The Richmond real estate market is surging into 2021 with momentum, according to ABC 8 News. Real estate investors looking for slow and predictable growth just might find Richmond the perfect place to own rental property, with both sales and price growth of homes in Richmond forecast to grow by about 5% in 2021.
The city continues to be a seller’s market, with nice property at a decent price point generating multiple offers.
Richmond is the capital of Virginia and the 3rd-most populous metropolitan area in the state. Nicknamed the “River City”, Richmond was originally founded as a trading center in 1609 by English colonists and played a key role in the Revolutionary War and the American Civil War.
Today, Richmond has a thriving diverse economy driven by the financial, law, and government sectors. One of 13 Federal Reserve Banks and a U.S. Court of Appeals are located in Richmond.
The Richmond region has a well-deserved reputation as a great place to raise a family, start a business, and grow a career. The city was recently rated as one of the best small cities in North America. Atlantic beaches, the Blue Ridge Mountains, and Washington D.C. are all within a two-hour drive of Richmond, Virginia.
Keep reading to learn why investors are considering the Richmond real estate market in 2021.
Richmond has been growing twice as fast as the state and the nation, according to The Virginia Gazette. Over the past 10 years, Richmond gained nearly 24,500 new residents, with most of the growth coming from people moving to the region from other parts of the U.S. and from other countries around the world.
Key Population Stats:
- Richmond is the 4th-largest city in Virginia with a population of over 230,000 in the city and more than 1.3 million in the Richmond metropolitan area.
- Population of Richmond grew by 0.16% year-over-year while median household incomes increased by 0.10% over the same time period.
- Over the last 10 years, the population of Richmond has grown by 12%.
- Metro area of Richmond includes the cities of Richmond, Colonial Heights, Hopewell, and Petersburg, along with the counties of Charles City, Chesterfield, Dinwiddle, Goochland, Hanover, Henrico, New Kent, Powhatan, and Prince George.
- Unemployment in Richmond is 5.7% (as of Oct. 2020) while job growth last year was nearly 1.2%.
- Median age in the Richmond metropolitan area is 39.1 years with 41% of the population between the ages of 20 and 49.
Richmond – also known as the “River City” – has been described as flowing with job opportunities, according to one local news station. The city recently ranked as the 69th-best place to find a job in the U.S. this year and is one of the five best cities in Virginia for employment.
The U.S. Bureau of Labor Statistics (BLS) reports that the economy in Richmond is slowly but surely recovering, with the current unemployment rate down to 5.7%. Job sectors showing the fastest signs of new growth include manufacturing and construction, trade and transportation, financial activities, and professional and business services.
Key Employment Stats:
- GDP of the Richmond MSA is over $78.7 billion, according to the Federal Reserve Bank of St. Louis, and has grown by more than 24% over the last ten years.
- Job growth rate in Richmond was 1.15% last year.
- Median household income in the Richmond Metro area is $68,324 while per capita income is $37,590.
- Forbes ranks Richmond #55 as the best place for business and careers in the U.S.
- Key industries in Richmond include advanced manufacturing, creative & knowledge-based businesses, finance and insurance, real estate, green technology, health & life sciences, and transportation & logistics.
- Richmond is ranked as a top 10 city for global trade by Global Trade Magazine.
- Dominion Energy, WestRock, Universal Corporation, and NewMarket Corporation are four Fortune 500/1000 companies headquartered in Richmond.
- Top private employers in Richmond include Capital One Financial Corporation, VCU Health System, Dominion Virginia Power, SunTrust Banks Inc., Amazon.com, United Parcel Service, and the Federal Reserve Bank of Richmond.
- Major colleges and universities in Richmond include Virginia Commonwealth University, University of Richmond, Virginia Union University, and J. Sargeant Reynolds Community College.
- Over 90% of the residents in Richmond are high school graduates or higher, while nearly 38% hold a Bachelor’s degree or postgraduate degree.
- Richmond is within a one-day drive of 55% of the nation’s population.
- Four major Interstate Highways and several major railroads pass through the Richmond metro area.
- The Central Business District is within 10 minutes of the Port of Richmond and the Richmond International Airport.
- Richmond International (RIC) served nearly 4.4 million passengers last year with major airlines such as American, Delta, United, Southwest, and JetBlue.
Real Estate Market
The real estate market in Richmond remains red hot, with buyers paying more for houses than sellers are asking. One local real estate agent told the Richmond Times-Disptach that the market is “steaming,” with houses coming and going in a flash.
As with many other real estate markets in Virginia, the reason for rising prices is that there’s simply not enough supply to meet the growing demand for property in the Richmond metropolitan area.
Key Market Stats:
- Zillow Home Value Index (ZHVI) for Richmond is $257,409 through November 2020.
- Home values in Richmond have increased by 7.9% year-over-year and are forecast to grow by another 10.2% in the next 12 months.
- Over the past five years home values in Richmond have increased by more than 45%.
