Buying real estate in Richmond, VA can be a worthy investment for 2021. Forbes ranked Richmond, Virginia at #8 in their list of “15 Housing Markets That Are Hot in 2020.” They analyzed which major metro areas are seeing their housing markets boom in 2020, especially in comparison to prior years. Richmond homes are getting sold in record time and the metro area’s housing inventory has been squeezed significantly over the last two years.
Let’s look at the Richmond housing market trends and forecast before discussing why you should consider investing there. There is a dearth of housing supply in the Richmond Metro. Over the last two years, available homes for sale have dropped by more than half. As of November 2020, Months Supply of Inventory for the Richmond Metro Area has decreased 57.1 percent for single-family homes, according to the Richmond Association of REALTORS®.
It has dropped to a record low of 0.9 months, which means that’s how long it would take to deplete the inventory to zero at the current sales pace. For condos and townhomes, the inventory would dwindle away in just 1.1 months, if no new listings are put on the market. From July through September, 5,198 homes were sold in the Richmond metro area, an 8 percent increase over the same quarter last year.
November sales posted a growth of 20% over last year for single-family homes The new listings were up 15% but still, the total inventory dropped by 52.3% pushing the home prices up 9.1 percent to $300,000. Pending Sales increased by 35.4 percent which shows that December is going to be another good month for total sales.
According to the Central Virginia Regional MLS report, for the 12-month period spanning December 2019 through November 2020, pending sales in the Richmond Metro area region were up 12.3 percent overall. The price range with the largest gain in sales was the $450,000 and above the range, where they increased 33.4 percent. The price range that tended to sell the quickest was the $100,000 to $199,999 range at 18 days; the price range that tended to sell the slowest was the $450,000 and Above range at 51 days.
According to the national property broker, Redfin, the Richmond housing market is very competitive.
- The average sale price of a home in Richmond was $275K last month, up 14.6% since last year.
- Homes in Richmond receive 5 offers on average and sell in around 7 days.
- Hot Homes can sell for about 5% above the list price and go pending in around 4 days.
The following real estate statistics are collected by the Richmond Association of REALTORS® for the time frame November 1 through November 30, 2020. It shows the percentage change of some of the key housing indicators of the Richmond Metro Housing Market (Chesterfield, Hanover, Henrico, and Richmond City), when compared to November 2019.
Looking at these trends, it's a seller's market in the Richmond Metro Area. Strong buyer demand is likely to continue into what is typically the slowest time of year. With inventory remaining constrained in most market segments, sellers continue to benefit from the tight market conditions.
|Richmond Metro Single Family Homes||Richmond Metro Condo/Townhomes|
|New Listings are up by 15.2%.||New Listings are up by 10%.|
|Pending Sales are up by 35.4%||Pending Sales are up by 34.4%|
|Closed Sales are up by 20%.||Closed Sales are up by 29.8%.|
|Days on Market Until Sale are 18, down 43.8%.||Days on Market Until Sale are 18, down 14.3%.|
|Median Sales Price is $300,000, up 9.1%.||Median Sales Price is $300,000, up 2.7%.|
|Average Sales Price is $341,608, up 8.3%.||Average Sales Price is $341,608, up 9.0%.|
|Pct. of Orig. Price Received is 101.0%, up 3.1%.||Pct. of Orig. Price Received is 101.0%, down 0.1%.|
|Housing Affordability Index is 135, down – 2.9%.||Housing Affordability Index is 135, up 2.7%.|
|Inventory of Homes for Sale down – 52.3%.||Inventory of Homes for Sale down 48.3%.|
|Months Supply of Inventory is 0.9, down – 57.1%.||Months Supply of Inventory is 0.9, down 54.5%.|
Richmond VA Real Estate Market Forecast 2021
What are the Richmond real estate market predictions for 2021? Virginia Beach is the biggest city in the state. It is followed by Norfolk on the shores of the Chesapeake. These large, dense housing markets attract attention, but it is Richmond, Virginia you should be thinking of. Yet few do beyond memorizing their state capitals. Richmond is home to roughly a quarter-million people.
The Richmond VA real estate market is actually several times larger than this. If you include the suburbs around it, the Richmond housing market contains nearly one and a half million people. This makes the Richmond area the third-largest metropolitan area in the state of Virginia.
Richmond has a mixture of owner-occupied and renter-occupied housing. Single-family detached homes are the single most common housing type in Richmond, accounting for 48.72% of the city's housing units. Other types of housing that are prevalent in Richmond include large apartment complexes, duplexes, and a few row houses.
According to Zillow, a leading real estate marketplace, the typical value of homes in Richmond is $252,840, and in Jan 2012 it was $153,000. Since then, home values have appreciated by nearly 65%. Richmond home values have gone up 7.9% over the last twelve months.
