NORTHERN VIRGINIA HOUSING 4Q17: Strongest Fourth Quarter Since 2006; Annual Starts Up 21% As Resale Listings Decline 12%
- 4Q17 Annual New Home Starts up 21% YoY – the strongest fourth quarter since 2006.
- Resale Market Listings were down 12% YoY and declined to 7 months of supply, quite low historically – these dynamics are beginning to increase the pace of home price appreciation, which was below normal from 2015 to 2016
- New home closing prices averaged $506K in 2017, resuming an upward trend this year.
According to Metrostudy’s quarterly survey of the Northern Virginia housing market, annual home starts, attached and detached, in Northern Virginia numbered 9,344 during 2017, up 21% over the previous year. Annual closings of 8,269 were up 8%, which is more in line with Metrostudy’s forecast of a 10% increase for 2017.
“Northern Virginia had the strongest fourth quarter since 2006,” said Ben Sage, Director of Metrostudy’s Mid-Atlantic region. “Condos were responsible for much of the starts increase last year, being up 64% but singles and towns registered a solid increase of their own, plus 16%.”
In the resale home market in Northern Virginia, there were 46,905 units sold through the MLS during 2017, according to MRIS, a 4% increase from one year ago. Listings are down 12% from this time last year to 6,739 units, attached and detached, which corresponds to only 1.7 months of supply. This is down from an already low 2.1 months one year ago, and it is quite low historically. These dynamics are beginning to increase the pace of home price appreciation, which was below normal from 2015 to 2016.
In 4Q17, the median price of an existing home sold in Northern Virginia was $380,000. The median price of a new home sold in the third quarter was $522,500 (preliminary), up 5.5% from $494,500 one year ago. After leveling off at an average of $472,000 from 2015 to 2016, new-home closing prices appear to have resumed an upward trend this year averaging $506,000 in 2017. Despite rising closing prices and very low resale supply, builders are generally cautious about raising plan prices, preferring instead to maintain sales pace.
Loudoun County remains the most active market area in Northern Virginia. During 2017, builders in Loudoun started 3,038 units, up 10% from the previous year, overcoming, for the present, some land constraint issues. Activity in Prince William was up 9% to 1,414 starts, again overcoming a dearth of available lots. Land supply in Fairfax/Arlington was the lowest in Northern Virginia, but it has been able to expand activity through condo development. Annual starts in this area have doubled over the past year, almost equaling Prince William’s output.
The overall inventory of vacant developed lots (VDL), or finished lots, numbered 18,091 at the end of 2017. This is even with the end of last year and is little changed over the past six quarters as builders are generally absorbing lots at the same pace they are being delivered. Overall supply of VDL in Northern Virginia, at 23 months, remains at the low end of normal, and VDL supply is most constrained in Fairfax/Arlington, Loudoun, Prince William, and Stafford, each of them with less than 20 months of supply. Proffer reform in Virginia has had the unintended consequence of stifling rezoning applications in several jurisdictions, which could raise the value for finished and fully entitled lots.
Finished vacant new homes in Northern Virginia tend to peak seasonally in the fourth quarter, which held true again in 2017. Finished vacant inventory ended the year at 1,132 units, down 1% compared to one year ago. Current inventory would last 1.6 months based on the annual closings pace, within the normal range and slightly below the 1.7 months of supply that existed one year ago.
“Northern Virginia’s new-home market improved in 2017 and enters 2018 with positive job growth, low unemployment, and very little resale inventory” said Sage. “The strong finish to 2017 may make it difficult to repeat the 16% increase in starts for singles and towns, but it is reasonable to expect that type of increase in closings in 2018.”
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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