing.
The fallout of the crash which helped lengthen and deepen the adjustement in values, was the inability to get anything financed. The lack of available financing led to a decrease in demand which caused property values to fall which caused fear which caused less willingness to lend which....you see the pattern. Once the developers caught on to the need for FHA and understood what was needed to get these projects approved, FHA provided the safety net that was sought - market rates and higher leverage. 96.5% loan to values and good rates and all of a sudden, the buyer showed up.
Later in the game, the local banks that had financed much of the construction also began to show up with programs to allow the end users to get financing for properties where FHA was not available. These projects, which had been struggling only for a lack of available financing, now with the financing barriers removed, began to sell....albeit at prices lower than projected during construction.....but they began to sell.
We are now entering the 2010 market with interest rates in upper 4% to lower 5% range, a 'normal' level of inventory, little to no new inventory being added, an expanded tax credit, dow 10,000 and a stablization of employment. Hmmmmm.......
2. Who bought all of these condos? People with the following characteristics: they live in an apartment, have a good salary and stable job and an advanced degree or skill set, they do not have anything to sell and either a little savings or a parent with some cash. When you combine all of these factors, you end up with a buyer who has the ability to buy up to a $250,000 condo with 3.5% downpayment and a 5% interest rate who gets $8,000 back from the goverment for doing so! In other words, a $0 transaction. Who wouldn't want to take advantage of that?
By far and away, the buyer's of 2009 were the young professionals of the world who elected to become owners instead of remaining renters. They absorbed the majority of the condo market and saved us all. If they bought early, they may have overpaid by 1-3% relative to those who came later, but they also probably got the better units. They will look very sharp in about 3-5 years.....
3. What does this mean for the future? It means recovery. As long as there was as much exesss inventory in the market as there was (which can also be argued that the reason for the excess was a result of lack of financing instead of lack of demand, bit I digress) there was never going to be a recovery. With demand returning to a 'normal' level (think 2003), we are now heading to a normal market, with one new problem...no one in building anything right now! At the current level of absorption of the condos, we will be out of inventory by middle to late 2010, which means moderate price increase and the recovery of the resale market. Once we free up the system to allow for move ups, the middle and upper end of the markets will recover as well.
In summary, understand that the USA should build about 1M houses per year (historic number of housing starts in normal markets.) In the height of the bubble, we were building about 1.6M. Right now, we are building about 300k new housing units and this has been going on for the last 24 months. The pending lack of supply SHOULD mean a slight, but sharp, increase in values sometime in 2010 and a decrease in marketing time required to get a home sold. Until the banks feel safe about lending to the builders, it could take quite a while to get back to production levels necessary to put demand and supply back in balance.
Sunday, December 20, 2009
Monday, August 10, 2009
In The Zone
The only constant in this world is change. Tomorrow will be different from today…today from yesterday….you get the picture.
What lags behind, in many cases, is the methods we use to measure, describe and predict. There is a little changing we need to do as Realtors in Richmond.
For many years, the zones of Richmond have remained stagnant. Zone 10, which is the primary zone that contains the Downtown Richmond neighborhoods plus The Fan and Museum Districts always served us pretty well. However, it is really no longer reflective of how we search, either as agents or as the buying public. It is hampering our growth and we need to change it.
Manchester is technically small parts of both zones 50 and 60. It is bounded by the city limits to the south of the river and is split by Hull Street. It is unfortunate as it is lumped in with areas that do not truly share its history, style or momentum. It is also truly holding back its growth.
As Richmond grows, our MLS needs to grow with it. I feel strongly that the Manchester area should be incorporated into Zone 10 as part of what is considered to be “Downtown.” The traffic patterns, development paths and physical proximity make it more “10” than “50” or “60.” Furthermore, having Hull Street serve as a dividing line for the current zones couldn’t be any less reflective of the reality of Manchester.
When Manchester was industrial, it did not matter. Now it does.
As a Realtor, I want our MLS to be as accurate as possible.
As a Richmonder, I want true market forces to dictate successes or failures and not financing or outdated lines.
Right now, neither is correct and we need to get it right.
