Investors pounce on Richmond real estate market
on October 26, 2013
The Richmond housing market is booming, and Doug Guilbert, a prospective buyer, is frustrated. Guilbert, 67, is a retired military veteran, has been trying to buy a home for two years, but each time he has lost out to investors.
“It’s very frustrating,” said Guilbert, who has made offers on six different homes. “And the prices of houses are just going up, so it’s just getting harder and harder for me.”
Guilbert’s story is a familiar one in Richmond, where investors have buoyed the housing market. From 2009 to 2012, cash buyers purchased nearly half of all homes sold in Richmond, according to real estate firm DataQuick. And the percentage of absentee buyers – buyers who have property tax bills sent to different address – climbed every year during that period. But some Richmond residents are concerned that replacing homeowners with absentee landlords will hurt neighborhoods.
“The biggest thing is that renters aren’t invested in neighborhoods so much,” said Guilbert, who is living in a rental apartment in Richmond. “If you’ve got a good rental company, that’s one thing. But if it’s just investors, they aren’t really invested in keeping the place nice.”
On a nationwide scale, there is plenty of evidence to support Guilbert’s fears, according to Alan Mallach, a New Jersey-based urban policy expert with the Brookings Institution and the Center for Community Progress. “Having a solid homeownership base is very important for neighborhood stability, especially when you’re talking about lower-income, working class neighborhoods,” Mallach said.
Homeowners tend to stay in neighborhoods longer, whereas renters turn over every few years. Homeowners are also more likely to make improvements to their homes and “spiffy them up,” as Mallach put it.
But Mallach thinks that market conditions will likely compel Richmond investors to do a good job maintaining their properties.
In particularly depressed housing markets, like Detroit, investors have little incentive to improve properties because they stand to make more money renting homes than selling them, according to Mallach. But in more stable housing markets, like Richmond, investors should be looking to keep their properties in good condition so that they sell them at some future date for a profit.
“From the standpoint of neighborhood vitality, they’re not going to destroy the neighborhood,” Mallach said. “That doesn’t mean they’re going to make it better, though.”
Joe Fisher, a local Realtor and president of Coronado Neighborhood Council, says the increased investor activity is nothing to get worked up about. “The market changes all the time,” he said. “It’s just like the weather: We complain when it’s too hot, we complain when it’s too cold, we complains when it rains.”
Fisher acknowledged that sellers have concerns about neighborhood stability, and that many would prefer to sell their homes to buyers who are going to live in them. But in the end, money talks: “People are not seeking out investors – they’re seeking out the quickest way to guarantee them the top dollar in their sale,” Fisher said.
Investors are beating out homebuyers, and not only because they are able to buy homes with cash. They can also buy homes “as-is,” and forgo the option to negotiate repairs with sellers. This speeds up the process and can save sellers a lot of money. People who need to borrow money when buying a house, can’t offer these deal-sweetening perks. “It knocks the homebuyer out of the picture,” said Mallach.
Guilbert also expressed concern about gentrification, and the effect that rising prices will have on low-income residents. As investors flood the market, housing prices have steadily climbed. Since the mortgage crisis, median home sale prices have increased from a low of $142,000 in Feb. 2010 to a high of $230,000 in July 2013.
Investors won’t rule the market forever, Fisher said. “There’s a time and season for everything. With my years, I’ve seen all the different markets, and it normally will balance itself out.”
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