RICHMOND, Va. — When Adrienne and Drew Cleveland decided to sell their home in Henrico's West End and relocate to Richmond's Northside, they quickly discovered what many buyers in the area already know: finding the right home in this market takes patience, and sometimes, a little imagination.
The couple landed on a fixer-upper, a home that Drew Cleveland describes as one that requires "vision and imagination to see what the neighborhood and the area will be."
In a market where move-in ready properties are drawing heavy interest, sometimes more than a dozen offers within the first day of listing, the Clevelands' willingness to take on a project actually worked in their favor.
Richmond is firmly in a seller's market, driven largely by a shortage of available homes, according to Dawson Boyer, owner and broker at Providence Hill Real Estate.
Boyer points to two groups putting particular pressure on local inventory: Baby Boomers looking to downsize and move from the suburbs into the city, and out-of-state buyers, including international purchasers, drawn to Richmond's neighborhoods and lifestyle.
"The Fan, the Museum District, Church Hill those are kind of the hot spots, and there's just nowhere else to build," Boyer said. "So again, you get back to the inventory issue, and then also a lot of people who have moved here from out of state."
Despite the competitive conditions, Boyer sees a potential silver lining.
As Baby Boomers downsize and transition out of their single-family homes, more properties could gradually come onto the market, offering some relief to first-time buyers who have struggled to find a home of their own.
Affordability challenges extend well beyond Richmond.
Nationally, mortgage rates have dropped to their lowest level since 2022, with the average rate on a 30-year mortgage falling to 5.98% during the last week of February.
That's the first time rates have dipped below 6% in three and a half years, according to Freddie Mac.
While that's welcome news for buyers, housing experts caution that lower rates alone don't solve the affordability puzzle.
Watch: Mortgage rates are dropping, but can you actually afford a home?
Homes across the U.S. are selling for a median price of around $420,000, and a recent analysis by the moving platform MovingPlace found that only three of 150 ZIP codes reviewed met the mortgage-to-income threshold recommended under the widely used 28/36 rule. That rule is a guideline suggesting buyers spend no more than 28% of their monthly income on housing costs.
"It is kind of frustrating for renters, especially if their rent is higher than their potential mortgage payment," said Miranda Marquit, a consumer advocate for MovingPlace.
Marquit also reminds buyers that the true cost of homeownership goes beyond the mortgage itself, factoring in utilities, maintenance, and other expenses that can catch new homeowners off guard.
On a more optimistic note, economists say a shift may be underway in the broader market.
The so-called "lock-in effect," where homeowners held onto their properties rather than sell and give up favorable existing financing, appears to be easing as rates come down.
"Before, where people felt locked into their low rate, feeling like it's not really worth it to buy a new home because they've got such favorable financing on the home they already own, that effect is starting to degrade," said Joel Berner, senior economist at Realtor.com.
For Richmond buyers navigating both local competition and national affordability headwinds, experts at Bankrate suggest paying down existing debt before entering the market, considering less expensive homes or neighborhoods, and exploring eligibility for down payment assistance programs.
As for home prices, J.P. Morgan expects them to stall nationally this year, while Redfin reported sale prices were up just over 1% year over year in January.
Scripps News contributed to this report.
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