What’s Coming in 2022?
2021 was a wild ride filled with a very competitive housing market across the country, record low inventory and a surplus of buyers causing prices to shoot up and sellers to reap the benefits. As we look ahead to 2022, the data tells much of the same story; this crazy housing market of low supply and high demand is here to stay in 2022 and potentially for years to come.
One South Realty Group’s founder, Rick Jarvis, did a data deep dive on the RVA housing market to come (check out the full video for the juicy details). He covers Richmond’s rental market, inflation in real estate, new home supply, mortgage rates, and the impact of large investment firms purchasing real estate. We’d like to call out three key points that we think are most critical for our clients to understand as they begin their home buying and/or selling journey in 2022.
#1 – More People Are Migrating to Richmond
Population growth is the number one trigger for increased housing demand. Richmond’s historic growth is reported to be about 2.3% and a recent LinkedIn study showed a higher than average rate at 6.1% (the 3rd highest growth rate in the nation amongst similar metro areas).
Richmond boasts the third highest growth rate in the U.S. at 6.1% among other metro areas.
– LINKEDIN, MARCH 2021
#2 – Millennials Make Up the Largest Part of RVA’s Population and Have Barely Entered the Housing Market
Millennials (25-40 year olds) make up a huge portion of the folks that are migrating to Richmond. The median age in Richmond is 34 years old (trending younger than the national median age at 38 years old) while the average age of the first-time homebuyer is 36 years old. If the stats hold true, the peak of millennial first-time homebuyers attempting to purchase their first home won’t be here for another 7 years! This means that more and more millennial buyers are going to continue to enter the market not just in the near term, but in the next decade.
#3 – Richmond Prices Are Still Cheap Compared to Neighboring Regions
Compared to neighboring regions like northern Virginia and Charlottesville, Richmond is still dirt cheap when it comes to housing and overall standard of living. Take a look at the median sales price for the following areas obtained from Zillow:
Richmond’s median sales price currently stands around $350,000. That looks like a steal if you are coming from any of these higher priced markets! Additionally, these buyers may be willing to submit more competitive offers than Richmond natives based solely on their perception of what a “good deal” is.
Common Excuses We Hear Not to Buy a House Right Now
Myth #1 – When mortgage rates rise, it will level out the market
They’re right – mortgage rates are absolutely going to rise. But, with such high levels of demand across Richmond, we don’t see mortgage rates making much of an impact on the high demand for housing. Even when they do rise, they are still near historic lows and while rising rates will kick some homebuyers out of the race, it won’t be enough to level out the giant gap in supply and demand. Rising interest rates also can’t contribute to building more homes to increase inventory.
Myth #2 – Foreclosures are coming when the government completely stops intervening
This usually comes from the folks that remember the Great Recession of 2008. However, as a result of that time period, subprime adjustable rate mortgages are almost nonexistent and the equity in the market is 250%-300% higher than it was in 2005 as we approached the 2008 crash. Subprime lending isn’t the issue here – we have an inventory crisis on our hands. Homeowners aren’t underwater on their mortgages (in fact, they are far from it more than likely). Homeowners have the ability to sell their homes and pocket the equity before foreclosing, thus preventing the tumbling of home values.
What Does All of This Mean?
As of January 2022, there is a 5 million home shortage nationwide. Typically, we are able to build about 1.5 million homes every year. Even if we were able to build 2 million new houses every year, it would still take 10 years to catch up and provide enough housing to support our growing population.
The housing shortage is here to stay for the long haul…
So buckle up and partner with an agent that knows how to win a contract. Stay patient, flexible and informed. At the end of the day, someone has to win that bidding war and we hope it’s you!
