Economic Conditions Effect Richmond Virginia Real Estate

It has been the best time ever to buy real estate. Mortgage interest rates have been lower than 5%, real estate prices are low, and sellers are motivated. To top things off, the government has offered huge incentives to purchase real estate. First time buyers get $8,000 in tax credits just for buying a house.

The government incentives have had an impact. First time home buyers are making up more than 45% of real estate transactions. In Richmond, Virginia, we've also seen a significant increase in the purchase of new construction homes.

Notwithstanding these favorable buying conditions, Richmond home sales have been down. Last month, Glen Allen (a suburb of Richmond) home sales were down considerably compared with May of last year. Mechanicsville Real Estate also saw a considerable decline from last year.

Why are home sales are lower even though buying is so favorable? People can't buy because they can't sell their current homes, they have no equity, no down payment, and can't get mortgage financing, or they just don't feel confident with their job stability.

Some of the government incentives have ended. The sub 5% interest rates have increased to around the 6% range. A one percent increase in interest rates is a substantial deal for housing affordability. A $150,000 home loan at 6% is almost $100 a month more than at 5%.

What will happen when the government incentives end? It's impossible to say. The economy and housing market do show signs of life, but It looks like the Richmond Virginia Real Estate market won't greatly improve in the near-distant future.