After months of delay, road pavers are finally laying asphalt at the entrance to the Magnolia Green subdivision off Hull Street Road in western Chesterfield County. The 1,800-acre project promised to extend the good life of large homes, golf and hiking trails to the far edges of Richmond's suburbia, but the financial crash of 2007 and 2008 brought it to a screeching halt along with many other similar developments.
The tank trucks and paving equipment, however, show that perhaps the Richmond area is finally seeing the bottom of a market fall after months of foreclosures, anemic home sales, falling prices and shrinking property tax assessments.
Few in the real estate business are willing to say that a turn is at hand, but the spirit seems brighter. “We had relative price stability in last year's fourth quarter and that's a very good sign, given the amount of inventory we have on hand waiting to be sold,” says Laura Lafayette, chief executive of the Richmond Association of Realtors.
Builders say that more families are showing up in their offices to explore construction options and prices. Christine Chmura, president of Chmura Economics & Analytics, says that housing permits, a way of tracking the markets, showed an upturn by 2 percent last year after declines of 31.6 percent in 2009, 32.8 percent in 2008 and 23 percent in 2007. “Our forecasts are for growth in permits housing of 2.6 percent this year and 5.6 percent in 2012,” she says.
Pushing them along is a fear that mortgage rates are showing signs of increasing, Lafayette says, and that potential buyers may start seriously considering making a move before rates explode rather than waiting for housing prices to drop even more.
A sweet spot showed up in the market last year — namely in houses selling for between $150,000 and $300,000. “We're selling in the $200,000 to $300,000 range; so long as it's under $300,000,” says Cheryl Hartje, a sales agent for HHHunt Homes at Magnolia Green. House sales are running at about four a month, she says. That's far fewer and at much lower prices than was envisioned a few years ago, but it seems like progress.
The Richmond market has a long way to go, however. Housing-market data shows that there are about 3,000 homes on the market and about 1,100 homes in foreclosure — not a ratio that makes a true turnaround seem imminent. Chmura says that the large number of foreclosures is a brake on the market that won't let up probably until 2012 or 2013.
Plus, the area isn't out of the bankruptcy woods yet. Roseland Village LLC filed for bankruptcy last month after losing its financing from banks. The entity had planned to build parts of the Roseland project, a 1,300-acre mixed use development in western Chesterfield near state Route 288. Magnolia Green went through a similar problem when it went into foreclosure before reorganizing itself and lowering its sights to cheaper homes last year.
While the market twists and turns, prospective home buyers are facing a series of contradictions. Although mortgage rates are low, borrowers are put through a grinder applying for loans as wary lenders fear federal regulations, Lafayette says. Another problem, reports The Wall Street Journal, is that banks in many housing markets in the country now require 20 percent, instead of the usual 10 percent, in cash down payments for new mortgages.
Another unexplained phenomenon, Lafayette says, is why sales data shows that the average price of a house sold dropped to $211,218 in January compared with about $236,000 in December, following several months of price strengthening.
Nevertheless, buying interest seems to be rising. “We're seeing a shift,” says Kevin McNulty, president of Lifestyle Builders and Developers in Midlothian. “More people are looking and there are more appointments at our design studios.” He says he hasn't heard that local banks are requiring bigger down payments.
The lingering bad market, however, made itself known again as homeowners throughout the area opened their mail to find that their property tax assessments had declined once again. Assessments overall have dropped 11 percent in the past three years, Lafayette says.
It isn't all that big a negative, she adds: “People forget that five years ago when their assessments went way up, they may have had more equity in the home but they also had to pay more in taxes.”
In the meantime, sellers, real estate agents and builders are crossing their fingers and waiting for the bottom to finally emerge. S