The only constant in this world is change. Tomorrow will be different from today…today from yesterday….you get the picture.
What lags behind, in many cases, is the methods we use to measure, describe and predict. There is a little changing we need to do as Realtors in Richmond.
For many years, the zones of Richmond have remained stagnant. Zone 10, which is the primary zone that contains the Downtown Richmond neighborhoods plus The Fan and Museum Districts always served us pretty well. However, it is really no longer reflective of how we search, either as agents or as the buying public. It is hampering our growth and we need to change it.
Manchester is technically small parts of both zones 50 and 60. It is bounded by the city limits to the south of the river and is split by Hull Street. It is unfortunate as it is lumped in with areas that do not truly share its history, style or momentum. It is also truly holding back its growth.
As Richmond grows, our MLS needs to grow with it. I feel strongly that the Manchester area should be incorporated into Zone 10 as part of what is considered to be “Downtown.” The traffic patterns, development paths and physical proximity make it more “10” than “50” or “60.” Furthermore, having Hull Street serve as a dividing line for the current zones couldn’t be any less reflective of the reality of Manchester.
When Manchester was industrial, it did not matter. Now it does.
As a Realtor, I want our MLS to be as accurate as possible.
As a Richmonder, I want true market forces to dictate successes or failures and not financing or outdated lines.
Right now, neither is correct and we need to get it right.
Wednesday, July 22, 2009
Thomas Jefferson and Solar Panels
Heart - “I love the old windows. Aren’t they beautiful?”
Wallet – “What are the heating bills?”
Welcome to a discussion that is growing louder and louder with no real resolution in sight. I am, of course, referring to the movement/trend towards “Green” building practices and how they are in direct conflict with many historic renovation practices.
I think that we can all agree that there needs to be preservation of our architectural heritage. No real argument there. And…there are programs at both the Federal and State levels that will refund a large portion of a developer’s costs in renovating a historic structure if it is done so within the guidelines of the National Park Service. The equity created is substantial and allow what would not be a feasible project to become a feasible one. It is, quite frankly, one of the main reasons that we have a Downtown again. We should be thankful that we have a development community that has the skill set to understand and employ these programs.
But here is the problem….the guidelines for these programs do pretty much nil to bring “green” elements to the table. Unless the windows are utterly unusable on your historic building, you have to re-use the original ones. Doors, ditto. Likewise, LEED certification is pretty much impossible in a tax credit renovation as many LEED techniques require an adjustment to the façade (a HUGE no-no), new windows (pretty hard to do), modern materials (no way) and “day-lighting” which is process by which natural light is brought into the interior of buildings through the use of atriums and/or interior courtyards (once again, hard to do within the DHR guidelines.)
Why is this so? The LEED scoring system is modern. The rules that govern the historic tax credits programs and really define the “historic renovation” process were written 15-20 years ago. It is a new world. The scoring system that governs LEED developed in a much more recent time frame and consequently, is much more “friendly” to new construction. Bottom line, the majority of new construction is suburban while historic rehabs tend to be urban.
So here we are again. If we truly want to impact our energy needs, then we need to make LEED feasible in the urban environment. Building ground up LEED is easy when compared to urban renovation. Throw in the Historic requirements, and it is darn close to impossible. We already have renovated a large number of our City’s eligible historic buildings over the past 10 years without LEED certification being an integral driver of the redevelopment process. That is unfortunate.
Imagine urban cores with revitalized historic buildings using eco friendly materials and LEED techniques. Now THAT would be making history….
Check out this article which goes into much more depth on the topic.
http://libres.uncg.edu/ir/uncg/f/umi-uncg-1574.pdf
Wallet – “What are the heating bills?”
Welcome to a discussion that is growing louder and louder with no real resolution in sight. I am, of course, referring to the movement/trend towards “Green” building practices and how they are in direct conflict with many historic renovation practices.
I think that we can all agree that there needs to be preservation of our architectural heritage. No real argument there. And…there are programs at both the Federal and State levels that will refund a large portion of a developer’s costs in renovating a historic structure if it is done so within the guidelines of the National Park Service. The equity created is substantial and allow what would not be a feasible project to become a feasible one. It is, quite frankly, one of the main reasons that we have a Downtown again. We should be thankful that we have a development community that has the skill set to understand and employ these programs.
