VCU Kornblau forum provides in-depth look at residential housing market
Recently, some 800 people registered to hear five panelists bring their experience and insights to bear on the Richmond housing scene. The experts discussed supply and demand, affordability and public policy. They suggested ideas, examined perspectives and proposed solutions. Yet in the end, they all had to agree with COO Steve Fritz of HHHunt, who said managing today’s chaotic, problematic Richmond housing situation is “like a game of Whack-a-Mole.”
Lisa Sturtevant, chief economist with Virginia Realtors, set the stage with her dramatic statistics. In Richmond, home sale prices are up 22% from 2019, but active listings are less than 50% of what they were two years ago. Housing demand is surging because people have increased their savings during the pandemic. Working from home has caused them to need more space, and today they can take advantage of historically low mortgage rates. So, what could help slow buyer demand? According to Sturtevant, “three headwinds.” Mortgage rates will increase, due to Federal Reserve actions in response to inflation. Home prices are now rising much faster than incomes. And finally, inventory is declining dramatically. “This is the story behind the story,” she explains. “It’s increasingly challenging.”
Rising home and rental costs
Next up was Laura Lafayette, CEO of the Richmond Association of Realtors. She testified as to the frenetic pace of the market in Richmond, causing people to overpay for homes. And as in dominos, the high cost of housing has repercussions for the rental market. People who could normally afford a home are getting outbid, and so they decide to rent instead. This creates a larger, wealthier base of apartment-hunters, thus crowding out the normal rental market.
…which is the perfect segueway for Jovan Burton, executive director of the Partnership for Housing Affordability. His particular concern is cost-burdened households, who typically account for a large portion of the rental market. A third of all Richmond households are now paying more than 30% of their income for housing. Five of the eight fastest growing occupations produce monthly wages of less than $1,000, whereas rents are hovering around $1,400. Rental relief programs are drying up, yet the need is tremendous. Burton says zoning that allows for multi-family housing can alter these conditions and alleviate pressure. The need is urgent: by 2040, the Richmond region will add 29,000 new low-income households, and they will all need someplace to live.
Fritz, representing the construction industry, goes so far as to name his segment of the presentation “Executing in Chaos.” Years of under-building, combined with the supply chain setbacks of COVID, have created a lack of inventory. “We are burning through our future,” he says, “we’ve sold our pipeline of finished lots. It can take 18 weeks for window orders to arrive, longer for cabinets and vinyl siding. We’re seeing 30-36% increases in materials as well as labor. This kind of cost escalation is not sustainable.”
A brighter future
Susan Dewey, CEO of Virginia Housing, shared a bright outlook. “I’m an eternal optimist,” she announces. “The answer is innovation. It’s not easy, but we have to think differently in the future.” Design, construction, financing, partnerships and public policy all come into play. The 3-D printed home is a new alternative. The community land trust model offers buyers the ability to own a home, if not the land it sits on. Public policy improves when local officials realize the issue is tied to economic development, such as when Amazon was unsure about locating its headquarters in Northern Virginia due to the high cost of housing. Ultimately, Dewey thinks, the key is partnerships – banding together to solve problems ranging from senior living options to the racial gap in housing.
But in the Q&A session at the end of the program, more than one person wanted to know when the market might finally return to a more balanced condition. “By any metric, we’re at least a couple of years off from the normal housing market,” guessed Sturtevant.
“There are always going to be challenges,” concludes Lafayette, “but a challenge of demand is not all bad. It’s good that people do want to live, work and put down roots here.”