Posted in Northern Virginia Market | Posted on 02-24-2015 | Written by Metrostudy News
- 2014 was a lackluster year for Northern Virginia housing – New Home Starts were down 7% from 2013
- Resale inventory remains low, so home values should continue to rise. The median MLS home price in this region is now $394k, up 4.9% YoY
- Metrostudy anticipates a 10% increase in starts this year for Northern Virginia.
February 2015: According to Metrostudy’s quarterly survey of the Northern Virginia housing market, home starts, attached and detached, in Northern Virginia numbered 8,100 during 2014, down 7% from 2013. Expectations for last year were much higher, but the toll of sequestration on housing carried through all of last year. Annual new home closings were also down as builders closed 8,355 units in 2014, a decline of only 1.4%, but the market should pick up this year if the local economy continues to improve.
“In the resale home market, supply is down due to seasonality, but it is up from one year ago,” said Ben Sage, Director of Metrostudy’s Mid-Atlantic Region. “December resale listings in Northern Virginia numbered 9,653 units – attached and detached – up 24% from a year ago. Despite this sizeable increase, resale inventory corresponds to only 3 months of supply, which is very low. Nationally, 6 months is considered normal, so home values should continue to increase.”
In 2014, Northern Virginia MLS sales numbered 38,691 units for the year, which is down 6 percent from the previous year. The median price of a home sold through the MLS in this area reached $394,000 in December, which is up 4.9 percent from one year ago.
Northern Virginia 4Q14 Annual Starts by Market Area
Loudoun County remains the most active market area in Northern Virginia, generating 3,484 starts last year, down 8% from the previous year. The Loudoun County housing market has been a major beneficiary of defense-related jobs in Northern Virginia, but the weakness in the Scientific/Technical employment sector has adversely affected builders in this area. Affordability is another issue, as the median new- home price has grown from $428,500 in 4Q11 to $524,600 in 4Q14, a 22% increase in only three years. Loudoun furthermore suffers from a shortage of lots, as vacant developed lot inventory measures only 17 months as of 4Q14.
Prince William County is the second most active area with 1,355 annual starts, which is also down from one year ago – minus 5 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 160 starts in Culpeper are up 43 percent, and the 280 starts in Frederick are up 8 percent.
The overall inventory of vacant developed lots (VDL), or finished lots, numbered 22,880 at the end of 2014, up 7% from the previous year. This is for all product types, including attached product as well as custom lots. With starts down, the supply of VDL has grown to 34 months up from 30 months at the end of 2013. 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 (11 months), Loudoun (17 months), and Prince William (21 months). Higher lot supplies persist in Caroline, Warren, Orange, and King George Counties.
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 1,149 units, which is up 6 percent from the previous year. Current inventory would last only 1.7 months at the 2014 closings pace. This is up from 1.5 months at the end of 2013, but it is still quite low. It has been a challenge for builders to sell homes of late, but incentives have been effective at moving product and keeping inventory under control.
“Now that 2014 is in the books, and it was a lackluster year to say the least, there is hope for this year,” said Sage. “The national economy is gaining steam, and the DC Metro job market finally has a pulse. Resale inventory is low, as is new-home inventory, which are major pluses given the mediocre demand. Assuming the forecasted job growth materializes, Metrostudy anticipates a 10percent increase in starts this year for Northern Virginia. Affordability remains an issue, and high land prices will not help that problem, but population growth created by new jobs will have to be accommodated.”
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