I read an interesting article today in the Richmond Times Dispatch news paper. The title is "Home sales slump likely to continue." I am including the article for your review and comments.
Home sales slump likely to continue
Market has not cooled off as steeply in the Richmond region as it has elsewhere
BY CAROL HAZARD
TIMES-DISPATCH STAFF WRITER
Sunday, December 31, 2006
The cooling housing market has been chillier than some real estate experts expected.
But not so cold in the Richmond area.
What's more, it hasn't slumped nearly as much here -- or nationwide -- as it did in the 1990 recession.
That said, the prospects for housing in the new year are not so bad -- and not so good.
"After hitting record highs in 2004 and 2005, single-family housing starts in the nation fell about 11 percent in 2006," said economist Christine Chmura, president of Chmura Economics & Analytics in Richmond.
"We expect them to fall another 6 percent in 2007 before starting to grow in 2008. In 2008, we expect growth to remain sluggish with an increase of only about 1 percent."
More declines in housing activity will shave about 1 percentage point off the gross domestic product in the first two quarters, she predicted.
"Overall, the economy is still performing well. It's just the housing sector that is going through a transition. But it is not contracting enough to [significantly] pull down the rest of the economy."
Consumer spending and business investment -- without the help of housing -- will propel economic growth, Chmura said.
"Similar to the nation, the housing sector in Richmond and Virginia has slowed," she said.
Housing starts through October dropped 33 percent in Virginia from their peak in August 2005, Chmura said. Northern Virginia led the decline, with housing starts sliding 49 percent. In the Richmond area, they were down 27 percent.
That said, the numbers are not as bad as they were in 1990, when housing starts in Virginia dropped 52 percent from their peak, Chmura said.
"The main factor causing housing to slow is affordability," she said. "Home prices have risen so much that some households have been priced out of the market."
In the third quarter, 44 percent of all households in the Richmond area -- with a median income of $55,741 -- could afford a median priced home of $182,000, with half selling for more and half for less.
In Washington, only 19 percent of households could afford a median priced home there of $467,000.
The Richmond area has seen considerable price appreciation in the past couple of years, but not nearly as much as in the skyrocketing Washington area, where prices are likely to decline over the next couple of quarters, Chmura said.
Price appreciation will continue to slow in the Richmond area but not show a year-over-year decline, she predicted.
"Virginia, in aggregate, will look like the nation," said David H. Downs, the Alfred L. Blake Chair of Real Estate at Virginia Commonwealth University.
"The national market should continue to correct. That doesn't mean that prices will necessarily go up or down -- simply that supply and demand will move toward longer-term normalcy."
Prices will be driven by inventory levels and local economies, Downs said. "Expect to see a wide divergence in housing appreciation based on price points and location."
Richmond benefits from companies moving into the area, said Wes Atiyeh, immediate past president of the Richmond Association of Realtors.
"Because of the overall makeup of Richmond, it would take a lot for us to bomb out," he said.
"We have a very diverse economic market, which creates and sustains the housing market here. I have never seen it dive in the tanks as it has other cities, but it's not going up as fast either."
If people are waiting to buy because they fear the market will get much worse, "that is not going to happen," Atiyeh said.
"Interest rates are low. We have inventory. Buyers can pick and choose."
Joan Peaslee, an agent with Prudential Slater James River, said a good house will always sell.
"Get the yard spruced up, paint where it's needed and clean, clean and clean, so there is no reason not to buy it."
Soft earth colors are in, Peaslee said. "Gone are the hunter greens, burgundies and navy blues."
Peaslee said the market is steady. Most sales are 60 to 90 days instead of one day, she said. Multiple offers are not common like they were two years ago, but they are not unheard of either.
She said prices here will rise in the spring -- traditionally the busiest time of the year.
After reading the above article I stopped to reflect on what home sales have been like in the Chesterfield/Tri-Cities. Currently there are over 6,000 homes for sale in our Central VA MLS and in the month of December there were only 900 plus homes that sold. What this means is at the current rate there is at least 6 months of home inventory if no other home comes on the market...which we all know will not be the case.
Several of the home owners I have talked with are just waiting for what they think the golden time to sell will be...spring time. The fault with this type of thinking is that by waiting until spring they risk even higher competion and worse continued price adjustments. So, what is a home owner who wants to sale their home to do?
While the numbers sound bleak and the media continues to push out negative article about the housing sector there is still hope. This is what I would like to discuss more in the near future.