But here is the problem….the guidelines for these programs do pretty much nil to bring “green” elements to the table. Unless the windows are utterly unusable on your historic building, you have to re-use the original ones. Doors, ditto. Likewise, LEED certification is pretty much impossible in a tax credit renovation as many LEED techniques require an adjustment to the façade (a HUGE no-no), new windows (pretty hard to do), modern materials (no way) and “day-lighting” which is process by which natural light is brought into the interior of buildings through the use of atriums and/or interior courtyards (once again, hard to do within the DHR guidelines.)
Why is this so? The LEED scoring system is modern. The rules that govern the historic tax credits programs and really define the “historic renovation” process were written 15-20 years ago. It is a new world. The scoring system that governs LEED developed in a much more recent time frame and consequently, is much more “friendly” to new construction. Bottom line, the majority of new construction is suburban while historic rehabs tend to be urban.
So here we are again. If we truly want to impact our energy needs, then we need to make LEED feasible in the urban environment. Building ground up LEED is easy when compared to urban renovation. Throw in the Historic requirements, and it is darn close to impossible. We already have renovated a large number of our City’s eligible historic buildings over the past 10 years without LEED certification being an integral driver of the redevelopment process. That is unfortunate.
Imagine urban cores with revitalized historic buildings using eco friendly materials and LEED techniques. Now THAT would be making history….
Check out this article which goes into much more depth on the topic.
http://libres.uncg.edu/ir/uncg/f/umi-uncg-1574.pdf
Monday, July 13, 2009
The Emrick Flats and Jackson Ward
Emrick Flats and Jackson Ward Summer of 2009
Sometime in the late summer of 2007, the first of what would become 20 residents of The Emrick Flats, moved into 101 West Marshall Street and began to call it home. The “Triangle Building,” as it was known, took its first small real estate steps and became part of the Richmond landscape.
It is amazing how times have changed in a very short time.
Looking back, I don’t think anyone KNEW that Emrick would be a success. As a matter of a fact, I would venture to guess that many would have expected failure. For the life-long Richmonder, the idea of a concrete and glass industrial building just blocks from the most notable Richmond redevelopment failures was nuts.
Surprise. Surprise. Surprise.
When we go back and look at certain events in our City’s resurgence, I truly believe that Emrick deserves mention. The Emrick Flats taught us that it was ok to be cool. It was ok to be different. It was ok to go back “inside” Downtown. The Emrick Flats taught us that Downtown Richmond was maybe worth another look. It taught us that these old buildings and their glorious bones had amazing inherent character and placed in the hands of the skilled architectural and development community, could become fabulous spaces again. Emrick is not like anything else….and that is a good thing.
Obviously, I am a fan.
The Emrick Flats is approaching the end of the sales cycle as just a few units remain. Late 2008 and 2009 have taken their tolls on many projects, but Emrick has been largely immune, despite Fannie and Freddy making condo financing VERY challenging. I think it speaks to the true core strength of Emrick and its design.
Thanks for stopping by.
Rick Jarvis
One South Realty Group, LLC
For more information on the project, visit:
www.onesouthrealty.com/emrickflats.cfm
Become a FAN!
http://www.facebook.com/home.php?#/pages/Richmond-VA/The-Emrick-Flats/213738910092?ref=ts
For more information on properties in Downtown Richmond, visit:
http://www.onesouthrealty.com/downtown-richmond-condos-flats.cfm
Sometime in the late summer of 2007, the first of what would become 20 residents of The Emrick Flats, moved into 101 West Marshall Street and began to call it home. The “Triangle Building,” as it was known, took its first small real estate steps and became part of the Richmond landscape.
It is amazing how times have changed in a very short time.
Looking back, I don’t think anyone KNEW that Emrick would be a success. As a matter of a fact, I would venture to guess that many would have expected failure. For the life-long Richmonder, the idea of a concrete and glass industrial building just blocks from the most notable Richmond redevelopment failures was nuts.
