Written and compiled by Kristen De Deyn Kirk
Hello Again, Coastal Virginia
How millennials brought one real estate investor back to the region
“Boomerang-worthy” isn’t how many people would describe our real estate market, but one business owner might: Nick Ron, CEO of House Buyers of America and a member of the Forbes Real Estate Council, targeted Coastal Virginia once, left and came back.
“We served the area in 2003 to 2010,” Ron says of his home-buying, cash-paying company. “The market got so bad; we retrenched in Maryland and the Virginia-DC metro area. We bought a few homes in Hampton Roads, but didn’t do much. Now, we’re really investing in the area.”
Several factors brought him back to our friendly shores in April 2021:
- Our homes’ low number of days on the market before selling
- Affordable prices compared to other regions, despite a recent uptick
And one of his biggest reasons: Millennials.
Ron identifies them—individuals ages 25 to 40—as a force in the 2021 real estate boom – especially when considering the buying of starter homes, those smaller homes priced on the lower end of the market, perfect for first-time buyers with tight budgets. Coastal Virginia is loaded with starters, says Ron.
Most millennials were too young to buy during the last real estate boom of the early 2000s. Some of them remember the housing bubble getting pricked in 2007 and popped in 2008. Ron speculates that millennials paid attention, seeing those older than them with ballooning mortgages on shrinking-in-value homes. They got spooked, postponed buying, and rented or moved in with mom and dad. But eventually those living arrangements got old—and shiny, good-market indicators sparkled, temptingly, including:
- Low interest rates
- An employee-driven job market, especially for skilled employees
Plus, millennials are in their peak earning years, Ron notes.
He understands this age group. Beyond knowing the impact past real estate markets have on their psyche, Ron tracks millennials’ likes and dislikes: house buyers often purchase homes from Boomers. The owners would rather not fix up their home to sell it. So after buying their house, Ron’s company adds the features millennials want and then re-lists it.
Sounds like an efficient process, but don’t surmise that working with millennials is easy—or that home buying is carefree for them. Under normal circumstances, a buyer could wait to be fully approved for a loan until they had made an offer on a home. Not anymore. Also, the buyer could leisurely look at dozens of options, wait days to decide, insist that home inspection problems be fixed and stipulate the seller pay closing costs. No way in 2021. Buyers must make an offer (likely over list price) the second they’re interested, be pre-approved and ready to sign the papers—if they’re lucky enough to get a “yes” from a seller. All this often equals stress for millennials and the Realtor helping them.
“You can tell who the first-time homebuyers are,” says Ron. “They’re more nervous, more cautious. They’re afraid they’re going to buy a house, and it’ll fall apart. Buyers who are moving up in the process are more sophisticated. They’re not as concerned about a few little home inspection items. They don’t get freaked out.”
The Houses! The Houses! Finally?
Movement in the market may good sign for movers
CGP Real Estate Consulting, a Virginia Beach consulting firm owned by Scott Westlake, didn’t want people to get too excited and think they could start dragging their feet if they were looking to buy a home in southside Coastal Virginia. But the firm had an ounce of good news to share in May as CoVaBIZ went to press. After analyzing numbers from Hampton Roads Real Estate Information Network (REIN), they reported that April saw a 33.01% jump in new listings compared to last April. (Enjoy that news, but note the italicized word.)
Why might this be?
Possibly the increased availability of the COVID vaccine. More shots provided could mean more shots in arms and more people feeling comfortable with the idea of moving out of both the pandemic and their houses.
Also: More people wanting more moolah for their home. They hear what a friend sold their house for, compared to what they bought it for, and see dollar signs…and then a “for sale” sign in their yard.
CGP Real Estate Consulting’s bottom line, as they post on their blog: Though the market may not return to “normal” as compared to a few years ago, they expect the summer trend to lighten the pressure on homebuyers—a little.
Do, however, keep these facts in mind:
- Active listings, houses available now, were down 39.92% from April 2020 to April 2021.
- Prices were up 14.47%.
Either number means pressure on buyers. Together they mean pressure to pick up the pace and make up your mind yesterday.
Squatting No More?
End to eviction moratorium could spell changes for renters and owners
With the national eviction moratorium temporarily extended—but not indefinite—rules stating landlords couldn’t evict tenants due to non-payment related to the pandemic continue to give renters temporary protection from possible homelessness.
Emergency Rental Assistance (ERA) has been available through the Virginia Rent Relief Program (RRP) for renters who fall behind on their payments. They or their landlords have received support from the Virginia Relief Fund, established by the federal government back in April 2020.
The dollars could eliminate disaster for renters and rental owners: Coastal Virginia is filled with a surprising number of renters, 40 of all homes in fact.
