Statistically speaking, the Downtown Richmond VA Condo Market is as poised for recovery as any segment in the Metro. We maintain a website at RichmondVaCondos.net that tracks available inventory by market segment and project. It also tracks much of the sales data that is illustrated below.
The following screenshot shows overall market inventory count the entire City of Richmond Market. This chart captures both the Downtown neighborhoods as well as those across the city. As you can see, the market looks radically different than it did at the time the RVA adjustment began.
Both the 23219 zip code and the Condo Market tell an even more interesting story (these statistics can be found here). The condo market in Richmond has declined in available inventory by an astounding 75% since 2008. From a high of over 400 units on the market to a current inventory that hovers around 100, the inventory of Condos in Richmond are one of the most potentially under-supplied markets in the Metro.
The 2008 Adjustment – In the mid-summer time frame of 2008 in Richmond, the economic tsunami that had already impacted other markets finally came to Richmond. The events that came to a head on Wall Street during 2008 effectively ended any and all mortgage lending as we knew it. As condominiums are far more sensitive to the lending environments than the single family market, the crash was driven as much by a lack of mortgage lending as by any other factor. When the mortgage market finally righted itself in late 2011 and began to make loans based on realistic underwriting guidelines, the markets became far more fluid and a bottom was found. We have ticked up since then in both number of sales and, to some extent, pricing.
Pricing – Pricing has recovered, but it is not necessarily evident within the data. The reasons are twofold and they are both related to inventory:
- The remaining developer inventory are the least desirable units in the buildings. In any condominium project, especially within projects developed using Historic Tax Credits, there are units whose floor plans are negatively impacted by historic constraints. These units, plus others that have design or view flaws are the units that remain in the hands of the developers and are being sold at a discount to the market. Likewise, many units that were leased by the developers during 2009-12 are now being re-marketed while tenant occupied, driving down values. In effect, the flawed inventory that SHOULD sell at a discount, is what is driving market perception.
- Quality resale inventory is being hamstrung by appraisal issues due to the flawed inventory setting market values. Part of the Dodd-Frank Financial Reform Bill was increasing the distance (figuratively) between lender and appraiser in an attempt to create more objectivity in the valuations. The real result has been appraisers who are less qualified in a specialty niche establishing values in condominium buildings and markets with which they are not familiar. In a typical condo, the price-per-foot difference between the upper and lower floors can be 30%. In a single family neighborhood, this is rarely more then 5-8%. The lower comparable sales tend to act a ‘value limiters’ within the project.
– The chart above shows available inventory in 23219 (Downtown Richmond) and shows it off by 50% or more from the height –
Recent Data Points – Several signature sales have occurred in the past 6 months that will help the market tremendously. The Vistas on the James tower has recorded a sale over $1M in September and Rockett’s Landing recorded a sale close to $1M in the same time frame. Rocketts has also broken ground on their Bankside Mews town homes whose sales prices will approach and exceed $1M. Further west along Libbie Avenue, The Tiber project will also record sales near and above $1M. The Ginter Place project has also (finally) achieved the magic ‘51% or greater’ sales level with close to 20 sales since April of 2012 with many sales in the mid to upper $300’s. These should all help provide comparable sales to the market at multiple price points.
Slated Development – This is the shortest segment in the analysis and is unfortunate. The number of units that have been added to the Downtown marketplace from 2008-2103 has been staggering but they have almost all been FOR RENT and not FOR SALE. Currently, there are a small number of units (<20) that have been added to the market by converting apartments to condominiums but by and large, the market has not provided any new condominiums to the market since 2008.
Summary – Overall, the market is primed for recovery. The lack of inventory creates an environment that will foster sharp price increases unless additional inventory is added. This additional inventory can come from either a dramatic increase in resale offerings or new product coming to market. With sales on the books at many price points, there are fewer barriers to recovery than in recent memory.