Surprise. Surprise. Surprise.
When we go back and look at certain events in our City’s resurgence, I truly believe that Emrick deserves mention. The Emrick Flats taught us that it was ok to be cool. It was ok to be different. It was ok to go back “inside” Downtown. The Emrick Flats taught us that Downtown Richmond was maybe worth another look. It taught us that these old buildings and their glorious bones had amazing inherent character and placed in the hands of the skilled architectural and development community, could become fabulous spaces again. Emrick is not like anything else….and that is a good thing.
Obviously, I am a fan.
The Emrick Flats is approaching the end of the sales cycle as just a few units remain. Late 2008 and 2009 have taken their tolls on many projects, but Emrick has been largely immune, despite Fannie and Freddy making condo financing VERY challenging. I think it speaks to the true core strength of Emrick and its design.
Thanks for stopping by.
Rick Jarvis
One South Realty Group, LLC
For more information on the project, visit:
www.onesouthrealty.com/emrickflats.cfm
Become a FAN!
http://www.facebook.com/home.php?#/pages/Richmond-VA/The-Emrick-Flats/213738910092?ref=ts
For more information on properties in Downtown Richmond, visit:
http://www.onesouthrealty.com/downtown-richmond-condos-flats.cfm
Friday, June 12, 2009
Sitting in Traffic with Fanny and Freddy
As the development and housing reels from the lack of credit available right now, the fallout is all around us. We know about foreclosure. We know about short sales. We know about property values re-adjusting severely and people being trapped in their homes. This is a problem, for sure, but it can and will be solved by a balancing of supply and demand. It is already getting better....marginally.…but better.
Where we go from here is the issue that is more important. The new world of lending is pretty much DIRECTLY AT ODDS with the things that will set us free from the larger mess we are in.
Do tell…..
IF we are trying to be greener AND we are trying to reduce out dependence on foreign oil AND we are trying to reduce our carbon footprints AND we are trying to retool out transportation systems THEN WHY ARE WE PUNISHING URBAN DEVELOPMENT?
There is no way to build with any density other than to build vertically. Period.
Take, for example, any multi family building of 3-5 stories (or any height, for that matter) built in any urban area. The building can be an apartment building with no problem. But if there is to ownership, we got a problem.
The only way that any vertical structure can have individual ownership is condominium ownership. There is no other way (and do not say co-op, it is even more convoluted.)
Right now, there condominium lending environment is ridiculous. The requirements put onto condo lending call for unrealistic “pre-sold” requirements, interest rate add-ons, lower loan-to-values, a maximum number of investor owned units AND condominium dues are counted against qualifying ratios. Bottom line, is you need to make more money, have more cash to put down and only purchase in condo projects that have a large portion of units already sold.
I could MAYBE stomach these requirements if the same set of rules were applied to single family housing, but they are not. There is not a pre-sold requirement in any single family neighborhood. There is not a check of investor owned homes in any single family neighborhood. There is not an “add-on” to the interest rate and the maximum loan to value is 5% greater than condominiums.
This is the kicker…condo dues typically contain some utility costs and a repair reserve in the budget. This is not accounted for in single family loan underwriting.
It is akin to saying that single family homes do not require repairs and the owners have the option of using or not using water and sewer.
It is not fair. And it is just plain wrong.
If someone chooses to live in their downtown OR wishes to have a space that does not have a yard to maintain, then they should be able to choose to live in that environment without penalty. The current rules say otherwise.
Fannie Mae and Freddy Mac have spoken and they would prefer you live in the suburbs.
See you in traffic.
As the development and housing reels from the lack of credit available right now, the fallout is all around us. We know about foreclosure. We know about short sales. We know about property values re-adjusting severely and people being trapped in their homes. This is a problem, for sure, but it can and will be solved by a balancing of supply and demand. It is already getting better....marginally.…but better.
Where we go from here is the issue that is more important. The new world of lending is pretty much DIRECTLY AT ODDS with the things that will set us free from the larger mess we are in.
Do tell…..
