MARYLAND HOUSING 4Q18: New Home Market Underperforms in 2018, Delivering Slight Year-End Gain in Starts; Modest Demand Expected in 2019

  • 2018 Annual New Home Starts Up 4% YoY
  • The median price of a new home sold in 4Q18 was flat YoY: Builders are fighting for every sale, and competition from resales and other builders is preventing meaningful price increases, despite cost pressures and thin margins.
  • Metrostudy has modest expectations for new-home demand in Maryland in 2019.

According to Metrostudy’s 4Q18 quarterly survey, home starts, attached and detached, in Maryland – which includes DC but excludes the Eastern Shore south of Queen Anne’s County – numbered 10,823 units during 2018, up 4% compared to one year ago.

“Maryland’s year-end gain is better than a decline, but the market continues to underperform despite the steady job growth and the under-supplied resale market that
existed for most of last year,” said Ben Sage, Director of Metrostudy’s Mid-Atlantic region. “The greatest growth potential for homebuilders is in the first-time buyer segment, but overall this group does not appear to be interested in buying first-time buyer product in the locations where it could be delivered. The resale market has shifted, with a 5% decline in units sold through the MLS in Maryland during 2018. The falloff deepened at the end of the year, as 4Q resale volume declined by 15%. Resale inventory began to rise in the last few months of 2018, after 34 straight months of decline, ending the year with December 2018 listings up 5% from the prior year. The changing nature of resale supply/demand is likely to slow home-price gains.”

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In 4Q18, the median price of an existing home sold in Maryland was $291K in 4Q18, up 1% compared to 4Q17. The FHFA home price index for Baltimore, a repeat-sales index, indicates that annual home price appreciation is plus 3.7% in Baltimore (4Q figure), down from 2016 and 2017. The median price of a new home sold in 4Q18 was $448K, which is down slightly from one year ago. Builders are fighting for every sale, and competitive pressures, from both resales and other builders, are preventing meaningful price increases despite cost pressures and thin margins. The good news is the median new-home price in Maryland is $50,000 less than Northern Virginia, which may help explain why starts are up in Maryland compared to a decline in NoVA.

The neighboring counties of Prince George’s and Anne Arundel remain the top two areas, in terms of starts. Anne Arundel had 1,802 annual starts, up 8% from one year ago. The 1,898 starts in Prince George’s during 2018 were up 13%, or plus 22 units, YoY. This is the largest numerical gain of any county. Much of the increase is due to increased activity in Glenn Dale Crossing, Westphalia Town Center, Beechtree South TH, and Westphalia/Parkside.

The supply of vacant developed lots is quite low, especially given the extended entitlement time in Maryland compared to most jurisdictions. The most under-supplied areas are Howard, Montgomery, and Baltimore Counties.

New-home inventory has generally leveled off since 3Q15 and remains healthy as builders are building to demand rather than getting out in front of the market with specs. Given the uncertainty in the market, Metrostudy expects limited spec-building heading into the spring.

“Metrostudy has modest expectations for new-home demand in Maryland in 2019,” said Sage. “The market was able to eke out a slight gain in starts last year, mainly due to increased homebuilding in Anne Arundel and Prince George’s County. The economy is generating some tail winds for builders, but this is not expected to overcome the apparent softening in the resale market and possible negative impact on homebuyer confidence.”

For information contact:
Ben Sage -703.574.8429

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