Posted in Northern Virginia Market | Posted on 12-10-2014 | Written by Metrostudy News
- Our 3Q14 survey shows annual new home starts down 6% YoY;
- Loudon County is the most active market area in Northern Virginia, with prices up 23% since 3Q12;
- There are more choices for homebuyers as resale listings are up and the number of new-home communities has increased
December 2014: Metrostudy’s 3Q14 survey of the Northern Virginia housing market showed the annual new home starts rate of 8,179 down 6% from 3Q13’s rate. Expectations for this year were much higher, but the weak economy may be taking its toll on the homebuilding industry. Annual new home closings were up as builders closed 8,584 units over the last four quarters. This represents an increase of 6% over the previous year, but competition has increased. There are more communities open now compared to last year, as measured by our model home count.
In the resale home market, supply is growing but not by enough to shift the market in favor of buyers. September resale listings in Northern Virginia numbered 13,795 units, up 37 percent from a year ago. Despite this sizeable increase, resale inventory corresponds to only 4.3 months of supply, which is rather low. Nationally, 6 months is considered normal, so prices should continue to climb though at a more moderate pace.
“Loudoun County is easily the most active market area in Northern Virginia, generating 3,450 starts during the year ending 3Q14,” said Ben Sage, Director of Metrostudy’s Mid-Atlantic Region. “This is actually down 11% from one year ago. The Loudoun County housing market has been a major beneficiary of defense-related jobs in Northern Virginia, but the weakness in the Scientific/Technical sector appears to be affecting builders in Loudoun more than any other area. Affordability is another issue, as the median new-home price has grown from $443,600 in 3Q12 to $547,000 in 3Q14, a 23 percent increase in only two years. Loudoun furthermore suffers from a shortage of lots, as vacant developed lot inventory measures only 15 months as of 3Q14.”
Prince William County is the second most active area with 1,319 annual starts, which is also down from one year ago – minus 7 percent. In fact, of the six most active counties in terms of starts, only two generated an increase in annual starts from one year ago. The 838 starts in Stafford are up 6%, and the 309 starts in Frederick are up 38%. Culpeper generated the largest percentage increase, growing 63 percent from 97 annual starts in 3Q13 to 158 in 3Q14.
The overall inventory of vacant developed lots (VDL), or finished lots, numbered 21,991 in 3Q14, which is up slightly from a year ago. With starts beginning to decline, the supply of VDL inched upward to 32 months up from 29 months a year ago. This is above normal for the area, but supply varies greatly by market area. Supply is generally smallest in the counties with the most starts: Fairfax, Loudoun, and Prince William. Higher lot supplies persist in Caroline, Warren, Orange, and King George Counties. With some key submarkets under-supplied with lots, it is very important to monitor the pipeline of future lots.
Given the relative weakness in the demand indicators, it becomes increasingly important to monitor new-home supply. Finished vacant new homes in Northern Virginia number 1,044 units, which is up 34% from one year ago. Current inventory would last only 1.5 months at the 3Q14 annual closings pace. This is low, particularly given the amount of attached- product being built, but it is up from 1.2 months last quarter. This trend supports the anecdotal reports that some builders were building homes on spec in anticipation of demand that has been slow to materialize.
“The weakness in the market as reported by builders throughout the year has been evident in Metrostudy’s weekly survey of sales traffic and contracts, and it was apparent in this quarter’s field survey results as well,” said Sage. “Over the last few years consumers have benefited from homebuyer tax credits and very low mortgage rates, and this drew down the buyer pool. We need job growth to replenish this pool and re-energize homebuilding, but the region just can’t get any traction on this front. Until it does, modest expectations of new home demand are warranted.”
For information contact:
Ben Sage -703.574.8429
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