There are a few other forces boosting that demand as well, including ever-increasing rents (which lead people to become owners instead of renters), the ability to work remotely (which in NH has created an influx of people from more expensive neighboring states), etc.On the supply side, inventory had been on a downward trend for at least the past three years, and the pandemic exacerbated the problem. 

The only condos/townhomes that bring that level are in the upper 200s-300s price range.  

I am searching for deals using the 70% Rule to BRRRR a townhouse in Alexandria, VA, but keep running into issues related to decreased inventory and high listing prices. 

It seems it does take 10-20% above list to secure a deal especially the duplexes in the 200-250 range.

Things are moving quickly and finding affordable inventory is a bit tough right now but making connections is a big start to get up and running!

The iRS will treat them as inventory.  

https://www.har.com/content/newsroom/Houston Real Estate Highlights in June:-Single-family home sales increased for the thirteenth consecutive month, up 13.6 percent year-over-year with 10,638 units sold;-The Days on Market (DOM) figure for single-family homes fell from 57 to 29;-Total property sales rose 16.9 percent with 13,090 units sold – the highest volume in history;-Total dollar volume increased 43.8 percent to $4.8 billion – a historic high;-The single-family average price reached a new record high, increasing 23.7 percent to $395,316; -The single-family median price rose 20.0 percent to $314,500 – also a record high; -Single-family homes months of inventory registered a 1.5-months supply, down from 3.0 months year-over-year and below the national inventory of 2.5 months;-On a year-to-date basis, single-family homes sales are running 25.9 percent ahead of 2020’s record pace.

The MSA saw a 6% increase to 0.6 months of inventory.

If sellers are offloading as much inventory as you've eluded too, you may see inventory pile up which leads to more days on market and lower sales prices.It doesn't hurt to get out there, see properties and submit offers to test the market so long as you're prepared to pull the trigger once you find something worth investing in.Best of luck to you moving forward!

The Texas A&M Real Estate Center defines a balanced market as one with roughly 6.5 months of inventory.