According to NeighborhoodScout's data, appreciation rates for homes in Richmond have been tracking above average for the last ten years. The cumulative appreciation rate over the ten years has been 46.43%, which equates to an annual average appreciation rate of 3.89%. During the latest twelve months, Richmond's appreciation rate has been 4.06%, and in the latest quarter, it's been 0.86%, which annualizes to a rate of 3.47%.
Here is a short and crisp housing market forecast given by Zillow for Richmond City, Chesterfield, Hanover, and Henrico — all of which is part of the Richmond Metro Area Housing Market.
- Richmond home values have gone up 7.9% over the past year and the latest forecast is that they will rise 7.8% over the next 12 months. However, Richmond real estate is still very affordable.
- Chesterfield home values have gone up 6.2% over the past year and the latest forecast is that they will rise 7.7% over the next 12 months.
- Hanover home values have gone up 4.4% over the past year and the latest forecast is that they will rise 7.1% over the next 12 months.
- Henrico home values have gone up 4.8% over the past year and the latest forecast is that they will rise 7.3% over the next 12 months.
LittleBigHomes.com also estimates that the probability for rising home prices in Richmond, VA is 88% for the 3 years ending with the 3rd Quarter of 2021. Housing inventory remains low in many major cities across the nation, and this region is no exception to that. The supply and demand dynamics will likely put the negotiating power in the hands of sellers, pushing prices north again over the next 12 months.
There exists a limited supply of homes and buyers are forced to compete often resulting in higher prices and/or quicker sales that tend to benefit sellers. Looking at these statistics, it is no brainer that Richmond home prices will continue to rise in 2021. Clearly, for the long-term investment, you cannot ignore underestimate investing in the Richmond metro area.
The chart below, created by Zillow, shows the growth of median home values since 2011 and their forecast until October 2021 (the green area).
Richmond Real Estate Investment: Should You Invest Here?
Many real estate investors have asked themselves if buying a property in Richmond is a good investment? You need to drill deeper into local trends if you want to know what the market holds for the year ahead. We have already discussed the Richmond housing market forecast for answers on why to put resources into this market. Although, this article alone is not a comprehensive source to make a final investment decision for Richmond we have collected some data for those who are keen to invest in Richmond real estate in 2021.
Being the capital of Virginia is not reason enough to make a real estate investment. However, being a capital city results makes it a good housing market to invest in. For example, government employment for better or for worse is relatively high in state capitals. That creates a large number of good-paying jobs, raising property values.
You see the same thing on a grander scale in the wealthy suburbs around Washington, D.C. Being the state capital and the central transportation hub for the region resulted in it being a center of commerce and trade. This led to many law firms and banks having their headquarters here. That is aside from the hospitals and educational institutions in the area. This contributed to the average salary hovering around 50,000 dollars a year.
In 2017, Richmond made multiple lists of the best places to retire in the United States as well as top places to live. Points in favor of the Richmond VA real estate market included its intellectual and creative life, affordability, and quality of healthcare. This has led to a spate of new construction for active adult communities.
Investing in Richmond real estate will fetch you good returns in the long term as the home prices in Richmond have been trending up year-over-year. Let’s take a look at the number of positive things going on in the Richmond real estate market which can help investors who are keen to buy an investment property in this city.
Richmond's Large Student Market For Rentals
The Richmond VA real estate market is perfect for those who want to cater to the student market. It is incredibly diverse. The Virginia Commonwealth University campus is home to roughly 30,000 students. That’s aside from the University of Richmond satellite campus. Virginia Union University hosts nearly two thousand college students.
Small private schools like Virginia College and Fortis College host just a few hundred students. There are Baptist, Presbyterian, and several other seminaries in the city, as well. You could find a Richmond real estate investment property near any of these campuses (or in easy reach of several) and rent out to a steady stream of students.
The main reason you would buy a Richmond real estate investment property is for the rental income. However, the more important factor is the return on the investment. In this regard, the Richmond housing market shines. The median rental rate is roughly 1300 dollars a month for an apartment.
Rental rates are increasing year-over-year due to demand. This will result in continued increases in rents for the foreseeable future. If the economy were to decline (due to unforeseen things like this pandemic), the fact that there are so many students in the area will bolster rental rates in the Richmond real estate market.
Current Rental Market Trends: Before the pandemic, the average rent for an apartment in Richmond was growing at 6% annually (source: RENTCafe). The average size for a Richmond, VA apartment is 862 square feet, but this number varies greatly depending on unit type. Studio apartments are the smallest and most affordable. Around 55% of the households in Richmond, VA are renter-occupied while 44% are owner-occupied.
As of November 2020, the average rent for an apartment in Richmond, VA is $1277 which is a 2.27% increase from last year when the average rent was $1248, and a 0.23% increase from last month when the average rent was $1274.
- One-bedroom apartments in Richmond rent for $1120 a month on average (a 0.09% increase from last year).
- Two-bedroom apartment rents average $1396 (a 2.01% increase from last year).
