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IN MY OTHER job as the real-estate editor for this newspaper, the one issue I get grilled about more than any other is the rising cost of housing around here. The sticker shock is universal, whether I'm talking with government officials, builders, real-estate agents, parents whose children are setting out on their own, or casual observers of the housing marketplace.
No one I've run across claims to have the definitive answer. But almost everyone cites the age-old rule of supply and demand. Demand has been so great over the past few decades that the supply of available land has dwindled. Efforts to curtail growth, such as downzoning, may be well-intentioned but have spiked the cost of the land that's left.
Once land is sold to a developer, the proffers that local governments obtain during rezoning negotiations are adding tens of thousands of dollars to the cost of a house before it is built.
With such a great outlay before the first nail is hammered, the cost of the house is already way higher than it was just a few years ago. And if he chooses to build under a parcel's existing zoning, no builder is going to construct an "affordable" home on an expensive, multi-acre lot.
Just to remove any question about how home prices have soared in the Fredericksburg area, here are some numbers:
The average area sales price in 1996 was $130,139.
The average area sales price in 2001 was $169,480.
The average area sales price in January was $303,877.
Even town houses in the city's new Idlewild Village subdivision are selling for more than $300,000.
Houses may cost more to build from year to year as the cost of materials and labor rises, but the sharp increases we're seeing here reflect much more than the price of lumber and carpenters.
Insurance companies can provide some insight here. These days, agents set the replacement cost of a house in this area at $100 per square foot of finished living space. They are saying that the cost to replace your 2,500-square-foot, two-story colonial with the unfinished basement would be $250,000. If you had that house refinanced recently, you learned that the market-value appraisal is knocking on the $400,000 door.
(Check your policy. You don't need enough coverage to buy your house, but you do need enough to rebuild it.)
So if you're wondering where all the $250,000 houses went, they're still there. You just have to pay a $150,000 premium to buy one.
Real-estate agents also point out that escalating prices prevent existing homeowners from moving up, so they stay put and the houses they're in don't become available. There's no "trickle up."
Aside from the daunting price tags their younger loved ones are looking at, homeowners are hard-pressed to lament the feeling of increasing wealth.
But they know, too, that the appearance of housing equity is just that. While the value of your property has no doubt increased in recent years--perhaps markedly in just one year of ownership--it's not as though you enjoy an improved living standard because of it. The substantial gain you are realizing on your investment exists only on paper. If you sold your house today thinking you could buy a bigger one with the profit you'd realize, you'd be mistaken. Within this market, you'd probably break even at best. It would probably cost you more to buy back your own house tomorrow than what you sold it for today.
You can't tap the equity without having to pay it back, so you don't really even own your own equity.
Clearly, the Fredericksburg area isn't providing the quality, high-wage jobs that are necessary to pay for such expensive housing. The pressure for expensive housing continues to come from those willing to make the commute to Northern Virginia or Washington while providing their families with the quality of life we still enjoy here.
The service jobs spawned by the rapid commercial development in this area, or even the starting salary for a schoolteacher or police officer, might augment a household's income but would hardly allow a sole breadwinner to afford much of a house.
Apartment-hunters will find that the high cost of housing translates into high rents, making efforts to save for a house while renting problematic as well.
The new, expensive houses that are being built create housing inflation ripples across the market, allowing owners of older, less spacious homes to fetch an inflated asking price.
Though the influx of new residents is causing the region's quality of life, as some long-term residents see it, to evaporate, the area remains attractive to those accustomed to a busier pace in a more crowded place.
Here's a reality check for you: Fairfax and Spotsylvania counties have roughly the same land area, but Fairfax has more than 1 million people now, compared to Spotsylvania's 112,000. To a Fairfax resident, the Fredericksburg area is still the sticks.
Moreover, the current average sales price for a house in Northern Virginia is $475,321, so the differential of more than $171,000, despite the commuting trade-off, remains enticing.
The big losers here are the young people who are just trying to get a foot in the door of the housing market. The stock answer is that they simply have to look farther out, say to Orange and Caroline counties, for more affordable digs.
But that isn't necessarily so. Town houses in the new Ladysmith village development start at more than $200,000. Financing that amount for 30 years at today's rates will set you back $1,200 per month, plus a couple hundred more for insurance and taxes. To achieve the 30 percent benchmark--the maximum percentage of salary that should go toward housing--household income to buy that house would have to be about $55,000. Not exactly pocket change. Schoolteachers in Spotsylvania and Stafford start at about $34,000.
It's no wonder that the manufactured housing, with some new models costing less than $100,000, remains popular for young people who don't want to pay rent.
Many young people are getting family financial help in buying their first homes. Good for them, of course, but it's just another avenue for the market to get what the market wants: more money. And that only adds to the gap between the haves, and the have-nots.
We have an ample supply of reasons for the high cost of housing, but the demand for a solution isn't being met.
RICHARD AMRHINE is a writer and editor with The Free Lance-Star.