IF we are trying to be greener AND we are trying to reduce out dependence on foreign oil AND we are trying to reduce our carbon footprints AND we are trying to retool out transportation systems THEN WHY ARE WE PUNISHING URBAN DEVELOPMENT?
There is no way to build with any density other than to build vertically. Period.
Take, for example, any multi family building of 3-5 stories (or any height, for that matter) built in any urban area. The building can be an apartment building with no problem. But if there is to ownership, we got a problem.
The only way that any vertical structure can have individual ownership is condominium ownership. There is no other way (and do not say co-op, it is even more convoluted.)
Right now, there condominium lending environment is ridiculous. The requirements put onto condo lending call for unrealistic “pre-sold” requirements, interest rate add-ons, lower loan-to-values, a maximum number of investor owned units AND condominium dues are counted against qualifying ratios. Bottom line, is you need to make more money, have more cash to put down and only purchase in condo projects that have a large portion of units already sold.
I could MAYBE stomach these requirements if the same set of rules were applied to single family housing, but they are not. There is not a pre-sold requirement in any single family neighborhood. There is not a check of investor owned homes in any single family neighborhood. There is not an “add-on” to the interest rate and the maximum loan to value is 5% greater than condominiums.
This is the kicker…condo dues typically contain some utility costs and a repair reserve in the budget. This is not accounted for in single family loan underwriting.
It is akin to saying that single family homes do not require repairs and the owners have the option of using or not using water and sewer.
It is not fair. And it is just plain wrong.
If someone chooses to live in their downtown OR wishes to have a space that does not have a yard to maintain, then they should be able to choose to live in that environment without penalty. The current rules say otherwise.
Fannie Mae and Freddy Mac have spoken and they would prefer you live in the suburbs.
See you in traffic.
Monday, June 8, 2009
2009 | Mid Term Real Estate Report
Now that 2009 is almost ½ done, what have we learned?
I think that the answer is still being written but some definite trends are developing.
Here are few that seem to be prevalent throughout the different segments (and in no particular order):
Trend One – The Entry Level Buyer Saves the Day
The number of transactions occurring below $250,000 compared with last year is off by about 10%. The number of transactions occurring above $250,000 is off by about 40%. Ouch.Why is this? Simply put, the single person paying rent and making about $50,000 – 60,000 can pretty easily buy a property using FHA (3.5% down payment) and use the $8,000 first time buyer tax credit as his/her down payment. Anything over $250,000 requires either a salary in excess of $60,000 and cash to put down. Below the line, and it is almost a cashless transaction.
Trend Two – The Appraisal Revolution
It seems like every transaction is experiencing an issue with appraisals. It is not EVERY transaction, but it sometimes feels that way.
A much higher percentage of transactions are getting hung up on appraisals. Banks are now requiring appraisers to only go back 90 days for comps. There simply is not enough data to draw from. Comparable sales are lacking, especially recent ones, and appraisers are being scrutinized much more with their data selection. Appraisals are being contested by both sides.
It is tough.
This is being compounded by many lenders now randomly selecting appraisers from a pool when they used to use a select few. While some view the randomness as protection from loan officers conspiring with the apprasiers, it has also put many appraisers in situations where they are less familiar. I actually had to give one appraiser directions to 25th Street. Not to be too critical here, but if you cannot find 25th (it is between 24th and 26th) then how can you hope to be accurate in knowing where the neighborhood lines are truly drawn?
It is frustrating, but we will collectively deal with it.
Trend Three – The Buyers of Today are Sellers of Yesterday
“What is wrong with the buyers?” is a question we get from the selling community every day. “Why are they taking so long?” and “What kind of offer is that?” is heard constantly.
Well, the buyers are not doing anything that was not done to them in 2005-2007. When the market was seller dominated, buyers were forced to bid on properties. The reverse is now true. When the market was seller dominated, buyers were left hanging while sellers made their decisions. Sellers would take their time, ask for the world, and know that if a buyer did not step up, another one would. Now the reverse is VERY true.
When a seller makes a commitment to sell, they need to understand that they if they are not the best deal out there, they are unlikely to even get a nibble. If they are, then they will get offers far below ask. It is just the way it is.