- The average apartment rent over the prior 6 months in Richmond has increased by $11 (0.9%).
- One-bedroom units have decreased by $0 (0%).
- Two-bedroom apartments have increased by $2 (0.1%).
Top Neighborhoods include Jackson Ward, Westover Hills, Manchester, The North Side, Three Corners, and Oregon Hill. The most affordable neighborhoods where the asking prices are below the average Richmond rent are:
- Austin Heights, where the average rent goes for $847/month.
- Austin Park, where renters pay $847/mo on average.
- Brookland Park, where the average rent goes for $847/mo.
- Chatham Place ($847).
- Cloverland ($847).
- Confederate Heights ($847).
- Woodland Heights ($1,124),
- Monroe Ward ($1,169)
- The Museum District ($1,184).
The Tourist Market Boosts Short-Term Rentals
Yes, Richmond, Virginia has a tourist market. More than seven million people a year pass through. They may be visiting one of the oldest cities in the United States to tour the Revolutionary era or Civil War sights. Others attend weddings and graduations in the area. The city is considering becoming more friendly to short-term rentals, something that has been illegal.
Short-term rentals have been illegal under local law, but under the new ordinance, property owners can list with sites like Airbnb if they pay an annual $300 permitting fee. That fee would go toward a 3rd-party monitoring program. The city is also requiring short-term rental operators to live in the home for 185 days each year.
Certificate of Zoning Compliance (CZC) for Short-term Rental (Short-Term Rental Permit) is to be obtained on a biennial basis. The ordinance to permit short-term rentals was adopted by City Council on June 22, 2020. The effective date of the ordinance is July 1, 2020.
The Relative Landlord-Friendly Regulations
The Richmond housing market is quite landlord-friendly. There is no limit on late fees as long as they are written into the lease. Written leases aren’t required unless for more than 12 months. There is no notice of entry law in the state. The only area where Virginia falls short is the long, complex eviction process. The average Richmond real estate investment property owner offsets this by having a large security deposit and thorough background checks. Security deposits are typically limited to two month’s rent. You can charge an application deposit on top of the security deposit.
Unemployment in the Richmond area hovers around three percent, half a point or so below the national average. More importantly, the area has seen better than average job growth over the past few years. In 2017, they were among the top 25 metro areas with the fastest job growth. Future job growth is expected to be 35 percent over the next ten years, several percentage points higher than the national average.
This will contribute to steady population growth as college graduates find jobs in the area and end up raising their families here. Virginia’s economy has benefitted in recent years from increased federal government spending as well as improvements in its business climate. CNBC named Virginia the top state for doing business in 2019, a point driven home by Amazon’s selection of Northern Virginia for its HQ2 in November 2018.
Richmond’s ties to Northern Virginia are strengthening, helping Virginia’s capital city attract a wide range of new business development. Growth along the coast has been more modest but rising defense spending is finally providing a boost to the Norfolk area. Charlottesville and Harrisonburg are also hot spots.
Richmond has crafted a 1.5 billion dollar redevelopment plan for the area around Richmond Coliseum. Large sections of downtown will be renovated and redeveloped to include new condos, retail and commercial space. It will be home to a new transit building, arena, and mixed-use developments. This will increase the value of all properties in the Richmond housing market in and around downtown.
The Richmond Metro Area is historic, but it is already a modern city embracing smart growth and development. It is a stable housing market that offers good returns without massive regulation or heavy taxes.
Buying or selling real estate, for a majority of investors, is one of the most important decisions they will make. Choosing a real estate professional/counselor continues to be a vital part of this process. They are well-informed about critical factors that affect your specific market areas, such as changes in market conditions, market forecasts, consumer attitudes, best locations, timing, and interest rates.
NORADA REAL ESTATE INVESTMENTS has extensive experience investing in turnkey real estate and cash-flow properties. We strive to set the standard for our industry and inspire others by raising the bar on providing exceptional real estate investment opportunities in many other growth markets in the United States. We can help you succeed by minimizing risk and maximizing the profitability of your investment property in Richmond.
Consult with one of the investment counselors who can help build you a custom portfolio of Richmond turnkey properties. These are “Cash-Flow Rental Properties” located in some of the best neighborhoods of Richmond
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Please do not make any real estate or financial decisions based solely on the information found within this article. Some of the information contained in this article was pulled from third party sites mentioned under references. Although the information is believed to be reliable, Norada Real Estate Investments makes no representations, warranties, or guarantees, either express or implied, as to whether the information presented is accurate, reliable, or current. All information presented should be independently verified through the references given below. As a general policy, the Norada Real Estate Investments makes no claims or assertions about the future housing market conditions across the US. This article aimed to educate investors who are keen to invest in Richmond real estate. Purchasing an investment property requires a lot of studies, planning, and budgeting. Not all deals are solid investments. We always recommend doing your research and take the help of a real estate investment counselor.
Market Data, Reports & Forecasts
Student Market & Rental Trends