According to Virginia Housing, as of April 21, 2021, 33,140 Virginia households had received rent and mortgage relief assistance. The total amount: $179.5 million.
Of the beneficiaries, 26% of the household were white, 52% were Black. Sixty-six percent of all household approved for funds included children under eight. Applicants could receive up to 15 months of financial support for rent costs.
Renters and rental owners do not have to pay back the money.
Once the moratorium is eventually lifted, owners might understandably be less patient in waiting for rent and, possibly, unfortunately, less helpful in applying directly for RRP funds. So the Virginia Department of Housing and Community Development has allocated $5 million for communication efforts aimed at renters with language barriers and limited access to the Internet.
Doubling down on getting the word out about free money, they might reach those who need it most with an important message: Go to dhcd.virginia.gov/eligibility, check the guidelines and apply—before literally millions of dollars disappear. Not even half of the allotted $524 million has been distributed.
Reading Between the Lines
Retail centers exemplify good news-bad news scenario according to annual report
The 2021 Hampton Roads Real Estate Market Review and Forecast, published each year by the E.V. Williams Center for Real Estate at Old Dominion University Strome College of Business, packs a lot of data, trends and projections into 36 pages. In summary: It could be better, and it could be worse.
The section on retail centers particularly points to the seesaw of good news-bad news.
Grab your favorite drink, toast yourself for making it through 16 months of a pandemic so far, and sip as you take in the celebration-worthy trends:
- Amazon is gobbling up retail centers as fast as they can find them. They want properties in strategic locations for regional fulfillment and delivery centers.
- Interest rates are still low, so retailers looking to buy will feel as if they’re getting a break, and their mortgage payments could feel manageable.
- Customers will visit big stores with lots of room to distance themselves from others, and they’ll look for well-cleaned, pristine stores.
- Buying online and picking up in store should be an enduring trend. Contactless pickup has increased 50%. How does this help those looking to sell retail space? If customers are willing to come to a store for items after buying them online, those items need to be in the store, so the store owner needs space, hopefully lots of space, to store those items and serve their customers.
- Being ethical and environmentally friendly can earn customers’ respect and loyalty now more than ever. Be a nice person, let customers know about it, and they’ll help you to stay in business.
Now down the rest of your drink, and read on. Here are the challenges for retailers and those who sell or lease them space:
- Construction costs are up, and construction supplies are down. If you’re building new or renting new, you might need to add zeros to the price you thought you’d pay and patience to your why-are-we-so-far-behind-schedule worries.
- Retailers hanging on by a thread as the pandemic started are seeing the thread cut after not having the financial means to “pivot” their business models as fast as a politician covering up a scandal.
- Online buying and at-home delivery thrived, too. The ease of such purchases is solidified equally in the minds of 8- and 80-year-olds. It’ll take a lot to tempt them out of their homes.
By the Numbers
Big-picture win for industrial retail estate
E-commerce skyrocketing in 2020 softened the impact of the pandemic on industrial space demand. The “stuff” all had to sit somewhere before being delivered. While average vacancy rates based on square-footage crept up about 1% to around 2.5 to 3.5% depending on size, they rose nowhere near the vacancy rates seen back in 2015 (5.5 to 6.5%).
The overall, good news for industrial spaces:
- 9% vacancy rate
- 461,000 positive net absorption
- 6% rent growth
- 874,000 square feet delivered
- 4 million square feet under construction
Moving Up, Apartment-style
- Until 2019, Coastal Virginia apartment occupancy rates lagged national averages. The trend of a better-than-average occupancy should continue through 2025. Last year’s local rate: 96%. National rate: 93.4%
- Rent prices for two-bedroom (4.65%) and three-bedroom apartments (5%) rose in 2020 as demand increased, probably because we wanted space for all that working from home. We should expect to see about the same increases the next few years before new apartments are built to meet local demand.
- Renters can expect to pay online if they aren’t already. With some owners struggling to get their money from renters in 2020, many are turning to easier, contact-less, no-excuses, online systems. They’ll use similar technology for tours and electronic lease-signing.
Sources: Nick Ron, CEO, House Buyers of America; Scott Westlake, CEO, CGP Real Estate Consulting blog; REIN; Virginia Department of Housing and Community Development; Virginia Housing; Christen Faatz, senior vice president of corporate finance and accounting, The Franklin Johnston Group, contributor, 2021 Hampton Roads Real Estate Market Review, by the E.V. Williams Center for Real Estate at Old Dominion University Strome College of Business; Retail outlook report 2021 Hampton Roads Real Estate Market Review; Geoff Poston, CCIM, SIOR, vice president, Cushman & Wakefield/Thalhimer, contributor, 2021 Hampton Roads Real Estate Market Review; Ycharts.com; CoStar Group; U.S. Census Bureau