Government Shutdown Affecting New Home Sales in the Mid-Atlantic

Metrostudy announces the results of its latest Sentiment Survey, which asked new home industry executives to reflect on sales performance in the fourth quarter of 2018 and share their expectations for the first quarter of 2019. We also asked respondents to identify the most-concerning work issue today. Most survey respondents (60%) work in the metro Washington, DC area, but we welcomed contributors from smaller markets such as Richmond, Baltimore, Charlottesville, the Delaware shore, and Pennsylvania.

Thank goodness the government shutdown appears to be over. You might recall that due to a government shutdown and sequestration concerns, 2013 was a rough year for new home sales in the Mid-Atlantic, particularly in metro DC. While we won’t face sequestration issues with the recently ended government shutdown, members of our industry fear a repeat of lackluster sales looming for 2019, even with a strong economy.

2018 Ended with a Thud
Q1. Considering 4Q18 results, please rate your average sales per community.

  • Possible Answer 1: We exceeded our goals
  • Possible Answer 2: We met our goals
  • Possible Answer 3: We did not meet our goals

ATL Graph 1

The Sentiment Survey’s perennial first question reviews sales performance in the previous quarter. You’ll remember, 2018 started on a promising note – 49% of Survey respondents exceeded their average sales goals in 1Q18 and only 8% missed their goals. However, every quarter since then we’ve seen significant increases in the share of respondents who reported disappointing sales volume. In our January 2019 Survey (referring to 4Q18), the highest share of Survey respondents since 4Q15 failed to meet their average sales goals (41%).

Little Hope for A Bright First Quarter
Q2. How optimistic are you that average sales per community in 1Q19 will outperform sales in 1Q18?

  • Possible Answer 1: Optimistic! 1Q19 average sales will exceed 1Q18 sales
  • Possible Answer 2: Unsure. 1Q19 average sales will meet 1Q18 sales
  • Possible Answer 3: Doubtful. 1Q19 average sales will lag 1Q18 sales

ATL Graph 2

The second question Metrostudy asks every quarter relates to optimism going forward. In our last survey (conducted in October 2018), 76% of respondents expected average sales in 4Q18 would match or exceed average sales in 4Q17. This quarter though, 58% expect average sales volume in 1Q19 will match or exceed sales volume in 1Q18. While the share of optimistic respondents declined significantly from 23% last quarter to 5% this quarter, the share of true doubters declined slightly, from 25% to 23%. A little more than half of respondents expect average sales per community in 1Q19 will look a lot like sales volume in 1Q18.

The reason cited most by respondents for their unsure or doubtful outlook in 1Q19 was the government shutdown, followed by increasing interest rates.

Political Uncertainty Depriving Us of Sleep…Again

ATL Table 3

The table above summarizes Sentiment Survey responses since 1Q18 for our last question. The red font indicates that the corresponding issue ranks in the top 3 (by quarter). Affordability concerns ranked #1 in 1Q19, followed by political uncertainty and land availability. The results show us that new home executives, who usually worry most about land prices and land availability, are now kept up at night by what’s happening in Washington, DC – a big change. The last time political uncertainty ranked in the top ten was in 2Q17.

Please consider Metrostudy your ally for navigating the ups and downs in your local market. Our consulting team provides the research and analysis you need for land committees or investors regarding pending or active new home projects. Metrostudy welcomes your questions about our consulting services, the Sentiment Survey, or Metrosearch, our flagship new home database.

Warmly,

Rosemary deButts
Consultant
Metrostudy | A Hanley Wood Company
rdebutts@metrostudy.com
540 454 6792 (M)

 

Mid-Atlantic Team

Ben Sage
Senior Director East Region
bsage@metrostudy.com
703.574.8429

Gregg Lowenstein
Director of Business Development
glowenstein@metrostudy.com
202.394.6883

Debbie Rosenstein
Senior Consultant
drosenstein@metrostudy.com
703.819.1449