MARYLAND HOUSING 4Q17: 2018 Poised for Continued Growth; With Healthy New Home Inventory, Builders Can Benefit from Limited Resale Market Supply

  • 4Q17 Annual New Home Starts Down 1% YoY on Condo Market Declines; Annual Closings Up 9% YoY.
  • December resale listings were down 10% YoY while new home inventory remains healthy: the limited resale supply should help builders, but their ability to raise prices has been muted.
  • The market is poised for further improvement in 2018, with positive job growth, low unemployment, and very little resale inventory.

According to Metrostudy’s 4Q17 quarterly survey, home starts, attached and detached, in Maryland – which includes DC but excludes the Eastern Shore south of Queen Anne’s County – numbered 10,331 during 2017, down 1% compared to one year ago, below Metrostudy’s forecast. Single
 family and townhome starts, combined, are up 7% in 2017, just short of Metrostudy’s
 plus 10% forecast.
 The annual closings rate numbered 10,175 units, up 9% from one year ago. Single family and townhome
closings, combined, are similarly up 10%.

“The slight decline in annual starts is due to the condo cycle, which experienced a 38% decline in starts in 2017,” said Ben Sage, Director of Metrostudy’s Mid-Atlantic region. “The resale market is also improving, with 73,893 units sold through the MLS in Maryland during 2017, representing a 3% increase from one year ago. However, resale listings numbered only 14,738 units, attached and detached, down 10% compared to December 2016. This results in a months of supply calculation of 2.4, down from an already-low 2.7 the year before. Overall, there are early signs of upward pressure on existing home prices in Maryland. That and the limited supply should be helpful to builders, though their ability to raise prices has been muted so far.”

Anne Arundel and Prince George’s were the top two areas, in terms of starts, over the past year. The 1,704 starts in Anne Arundel during 2017 represent 15% growth. Prince George’s started 1,664 units in 2017, down 6% from 2016. The decline is entirely due to a 248-unit condo tower, The Haven at National Harbor, whose start in 2016 inflated activity in the county that year. Excluding this project, Prince George’s starts were up 10% in 2017.  Frederick grew the fastest in the region with 1,258 starts in 2017, representing a 53% increase, driven largely by Landsdale
 whose 192 starts last year (towns and singles
 combined) represent an 85% increase over 2016.

The median price of an existing home sold in Maryland was $297,000 in 4Q17 (preliminary), up 4.7% compared to 4Q16. The median price of a new home sold was $457,000 (preliminary), up 1% from one year ago. Since 2011, though, new home pricing has grown faster than resale prices, resulting in a widening price spread between new and resale homes. This may help explain the strength of the resale market relative to only modest improvement for new homes.

The overall inventory of vacant developed lots (VDL), or finished lots, numbered 13,112 at the end
of 2017, up 10% from 2016. This is for all product types, including attached product as well as custom lots. Despite the increase in inventory, the corresponding months of
 supply stands at 15, which remains quite low. Besides DC and Baltimore City, the most under-supplied areas are Montgomery, Howard,
and Baltimore County. None of the
more active counties in Maryland are over-supplied
 with lots, which is unusual.

New home inventory levels fell back to normal after being slightly elevated to end 2016. In 2017, finished empty new-home inventory, which tends to peak in 4Q, was at 2,318 units, level compared to one year ago. Single family and townhome inventory alone represents 1.6 months of supply, down from last year as closings have increased. New home inventory is very healthy; in fact, builders may benefit from having some inventory this spring given the lack of resale supply.

“The region enters 2018 with positive job growth, low unemployment, and very little resale inventory,” said Sage. “Maryland’s single family (attached and detached) new-home market improved in 2017, in line with Metrostudy’s forecast. The market is poised for further improvement this year provided the consumer can decipher changes to the tax law affecting home ownership.”

For information contact:
Ben Sage -703.574.8429
bsage@metrostudy.com

About Metrostudy: Metrostudy is the leading provider of primary and secondary market information to the housing and related industries nationwide. Metrostudy provides research, data, analytics and consulting services to help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. For more information, visit www.metrostudy.com

About Hanley Wood: Hanley Wood, LLC is the premier information, media, event, and strategic marketing services company serving the residential, commercial design and construction industries. Utilizing the largest editorial- and analytics-driven construction market database, the company produces powerful market data and insights; award-winning publications, newsletters and websites; marquee trade shows and executive events; and strategic marketing solutions. To learn more, visit hanleywood.com.

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