- Median list price of a single-family home in Richmond is $289,500 based on the most recent report from Realtor.com (Nov. 2020).
- Listing prices for homes in Richmond are trending up by 12.8% year-over-year.
- Median listing price per square foot for a home in Richmond is $173.
- Days on market (median) is 50.
- Median sold price for a single-family home in Richmond is $300,000.
- Sale-to-list price ratio is 100%, which means that on average homes in Richmond are selling for approximately the asking price.
- Of the 116 neighborhoods in Richmond, Westhampton is the most expensive with a median listing price of $750,000.
- Most affordable neighborhood to buy a home in Richmond is Swansboro, where the median listing price is $174,800.
Attractive Renters’ Market
Richmond is ranked among the top 15 hottest housing markets by Forbes. Home prices are rising and homes are selling in record amounts of time. With deals happening so quickly, housing inventory has been squeezed significantly, with the number of homes for sale about half from one year ago.
Even though Richmond is in the middle of a strong seller’s market, many homeowners are deciding to keep what they have and rent instead. As one suburban Richmond newspaper recently reported, people are becoming real estate investors instead by turning their homes into rental property that cash flows, so “they don’t have the need or desire to sell that property.”
Key Market Stats:
- Median rent in Richmond for a 3-bedroom home is $1,654 per month, according to the most recent report from Zumper (Dec. 2020).
- Rents in Richmond have increased by 14% year-over-year.
- Over the past five years average rents in Richmond have grown by more than 26%.
- 70% of the rental units in Richmond rent for more than $1,001 per month.
- Renter-occupied households in Richmond account for 56% of the total occupied housing units in the metropolitan area.
- Most affordable neighborhoods for renters in Richmond include Chippenham Forest, Deerbourne, and Brookland Park where rents average about $795 per month.
- Most expensive neighborhoods in Richmond for renters are Shockoe Bottom, The Fan, and Swansboro where rents are as high as $2,070 per month.
Historic Price Changes & Housing Affordability
Tracking the change in housing prices and monitoring the housing affordability index are two statistics real estate investors can use to forecast the potential performance of income property.
Every month Freddie Mac publishes a house price index (FMHPI) that measures the change in home prices for real estate markets in the U.S. The report assigns December 2000 with a benchmark of 100 and then compares the monthly change in housing prices in each state and metro area to 100.
The most recent FMHPI from Freddie Mac for the Richmond housing market shows:
- October 2015 HPI: 156.55
- October 2020 HPI: 209.18
- 5-year change in house prices: 33.6%
- One-year change in house prices: 9.1%
- Monthly change in house prices: 0.7%
Housing affordability is another metric real estate investors use to help decide how good a market is for rental property.
As a rule of thumb, markets where it is more expensive to buy a house – such as Richmond - usually see a higher percentage of renters.
The most recent report from Kiplinger’s Personal Finance surveyed home prices in the 100 largest metro areas. The survey uses an affordability scale of 1 to 10, with 1 being the more affordable market to buy a home in and 10 being the least affordable.
The affordability index report for Richmond shows:
- Since the last real estate cycle market peak in May 2006, home prices in Richmond have increased by 16.9%.
- Since the last real estate cycle market bottom in March 2012, home prices in Richmond have increased by 55.1%.
- Richmond has an affordability index of 7 out of 10, meaning that Richmond is one of the least affordable markets to buy a home.
Quality of Life
Richmond is ranked by U.S. News & World Report as among the best places to live and retire in the country. The Richmond metro area receives high ratings for value, desirability, job market, and overall quality of life.
Key Quality of Life Stats:
- Cost of living in Richmond is 6.1% below the national average, according to the Greater Richmond Partnership.
- Richmond receives high rankings from Niche.com for family living, diversity, and nightlife.
- Inc.com lists Richmond as one of 13 “Major U.S. Cities Where You Can Live Well on Less Than $50,000 a Year.”
- Richmond is the #2 city to which Millennials are moving, according to Time.
- Wide variety of lifestyle and housing options in Richmond include city and suburban living, renovated warehouse apartments, historic townhomes, and waterfront communities.
- Climate in Richmond is humid subtropical with hot, humid summers and moderately cold winters.
- Virginia Museum of Fine Arts, Richmond Symphony, and the American Civil War Museum are just a few of the countless cultural attractions in Richmond.
- Richmond is just a short drive to the University of Virginia, Washington D.C.-Baltimore, and Hampton Roads along the Virginia Coast.
Get Out the Map
Where to begin your search? Roofstock created a heat map of Richmond based on our Neighborhood Rating, a dynamic algorithm that enables you to make informed investment decisions by measuring school district quality, home values, employment rates, income levels, and other vital investment criteria.
DARK GREEN: 4-5 star neighborhood
LIGHT GREEN: 3.5-4 star neighborhood
YELLOW: 2.5-3 star neighborhood
ORANGE: 2 star neighborhood
RED: 1 star neighborhood
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