As the capital city of the State of Virginia (VA), Richmond is bursting with culture, history, and commerce. It has a diverse, busy economy- and is growing in more ways than one. Amongst the things helping Richmond to thrive is the highly competitive and reasonably affordable housing market.
The Richmond, VA, real estate market is one of the fastest moving in the country. Recent trends reported by the Richmond Association of Realtors show a sway toward a seller's market- but the numbers prove it is still a great place to buy or invest. Those looking to buy a property to rent could find Richmond sitting high on their list.
Below, we explore the recent real estate trends in the Richmond Metro area to help provide a clearer picture of the current climate. We discuss the forecast, the things that have the greatest impact on the market, and share information that real estate investors need to know before spending their money.
Richmond Real Estate Market Trends and Statistics Up to April 2023
Median Price for Home Sales
House prices were down year-over-year in the Richmond region in April 2023- but have been up for every month prior. The most recent reports have home values at $327,800- the highest of the year so far, but 5.4% less year-over-year. This is slightly below the national average, so Richmond, VA, can be considered to have an affordable housing market.
Overall, home prices have been higher in the first part of the year than they were last year- 0.7% up in January, 8.9% up in February, and 1.5% up in March. Although there is no clear pattern, it seems that the trends are similar to 2022.
The median list price is slightly higher than the sale price, at $201 per square foot. This means homes in Richmond, VA, sell (on average) for less than the asking price.
Total Volume of Sales
Sales activity has been much lower this year than last year- continuing the trend of 2022, which showed a large drop in the total number of homes sold in the second half of the year. Since January 2023, year-over-year home sales decreased by between 18.9% and 39.8% (January saw the most significant decline and February was the most successful month in this sense).
As of April, total sales volume was down by 32.9%. This is likely tied to the reduced number of new listings and generally lacking inventory. Homes still move very quickly, and prices are up, so fewer homes sold does not seem to be an indication of a cooling market.
Median Days On Market
The Richmond housing market is highly competitive- and sales move quickly. Properties spent an average of nine days on the market as of April 2023- only one day more than the same period from the previous year.
There has been an increase every month in the first section of the year for the length of time spent on the market, but it is not significant. At its slowest (in January), homes still spent only 21 days on market- indicating a healthy buyer demand.
Sale-to-List Price Ratio
Richmond, VA, has a positive sale-to-list price ratio of 102.8%- meaning the average property sells for 2.8% higher than the list price. Because the demand for property outweighs the number of homes for sale, buyers are likely to find themselves in bidding competitions with others- ultimately driving the price up above the asking price.
More than half of homes sold in Richmond in April 2023 sold above the listing price- compared to just 24.3% that sold with a price drop. The number of sellers dropping their prices increased by 10.7% year-over-year- a trend that began back in October 2022. Experts believe this is in response to the increased mortgage interest rates that have affected affordability for many buyers.
Although a percentage of 56 for homes selling higher than the asking price sounds great (and it is, for sellers), it does represent quite a significant decline from the previous year- 16.8%, to be exact. Again, the likelihood is that many buyers cannot afford to pay above the odds because of higher costs for monthly mortgage payments.
What Factors Have the Greatest Impact on the Richmond Housing Market?
Influx of People Moving from Northern Virginia
After the pandemic, droves of Northern Virginia residents relocated to Richmond- mainly for better remote working possibilities and more economic stability. It created a wave of new buyers that helped prices to rise steadily and built a more competitive sales market.
This is also a great boost for the rental property market and real estate investors. With the increase in people migrating from other parts of the state comes a higher demand for homes to rent- since not everyone is in a position to buy.
Imbalanced Supply and Demand
Furthermore, the supply of housing in Richmond is not at the same level as the demand. People are in competition for the same properties- which, again, has contributed to the increase in home prices.
New home construction efforts- particularly for condos and apartments are underway in the city to help boost housing inventory- offering interesting opportunities for property investors.
Inflated Mortgage Rates
Like most of the country, Richmond has felt the impact of higher interest rates on mortgages. It has made home buying less affordable, and has affected the number of people deciding to sell. Those who have good fixed deals on their current plans are not in a good position to sell and face a much higher monthly cost.
In theory, the home values in Richmond could have climbed more than they have- the demand is certainly there. However, sellers have to be careful not to price out potential buyers who are worried about affording a mortgage. It could be curbing the overall growth of the seller's market.
