September/October 2004

Riding the Wave

Home prices are still rising—it’s a great market for both sellers and builders

by Karen Haywood Queen

From Sandbridge to Williamsburg to Suffolk, it’s no secret that both new construction and existing homes are selling almost as fast as the sign is hammered into the front yard, often for more than the asking price.

Some homebuyers are opting out of a home inspection to make their offer look better, a practice real estate agents don’t recommend. Sales of condos are up too, as some buyers look for maintenance-free luxury living and others look for an affordable way to get into the market. New homes, especially on the high end, are offering more technology than ever with structured wiring, computer networking and more. And prices continue to creep up.

One buyer closed on a condo this spring for $400,000 in Chesapeake. Three years ago, it could have been hers for $250,000. Agents are juggling phone calls on their main office numbers, extensions and cell phones. As interest rates inch up ever so slightly, the holdouts are rushing into the market—ready to sell their home, buy up and ride the wave.

A luxury home in Sandbridge is typical of today’s market. Built in 1999 for $400,000, the recent asking price was $795,000.

“The market is sizzling, says Tom Shell, co-owner of Sandbridge Realty. “The houses are lasting no longer than a week and going for the full asking price.”

Land is at such a premium in Sandbridge that new owners often tear down their purchase—say a house worth up to $600,000—then build a new home worth $1 million or more on the property.

“You could have purchased in Sandbridge, even in the year 2001, entry level around $200,000,” Shell says. “Now to get a single-family home in Sandbridge, it’s approaching $600,000. When you realize that’s what you’re going to be tearing down to build a million-dollar home, that’s a wow. The appreciation on the new one is going to be even better than the one that’s been standing a couple of years.”

Appreciation is running about 20 percent a year in Sandbridge and that’s typical for the region.

The average price for a new single-family home in Hampton Roads is $280,887, says John W. “Chip” Iuliano, president of the Tidewater Builders Association and owner of Area Builders Inc. of Tidewater. That’s compared to $260,000 nationwide and up 16 percent from the same time last year.

That’s making it tough for some people to buy that all-important first home.

“Under $300,000, it’s a seller’s market,” says Renee Graves, of William E. Wood Realtors and Associates Realtors, site agent at The Pointe at Jamestown near Williamsburg. “In Williamsburg, we have 11 houses for sale in the $250,000 to $270,000 price range. If it’s in nice condition and it’s in tiptop share, it’s usually selling in less than a week and there’s usually a bidding war.”

Although anything under $300,000 is going fast, that still sounds like a luxury home to many buyers who can’t qualify for a mortgage that large.

Says Iuliano, “It’s something we’re very aware of. The cost of living is going up so drastically, it’s putting a single-family home out of the reach of most of the workforce—teachers, firemen. That’s a major concern we have right now. It’s something we’re very aware of. We’re trying to do things with the different cities and municipalities to work on the problem.”

Although a strong sellers’ market is driving up price of existing homes, rising costs of land and materials such as lumber and cement helped push up the price of new construction this spring and early summer, Iuliano says.

“I know there are houses I contracted and priced six months ago, that if I contracted for today, the price would be $20,000 or $25,000 more,” he says.

Some of the lumber prices have starting coming down, Iuliano says, but prices for cement remain high and it is even being rationed.

“You used to be able to get concrete delivered to your job today,” he says. “Now you need to order three days in advance to get concrete. They’re producing all they can.”

Prices are going up so rapidly that’s it’s pricing some people out of the market.

The need for affordable houses, coupled with a new demand for maintenance-free living, has helped drive a large increase in condo sales.

Condo permits during the first quarter of 2004 were up 40 percent over the first quarter of 2003 and, in turn, condo permits during the first quarter of 2003 were up 46 percent over the first quarter of 2002, Iuliano says.

Come with us around the region as we look at what’s available in different price ranges and offer tips on buying and selling in today’s market.

For the rest of this story, you can order the September/October 2004 issue of Hampton Roads Magazine.