An HHHunt home under construction in Rutland Grove, a new community in Hanover County (Photo by Justin Vaughan)
If you’re planning to build a new home in the Richmond area in the next year, you’ll need a lot of patience and a bigger mortgage.
According to the Richmond Association of Realtors, the Richmond region is one of the most competitive residential real estate markets in the commonwealth, with all market indicators signaling another year of unprecedented growth.
Residential real estate in Central Virginia sold at a record-breaking pace in 2020, with a sales volume more than 30% higher than 2019 sales. Richmonders, like people in communities across the country, are buying new homes in record numbers despite the coronavirus pandemic — or maybe because of it.
A lack of existing housing inventory has helped to fuel consumer interest in new construction, but there are some real challenges to the residential building industry’s continued ability to meet the level of demand. With sales of new homes reaching all-time highs, builders are beginning to run out of buildable lots.
There’s also a shortage of lumber to build new homes. According to the National Association of Home Builders, lumber prices rose nearly 250% since April 2020, adding nearly $36,000 to the average price of a new single-family home. “Builders are facing supply shortages so extreme that you’re starting to see allocation limits on some materials,” says Danna Markland, CEO of the Home Building Association of Richmond.
Many new-home builders sold through their 2021 inventories in 2020, says Jonathan D. Ridout, vice president of real estate development and general manager for HHHunt Communities. “I’ve spoken with multiple builders in our communities,” he says. “I’d say all of them are limiting their monthly sales in order to make sure that they can deliver to the consumer what they want.
“It takes two to three years from the time you get zoning to when you pull a permit on a house — that’s a real problem,” he continues. “A lot of us are trying to work with municipalities to see what we can do to speed up some of those processes so this supply and demand issue doesn’t get magnified as we continue to have a very hot housing market.”
The increase in demand can also be linked to changing demographics. “The number of contracts is just so much greater than what’s on the market,” says David Johannas, principal of Johannas Design Group and architect of The 2200 at Cary, a new development of 19 modern townhouses in the Fan. “I think if you were to look historically at the number of units we’ve been developing … we just haven’t been keeping up with demand for years. With almost 140 million millennials and Gen Z’s getting ready to buy, we’re facing a real shortage.”
Markland traces the root of the problem back to the 2008 recession, when many people left the building and construction workforce, and the industry never returned to its pre-recession volume. She says the pandemic exacerbated some issues in the industry, as the number of people opting to have homes built to their personal specifications increased dramatically. Labor shortages, significant disruptions in the building-materials supply chain, materials price increases and delivery issues, wet weather, permitting delays, and now lot shortages are all causing major delays in projects and increases in home prices.
“Right now, in a best-case scenario, it takes 90 days longer to build a home this year than it did prior to the pandemic,” Markland says, “but in many cases it’s taking longer than that.”
