Bacon's Rebellion

Democracy Thrives in Sunlight

The Great Inversion Continues Apace

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by

James A. Bacon
in ,

Renovated house for sale in Church Hill for $310,000. Twenty-five years ago, I purchased a house on the same street about seven blocks away for $28,000, renovated it to comparable condition and sold it a few years later for $110,00. I should have stayed in Church Hill!
Renovated house for sale in Church Hill for $310,000. Source: ZIlllow

by James A. Bacon

The Richmond metropolitan economy has been an also-ran since the 2007-2008 recession, so it came as some surprise to see that Zillow, the online real estate marketplace, listed our burg as the expected 4th hottest housing market in 2016.

The bizarre thing about the ranking is that forecast home value appreciation of 2.2% was half that of the other Top 10 metropolitan regions (Denver, Seattle and Dallas-Fort Worth led the way, with anticipated appreciation of 5% of more). But Zillow included unemployment rate and income growth in its metrics of “hotness,” and by those measures Richmond scored pretty well. Anticipated income growth of 1.2% was the highest of the Top 10 metros by a small margin, and unemployment of 4.4% was in the middle range.

Of greater interest was Zillow’s dive into real estate sub-markets. (I couldn’t find these numbers online, so I quote them from the Richmond Times-Dispatch story.) Despite horrendously bad schools and a lingering crime problem, real estate values are booming in the city. Predicted performance for selected neighborhoods:

Church Hill — + 6.7%
Carytown — +5.3%
Fan — +4.8%
Barton Heights — + 4.7%
Forest Hill Terrace — + 4.6%

If neighborhoods in Richmond’s urban core are hot, values in outlying neighborhoods likely are growing slower than the 2.2% average rate. Thus, despite record low gasoline prices (the lowest in decades, on an inflation-adjusted basis) that reduce the cost of commuting, people still want to live in walkable communities in the metropolitan center.

The Great Inversion — the shift in preferences for walkable communities in urban cores — continues apace.

Update: Speaking of the Great Inversion, how about this news — GE is relocating from the leafy Fairfield, Conn., suburbs to downtown Boston. Quoth the Wall Street Journal: The move to Boston’s waterfront is “a bet that the talent it needs is better recruited and groomed in a city than an office park.”

It didn’t hurt that Boston offered $145 million in incentives, including $25 million break in city taxes and $120 million in state infrastructure spending such as roads and parking. But New York, which recruited GE heavily, reportedly offered even more. The incentives influenced which downtown urban setting GE selected, not whether to stay in the ‘burbs or not.

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7 responses to “The Great Inversion Continues Apace”

  1. TooManyTaxes Avatar
    TooManyTaxes

    JAB – I see an attraction to cities and walkable communities for many people of all races and backgrounds. But unless someone with children can afford private schools, I don’t think many families with children will move to Richmond. I know many a family in McLean-Falls Church-Vienna who loved city life until it was time for their kids to start school.

    Cities need education reform. That step would make them much more attractive to a broader segment of the market.

  2. Blackbird Fly Avatar
    Blackbird Fly

    We need a vanguard of parents sending their children to RPS and, for at least some schools, the problems could be relieved. RPS currently has a student body that comes with many challenges–Henrico could do no better if RPS students were sent there.

  3. Cville Resident Avatar
    Cville Resident

    I was in Church Hill on New Year’s visiting friends. What a difference 15 years can make!

    Being that you are a Richmond area resident, I’d like to ask you about the “also ran” comment….

    Stats are one thing, but….every time I visit Richmond, I see new businesses, commercial growth, etc. Everyone that I know in the area seems to enjoy living in the area.

    If you were to step back from stats and describe what you see on the ground and take the temperature of the people you talk to, would you describe Richmond as an “also ran”? I don’t see the city in that light from either an economic or cultural perspective.

    1. James A. Bacon Avatar
      James A. Bacon

      Cville, I would not personally describe Richmond as a “also ran.” I think it’s a fantastic city. I have seen extraordinary changes over the 30 years I have lived here, and it’s a much more exciting place to live. Even as I approach retirement knowing that I could live almost anywhere I wanted (I probably couldn’t afford Manhattan or San Francisco), I’m happy to stay here.

      I use the “also ran” phrase as a descriptor of the region’s economic performance since the 2007 recession. Job and income growth has been middling compared to other metros.

      What the numbers don’t portray is the churn going on under the surface. There is a lot of creative destruction going on. We lost the big banks. We lost a bunch of Fortune 500 companies. Some major employers took some heavy hits. But the region has been reinventing itself. Richmond has a good vibe. People are optimistic about where we’re heading. We’ll see a payoff eventually.

      1. Cville Resident Avatar
        Cville Resident

        I am in 100% agreement with you about the payoff. There is too much young talent in the Richmond metro area for there not to be some breakthroughs in the next decade.

  4. Jason Avatar
    Jason

    I’m not surprised by the Zillow projections. It’s one of the reasons I chose Richmond when my family and I decided it was time to flee D.C. — I felt home ownership would be a solid investment here for the next 20 years (we also looked at places like Harrisburg, Baltimore and Raleigh-Durham). Young families that do not enjoy the hyper-transient nature of D.C. will look to raise their families elsewhere — and for many of them the best options will be Philly, Baltimore, Richmond, and Raleigh. If Richmond can position itself as the best of those four to raise a family, it could grow substantially.

  5. LarrytheG Avatar
    LarrytheG

    re: the “payoff”.

    I was reading the other day – “The largest employer in each State”.

    there are various articles published recently but for most states – it’s either Walmart or Higher Ed – some Medical…

    “Nearly 40,000 Virginia residents were employed by Wal-Mart at the end of last year, more than any other company in the state. ”

    now , it’s totally true – that people have to have jobs of some kind in order to be able to purchase stuff from WalMart…

    so then RTD does publish this handy dandy thing:

    TOP 50 EMPLOYERS IN RICHMOND, VA

    http://www.richmond.com/business/local/top-50-employers/

    which I found interesting in that there is more private sector than I would have expected – and… it’s diverse… no real dominate company or industry….

    that probably does bode well for Richmond…

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