So, I will leave it at this….2009 is a new world with new rules. Unfortunately, the rule book is still being written.
I think that the answer is still being written but some definite trends are developing.
Here are few that seem to be prevalent throughout the different segments (and in no particular order):
Trend One – The Entry Level Buyer Saves the Day
The number of transactions occurring below $250,000 compared with last year is off by about 10%. The number of transactions occurring above $250,000 is off by about 40%. Ouch.Why is this? Simply put, the single person paying rent and making about $50,000 – 60,000 can pretty easily buy a property using FHA (3.5% down payment) and use the $8,000 first time buyer tax credit as his/her down payment. Anything over $250,000 requires either a salary in excess of $60,000 and cash to put down. Below the line, and it is almost a cashless transaction.
Trend Two – The Appraisal Revolution
It seems like every transaction is experiencing an issue with appraisals. It is not EVERY transaction, but it sometimes feels that way.
A much higher percentage of transactions are getting hung up on appraisals. Banks are now requiring appraisers to only go back 90 days for comps. There simply is not enough data to draw from. Comparable sales are lacking, especially recent ones, and appraisers are being scrutinized much more with their data selection. Appraisals are being contested by both sides.
It is tough.
This is being compounded by many lenders now randomly selecting appraisers from a pool when they used to use a select few. While some view the randomness as protection from loan officers conspiring with the apprasiers, it has also put many appraisers in situations where they are less familiar. I actually had to give one appraiser directions to 25th Street. Not to be too critical here, but if you cannot find 25th (it is between 24th and 26th) then how can you hope to be accurate in knowing where the neighborhood lines are truly drawn?
It is frustrating, but we will collectively deal with it.
Trend Three – The Buyers of Today are Sellers of Yesterday
“What is wrong with the buyers?” is a question we get from the selling community every day. “Why are they taking so long?” and “What kind of offer is that?” is heard constantly.
Well, the buyers are not doing anything that was not done to them in 2005-2007. When the market was seller dominated, buyers were forced to bid on properties. The reverse is now true. When the market was seller dominated, buyers were left hanging while sellers made their decisions. Sellers would take their time, ask for the world, and know that if a buyer did not step up, another one would. Now the reverse is VERY true.
When a seller makes a commitment to sell, they need to understand that they if they are not the best deal out there, they are unlikely to even get a nibble. If they are, then they will get offers far below ask. It is just the way it is.
So, I will leave it at this….2009 is a new world with new rules. Unfortunately, the rule book is still being written.
Tuesday, October 14, 2008
something to think about
Rents.
Think about rents.
Buried under all of the news of gloom and doom are smiling apartment and rental property owners. Very few people anywhere (excpet the apartment owners) are talking the fact that rents rose as much as 10% in many of the Richmond sub-markets this last rental season.
What does that mean?
It means that the buy vs. rent decision is moving closer and closer to today.
Huh?
In the last few years, you could justify buying a home based on a 4 to 6 year model that basically said “when you add up the tax benefits of ownership, plus the increase in your equity, then you would be in a better position in 5 years.”
Now, the monthly obligation for both rent and mortgage have gotten much closer as property values have adjusted downward and the rents have increased. The buy vs. rent decision can now be justified almost immediately.
So when do things change?
They are starting to.
Get off the sidelines…..they are some INCREDIBLE deals out there.
Rick
Think about rents.
Buried under all of the news of gloom and doom are smiling apartment and rental property owners. Very few people anywhere (excpet the apartment owners) are talking the fact that rents rose as much as 10% in many of the Richmond sub-markets this last rental season.
What does that mean?
It means that the buy vs. rent decision is moving closer and closer to today.
Huh?
In the last few years, you could justify buying a home based on a 4 to 6 year model that basically said “when you add up the tax benefits of ownership, plus the increase in your equity, then you would be in a better position in 5 years.”
Now, the monthly obligation for both rent and mortgage have gotten much closer as property values have adjusted downward and the rents have increased. The buy vs. rent decision can now be justified almost immediately.
So when do things change?
They are starting to.
Get off the sidelines…..they are some INCREDIBLE deals out there.
Rick
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