Residential real estate in the Richmond area may be poised to start its rebound after several years of lackluster results, but the uncertain economy and wavering consumer confidence make prospects for a housing recovery in 2012 far from a sure thing.
"Resilient" is the word Laura Lafayette, chief executive of the Richmond Association of Realtors, uses to describe the local housing market in 2011. She expects pending sales and closed sales to show improvement from 2010. "That's especially important because 2011 was the first year in about four that we have not had a tax credit pushing buyers into the market. It's also remarkable because in 2010 we had not one but two tax credits."
While average prices and numbers of homes sold during the 12 months from September 2010 to September 2011 showed little change from the previous 12 months, more recent results illustrate greater stability, if not growth. Sales of pre-owned homes in the third quarter — July, August and September — surpassed the rate from the same period in 2010 by 27 percent, says Tom Tyler, senior analyst at Integra Realty Resources-Richmond.
Builders saw a 24 percent increase in new houses sold, he says. "There has also been renewed activity in several communities that were once stalled, and ground was broken for the development of several new subdivisions in the local market in recent months."
"You've heard it before," Lafayette says, "but now is a great time for home buying." Interest rates remain at historic lows, with no expectations of a significant rise, especially in a presidential election year.
Less positive is the lower average sales price of homes, Lafayette adds, although for buyers, lower prices mean greater affordability. "We continue to have distressed property on the market, short sales and foreclosures, which had a downward pressure on sale prices in 2011."
For some homeowners, lower valuations make their homes worth less than the amount of their mortgages, a situation called negative equity. Virginia ranked seventh worst among the states in high negative equity, according to CoreLogic Inc., a company that analyzes real estate and finance information. In the Richmond metro area, 19.5 percent of all residential properties with a mortgage fit that situation in the July to September 2011 quarter, unchanged from the same three months of 2010. Statewide, the percentage was 22.9 percent.
Foreclosure activity, which can lead to the mortgage holder taking back the home after lapses in loan payments, remained higher in 2011 than in 2010, CoreLogic says. However, the percentage of borrowers more than 90 days behind in their loan payments has fallen from recent highs.
"Two years after the recession officially ended, the housing industry is still in depression," says Christine Chmura, president and senior economist at Chmura Economics & Analytics in Richmond. "As the unemployment rate gradually drops, the housing industry will start to recover. Although 2012 will show some improvement in the housing market, we don't expect strong growth until 2013.