If you are looking to build a new home in the Richmond area in the next year, you will need a lot of patience and a larger mortgage.
According to the Richmond Association of Realtors, the Richmond area is one of the most competitive residential real estate markets in the Commonwealth, with all market indicators pointing to another year of unprecedented growth.
Central Virginia residential real estate sold at record speeds in 2020, with sales volumes more than 30% higher than 2019. Like people in communities across the country, Richmond-based people are buying new homes in record numbers despite – or maybe because of – the coronavirus pandemic.
A shortage of existing housing stock has helped drive consumer interest in new builds, but there are some real challenges to the housing industry’s continued ability to meet demand. As new home sales hit an all-time high, builders are running out of buildable land.
There is also a lack of lumber for building new houses. According to the National Association of Home Builders, wood prices have increased nearly 250% since April 2020, increasing the average price of a new single family home by nearly $ 36,000. “Builders are faced with such extreme delivery bottlenecks that they see allocation restrictions for some materials,” says Danna Markland, CEO of Richmond Housing Association.
According to Jonathan D. Ridout, Vice President of Real Estate Development and General Manager for, many new homes in 2020 sold their holdings in 2021 HHHunt Communities. “I’ve spoken to several builders in our communities,” he says. “I would say they all cap their monthly sales to make sure they can deliver what they want to consumers.
“It takes two to three years from the time of development to approval for a house – that’s a real problem,” he continues. “Many of us are trying to work with local authorities to see what we can do to speed up some of these processes so that this supply and demand problem doesn’t get worse as we continue to have a very hot housing market.”
The increase in demand can also be related to demographic change. “The number of contracts is simply much larger than what’s on the market,” says David Johannas, director of Johanna’s design group and architect of The 2200 at Cary, a redevelopment of 19 modern townhouses in the Fan. “I think if you look at the numbers we are developing historically … we just haven’t kept up with demand for years. With almost 140 million millennials and the willingness of Generation Z to buy, we are facing a real shortage. “
Markland traces the root of the problem back to the 2008 recession when many people left the construction business and the industry never returned to pre-recession volume. She says the pandemic has exacerbated some problems in the industry as the number of people choosing to have homes built to their personal specifications has increased dramatically. Labor shortages, significant disruptions in the building materials supply chain, material price increases and delivery problems, wet weather, delays in approval and now also land constraints lead to significant delays in projects and rising home prices.
“Right now, at best this year it will take 90 days longer to build a house than it did before the pandemic,” says Markland, “but in many cases it will take longer.”