When we’re feeling our way into a big decision, like buying a home, where’s the first place that most of us turn for input? From friends to family to coworkers, everyone who’s been through it will weigh in with their two cents.
But for those of you who are thinking about buying a house in 2018, I say: Unless those people have purchased a home in the CURRENT market—as in literally the past few months—they don’t know anything about this market. You can listen to be polite, but you’re well served to let it go in one ear and out the other.
Let’s just start by saying that 2018 is a little, well, crazy. So was 2015, which I thought couldn’t be topped. But then came 2016 … and 2017 … and now 2018 has taken the cake from all of the prior years. It’s crazy out there. And because these markets have been so radically different—virtually from season to season—no one who purchased a home as much as a year ago can offer you any input or advice that’s remotely applicable.
Worse yet, they could help to lead you into making mistakes.
Statistics don’t lie
Let’s start with some truly mind-blowing stats so far about 2018:
- In the zip codes 23220, 23221, 23222 and 23223, among houses that are on the market for five days or less, 83 percent sell for full price—or better. The average sales price was 101.5 percent of asking! Meanwhile, houses that were on the market for six to 10 days sold for 100.7 percent of asking price.
- North of Route 60 in Chesterfield (areas 62 and 64, for us Realtors), you’re 74 percent likely to pay at or over asking price within the first five days of a listing. If you manage to wait through 6 to 10 days (and it’s still there), you’ll get a small break at 99.5 percent of asking price.
- In the Deep Run, Glen Allen, and Godwin districts of Henrico County, when homes are sold within five days or less, 73 percent of the time they’re going for just over asking, at 100.3 percent. Six to 10 days in, sellers get 99.1 percent of their asking prices.
- Lastly, and for comparison, in 2015, 39 percent of listings within the city of Richmond sold in less than 10 days. Over the past six months, that number has climbed to 52 percent.
The moral of the story here is pretty obvious: If you’re planning to buy a home this year, then you better stick to comparing notes with folks who’ve been out there recently, because things have changed.
The other takeaway is this: The old methods for purchasing real estate are gone. Bidding wars have replaced aiming for bargains; waiting to make an offer has been replaced by the necessity for jumping on opportunities; and negotiations have been replaced by conceding. If you want the house of your dreams, you’ve got to jump on it and be prepared to pay what they’re asking, or, in some cases, more.
Some helpful bits
When dealing with this market, you should know that one of the latest trends includes buying in cash.
What does this mean? It means that, if you’re planning to buy a home by borrowing, there’s a pretty good chance that you’ll be up against a cash buyer who can make a purchase more rapidly. (Which probably explains some of those sales prices that were higher than asking—borrowers who are offering more to sweeten the deal over cash.)
Meanwhile, in Chesterfield, cash was used in just 8 percent of recent transactions, while in the West End of Henrico County, it was used just 11 percent of the time. So you’ll want to approach those markets differently.
Market terms are driven by number of listings
By now you might be wondering what drives these trends? And, in a word, it’s scarcity.
When listings are scarce, but people are buying, sellers can demand more for their homes and expect to leverage those factors. For this reason, when supplies drop by 75 percent, you can expect to see prices increasing.
So, what gives?
Good question. First, know that this type of market and these issues aren’t necessarily unique to Richmond. Consider:
- Nationwide, we’re under-supplying housing needs by anywhere from 300,000 to 500,000 houses per year. And this isn’t a new issue, as it spans back as far back as 2008. Add up those ten years and you end up with a housing deficit of 3M to 5M homes.
- Here in Richmond, we’re also gaining popularity as a living destination. When even more people seek to buy in an undersupplied market? You guessed it. More competition.
- Interest rates remain historically low. Like … really low, while the economy is doing well. So, people can not only borrow cheap, but they’re making more money, which makes for some serious buyers.
- Costs to build (new) is going up at a very rapid pace. That, in turn, is squeezing inventory even harder—especially in entry point housing.
- More people want to buy, as rental rates are rising.
- And, last but not least—within the city limits, people are staying put longer. As a result, where there used to be thousands of homes to choose from, there are now just hundreds.
Until all or some of those factors change, prices will continue to rise, which means that waiting to buy will only cost you more money.
If you want the home of your dreams, instead of wasting time by taking the advice of last years’ buyers (experiences that are now more or less irrelevant), get moving and act with confidence. You can do that by allowing us to help you to navigate this historically challenging market.