NORTHERN VIRGINIA HOUSING 2Q18: New Home Sales Below Expectations YTD – Resales Flattening on Low Supply
- 2Q18 Annual New Home Starts up 5% YoY, but Down 7% compared to 1H17
- The resale sales pace continues to flatten – with less new and resale competition, builders are beginning to test modest price increases for the first time in several years.
- Demand will need to be more sustained in 2H18 compared to previous years to meet Metrostudy’s forecast of a 15% increase in starts.
According to Metrostudy’s 2Q18 survey of the Northern Virginia housing market, annual home starts, attached and detached, in Northern Virginia numbered 9,118 during the year ending 2Q18, up 5% over the previous year, but down 7% compared to the first half of 2017. In 2Q18, closings activity was up 12% annually and up 13% year-to-date compared to the same periods last year.
“Some of the year-to-date decline in 2Q18 is due to condo activity, as single family and townhome starts are up slightly from last year,” said Ben Sage, Director of Metrostudy’s Mid-Atlantic region. “Starts are below expectations based on improved sales as reported by builders and stronger builder sentiment, which could be related to strong closings activity.”
In the resale home market in Northern Virginia, there were 46,652 units sold through the MLS during the year ending June 2018 according to MRIS. This represents a slight decline from one year ago as the sales pace has flattened in the face of so little supply. Listings were down 9%, corresponding to only 2.5 months of supply, down from an already low 2.8 months one year ago. These dynamics are contributing to early stages of home price appreciation, but not by as much as the supply-demand imbalance would signal. With less new and resale competition, builders are actually beginning to test modest price increases for the first time in several years, which helps offset rising construction cost increases.”
In 2Q18, the median price of an existing home sold in Northern Virginia was $424K. This is preliminary, but it is the highest on record. The median price of a new home sold in the second quarter was $497K (preliminary), down slightly from one year ago. This lack of movement could be due to higher levels of construction activity and first-time buyer demand in more distant counties such as Frederick and Spotsylvania.
Loudoun County remains the most active market area in Northern Virginia, with 2,975 starts during the year ending 2Q18, up slightly compared to one year ago. Loudoun’s share of Northern Virginia activity has leveled off at 32% over the past year, but its share is down from 44% four years ago. Demand for homes is strong in Loudoun, but it is supply constrained. Proffer reform in Virginia has had the unintended consequence of stifling rezoning applications in several jurisdictions. This has come at a bad time as demand is picking up and lot supply is much needed in the region.
The steady increase in the closings pace has kept new-home inventory well under control. The number of finished vacant new homes in Northern Virginia ended 2Q18 at 969 units, the lowest number in four years. Correspondingly, relative supply is down to 1.3 months. This is almost too low given the lack of resale inventory, and builders may wish they had more quick-close inventory on hand.
“First-half starts are a little lower than expected, in spite of the increase in sales as reported by builders,” said Sage. “Year-to-date 2018 average sales per subdivision have grown to 2.7 per month from 2.4 last year over the same period. Demand will need to be more sustained in the second half of this year compared to previous years in order to meet Metrostudy’s forecast of a 15% increase in starts. This is achievable given the growing economy and lack of resale supply.”
For information contact:
Ben Sage -703.574.8429
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
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