Cash has been king in the U.S. housing market since the pandemic, and Richmond is no exception. 

In 2023, nearly 19% of homes sold in Richmond, Chesterfield, Hanover, and Henrico were purchased with cash, compared to 14% in 2019, according to data from the Richmond Association of Realtors.

That percentage gets higher in traditionally pricier areas. The MLS home listing system divides the city into zones. Zone 20 encompasses the West End between Powhite Parkway and the University of Richmond. In that zone, which includes neighborhoods like Windsor Farms, about 47% of homes sold were purchased with cash in 2024, compared to 30% in 2019.

In a competitive market, buyers come to the table with cash in hand so their applications will stand out, said Jill Davenport, sales associate and Realtor with the Steele Group at Sotheby’s International Realty in Richmond. But sometimes it’s just a bargaining chip; buyers come in showing they have the cash, but they’ll include language in their offers granting them the right to obtain a mortgage.

Davenport said that about half of the cash offers she wrote in 2024 had this kind of language. Houses that go for $1 million or more tend to be cash-only, but a cash offer with a mortgage option still protects the seller because the buyer is contractually obligated to purchase the home even if they don’t get approved for a loan, she said. 

“There’s a perception that people are taking hundreds of thousands of dollars out of their bank accounts or stock portfolios, when in reality, that’s not happening,” Davenport said. “It’s a tactic to win the game, per se. In order to get the house, they’re showing they could pay cash if they needed to, but they will sometimes reserve the right to maintain a mortgage.” 

For some sellers, the competitive market means it doesn’t make sense to even consider an offer with debt, said Rick Jarvis, founder of One South Realty Group and a lifelong Richmonder. This is particularly true in the Zone 20s of the world, which has some of Richmond’s most expensive homes and no new land to build on. 

“If you have a seller, and there’s an escalating number of people making bids, and you’re asking $800,000 and going to end up at $1.1 million or $1.2 million, are you really going to accept someone putting down 20%?” Jarvis asked. “The pressure of the bidding war means the debt buyer gets pushed out.” 

Cash buyers of newly-built homes tend to be new Richmonders from the northeast who made a pretty penny selling their home in Connecticut or New York. These buyers would rather not deal with interest rates, said Chad Joyce, president of the Home Building Association of Richmond. 

“It’s not so much about their contract being accepted, they just feel more secure knowing they’re basically getting a 7% return on their money versus putting down a mortgage,” Joyce said.  

Interest rates only a minor deterrent

Since dipping below 3% in 2021, the 30-year fixed mortgage rate has skyrocketed, peaking at 7.8% in October 2023 and wavering around 6.8% as of April 25, according to Freddie Mac. 

For people who have to pay with debt, builders are finding creative ways to avoid a lull in business, Joyce said. Developers sometimes offer to buy down the homeowner’s mortgage rate if the buyer foregoes amenities like stainless steel appliances. The idea is to entice the buyer by cutting their monthly payment, which could add up to quite a bit over a 30-year period.  

“It’s a pretty good strategy with interest rates where they are,” Joyce said. “Every quarter point of interest, as it goes up, knocks out a certain portion of homebuyers nationally.” 

Even with high interest rates, Jarvis said the market still heavily favors sellers. Sure, buyers might sit on the fence for a little bit longer, but Richmond is still drastically undersupplied, housing-wise. A recent increase in new homes on the market was met with an equal increase in sales, he said.  

New listings in the Richmond area were up 7.7% in March compared to the same month a year before, according to Richmond Association of Realtors data. The median sale price increased from $405,000 to $421,000, closed sales were down 1.7%, and housing inventory dropped by 7.7% from 1.3 months of supply to 1.2.

Some buyers, Davenport said, seem resigned to high rates as the new normal. 

“People are settling into the reality of ‘I’m not going to see a 3% interest rate, and buying makes sense for me, my family, my lifestyle, et cetera,’” she said. “Life goes on. You might decide it makes sense for your life right now to buy a house, and if the interest rates do come down, you can refinance.” 

Supply side and first-time buyers

The city of Richmond’s population grew by about 2.8% between April 2020 and July 2024, according to data from the University of Virginia’s Weldon Cooper Center for Public Service. Henrico County’s population grew by 3.5% over that same time period, Hanover’s grew by 4%, and Chesterfield’s grew by 8.3%. 

Western Chesterfield has been a popular spot for new construction over the past few years, Joyce said. The county has approved zoning cases, provided water and sewer services for builders, and expressed interest, whereas other localities are less enthusiastic about new construction. 

“It’s a tough process to get a rezoning and to get people on board with adding housing close to their housing,” Joyce said. 

With high interest rates and the inflation in the economy over the past few years, homeownership can seem particularly out of reach for first-time buyers, Jarvis said. The times to buy are after Halloween into the beginning of February, or after a house has been on the market for a few weeks, he said. 

“You’ve got to buy when other people are not out in full force,” he said. “If you get to 14 or 30 days on the market, that’s when you can swoop in. Even if you have to pay asking price, you’re still not in escalation, and you don’t have to waive your appraisal or inspection rights.”