Real Estate Market Forecast for the Richmond, Virginia
Most experts agree that the Richmond real estate market is likely to continue on its upward trend of steady growth. A dramatic price increase is unlikely, but small climbs are likely. As long as the available inventory remains low, buyers will have no choice but to bid competitively to secure properties- maintaining the high rate of homes sold above asking.
As far as rental property goes, landlords and property investors should be thinking seriously about buying in the city. Signs point to increased rental costs and a busier market- with mortgages holding people back from buying.
Forecast for the US Housing Market Overall
Richmond has a fairly similar outlook to the US as a whole- with a battle between low housing supply driving prices up- and high mortgage rates forcing them down. The median list price for the USA is around $340,000- quite a drop from before the pandemic- when it was closer to $400,000.
Most people believe the US is in for a period of buyer/seller standoffs- with sellers aiming high on pricing because of the lack of options- and buyers fighting back on the basis that mortgages are unaffordable.
One thing seems sure- the nationwide shortage in housing inventory is here to stay for the time being. People who bought their homes recently because of interest rate spikes will not be motivated to sell just yet, and COVID-19 brought new construction down more than a few notches.
Generally speaking, US median sale price is expected to remain down- possibly dropping even further. Although some cities- such as Richmond- have a strong enough market to inspire above-asking offers, most places do not, so the sellers are likely to lose some of the power awarded to them by the supply and demand imbalance.
What Are the Chances of a Real Estate Market Crash in Richmond, VA?
There are no immediate concerns about a housing market crash in Richmond. Prices are increasing at a steady rate, and the low supply means plenty of demand for properties. The drop in sales volume is not a reflection of a drastically cooling market, according to experts. Instead, it is simply a knock-on effect of limited buyer options.
It will be interesting to see what happens in June through December of 2023 and into the new year- especially with median home values. The past year has been generally favorable in supporting price climbs, but can Richmond buyers sustain the trend?
Competition is sure to heat up. Despite minor increases in inventory, there is still a significant shortage, so buyers must be prepared to move quickly and bid aggressively if they want to secure a home. Those that do manage to succeed could find themselves in a good position for selling in the future if the prices continue to climb. Investors may also see high returns through rent as the tenant population grows- and more people choose to let rather than buy.
Overall, the Richmond, VA, real estate market is in good shape for 2023. It is technically a seller's market- with fast-moving properties and higher home values. That said, buyers still seem to have at least some of the power- as more sellers drop their asking prices and fewer homes sell above the listing price.
The Richmond area has a vibrant scene and thriving economy- with diverse housing and social balance. Buyers and investors have plenty of reasons to look at Richmond as their top choice for property in Virginia.
Frequently Asked Questions
Is Richmond the best Virginia city for property investments?
Richmond is widely considered one of the best places in Virginia to invest in rental property. It has a strong economy, decent employment, affordable property, and competitive rental prices.
Houses and apartments for rent in Richmond tend to fill up quickly- with limited vacancies and plenty of high-quality tenants to rent them. It is especially good for renting to families if you invest in single-family homes.
Is it the best? It depends on who you ask. Many people would say yes, but some prefer Lynchburg- particularly because it is home to five universities. If you are looking to invest in apartment properties aimed at younger students looking for affordable rent, perhaps Lynchburg could creep ahead of Richmond for the top spot.
How big is the housing market in the Richmond metro area?
The Richmond MSA includes Richmond, Colonial Heights, Hopewell, and Petersburg- and has a population of more than 1.3 million. Throughout the metro area, the housing market is growing in value and demand- with buyers searching beyond the central city to find property options.
What are the best neighborhoods in Richmond?
Choosing the best neighborhoods in Richmond depends on what you are looking for. Price-wise, the median values are consistent in many parts of the city- but there are some that stand out.
Stonewall Court is one of the most affluent and expensive neighborhoods- with prices regularly exceeding $1 million. Broad Rock is one of the cheapest places to live in the city- with median values around $200,000.
Overall, some neighborhoods considered the best places to live in Richmond are Scott's Addition, Lakeside, and Manchester.
How many months supply of housing does Richmond have?
Richmond's housing supply is very low. As of March 2023, there was less than one month's worth of housing inventory. Surprisingly, that figure shows an increase year-over-year- and the number of new listings has started to improve.