Metrostudy’s first-quarter survey of the Northern Virginia and the DC Metro Area housing markets indicates a respectable start to the year. Starts in the first quarter alone in Northern VA numbered 2,103, a 1.7% increase from 1Q13. According to our quarterly survey, home starts, attached and detached, in Northern Virginia numbered 8,719 during the year ending 1Q14, up 12% from a year ago. Montgomery County led suburban Maryland in annual starts with 415 in the top three communities in the first-quarter and with annual starts also up 12% from last year.

Annual new-home closings in Northern VA, or “move-ins” by Metrostudy methodology, were also up as builders closed 8,550 units over the last four quarters. This represents an increase of 19% from the previous year. In Suburban Maryland, quarterly new-home starts and closings were slightly up from the previous quarter and finished vacant new-home inventory is stable across the market.

In the resale home market, demand continues to outpace supply. March resale listings in Northern Virginia are up 31% from a year ago. Despite this increase, resale inventory stands at only 2.6 months of supply, which is extremely low; nationally, 6 months of supply is considered normal, so prices should continue to climb. Resale inventory is especially low in DC. Rising resale home prices should eventually allow builders of new homes to raise prices as well. In DC County, the median resale price jumped 15% per square foot over last year. In the Baltimore Metro Area, the resale median price jump has been less severe and sales steadily increased during the first-quarter closer to 30,000. In the DC Metro Area overall Months Supply of Listings climbed slightly to about 2.8 months.

“Loudoun County is easily the strongest market area in Northern Virginia, generating 3,869 starts during the year ending 1Q14,” says Ben Sage, director of Metrostudy’s Mid-Atlantic Market.  “It may be difficult for Loudoun to maintain this type of dominance due to scarcity of land and rising home prices.  Prince William County is the second most active area with 1,378 starts, which is actually down slightly from one year ago. Loudoun and Prince William are next in the path of growth from the more mature Fairfax County, which generated the third most starts in Northern Virginia at 1,251 units. There were 839 starts in Stafford County over the past four quarters, which is 255 more starts than a year ago. This represents the largest percentage increase among all areas at plus 44%.”

The overall inventory of vacant developed lots, or finished lots, increased slightly from one year ago to 21,978 in Northern Virginia. This is for all product types, including attached product as well as custom lots. Despite the modest increase, the months supply of VDL fell to 30 months from 33 months one year ago. This is approaching normal, and it is down from 43 months only three years ago. The supply of VDL varies greatly by county. Supply is generally smallest in the more active submarkets: Fairfax (9 months), Loudoun (14 months), Prince William (18 months), and Stafford (22 months). Higher lot supplies persist in Caroline, Frederick, Warren, King George, and Orange Counties. In Suburban Maryland, VDLs are in very short supply, with only Queene Anne's and Cecil counties having more lots than needed.

“With some key submarkets under-supplied with lots, it is very important to monitor the pipeline of future lots,” says Sage. Even though first-quarter starts were similar to one year ago, builders are reporting mediocre sales.  Even so, spec-home inventory remains in excellent shape. Finished vacant new-housing units in Northern Virginia number 937 units, which would last only 1.3 months at the current closings pace. This is the lowest first-quarter reading in many years. The number of finished empty units did increase slightly in 1Q14 compared to 1Q13, but closings are much stronger now. Overall, builders appear to have very little quick-close inventory.

The decline in job growth in recent months is worrisome, and it is contrary to several positive national economic indicators. Builders are reporting mixed results from the spring selling season, indicating that some of the 1Q14 starts are probably spec builds in anticipation of demand. Builders are being cautious with price increases, and they have gotten a little more aggressive with incentives in some locations in order to move product. However, in February DC ranked fourth among other U.S. metro areas in lowest uneployment rates with a rate under 5.5%, which should lead job-seekers to the City. Maryland submarkets in Baltimore also have low unemployment despite lacking federal government jobs. If the economy rallies starts should be up this year, but that is mainly due to activity in Loudoun and Stafford Counties. “The rest” of Northern Virginia may struggle to outpace last year’s output in 2014.

In the DC Metro Area overall, slowing of the local economy has stalled the housing market, although despite the rise in listings the resale market has maintained strength.New-home demand will move upward in 2014 if the local economy economy improves.

For information contact: Ben Sage at 703.574.8429


About Metrostudy

Metrostudy, a Hanley Wood company, is the leading provider of primary and secondary market information to the housing and related industries nationwide.  Established in 1975 in Houston, Metrostudy provides research, data, analytics and consulting services that help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day.

Learn more about markets featured in this article: Baltimore, MD, Washington, DC, Atlantic City, NJ.