• Quarterly new home starts up only 1% year-over-year
  • New home closings in the first half of 2016 up 7% year-over-year
  • Loudon County and Prince William county remain the top two counties for new home starts in the region
  • Spread between new home and resale prices continues to grow, strengthening existing home sales compared to the new home market.

According to Metrostudy’s 2Q16 quarterly survey, home starts, attached and detached, in Northern Virginia numbered 7,853 during the year ending 2Q16, up only 1%, or a 56-start increase, from the same period a year ago. Northern Virginia starts in 1H16 were up 2% YoY, and closings increased 7% over the same period.

New-home demand has been relatively weak over the last couple of years, but there is anecdotal feedback from builders that demand has improved this year.

“With resale prices relatively flat of late, the spread between new and resale prices has been growing,” said Ben Sage, Director of Metrostudy’s Mid-Atlantic region. “In the resale home market, listings were down 14% from one year ago but units sold through the MLS increased by 8% during the year ending June 2016. In 2Q16, the median price of a new home sold was $473K, which has been growing steadily, whereas the median price of an existing home sold in Northern Virginia was $397K, flat from one year ago. This could help explain the increase in sales for existing homes compared to the new home market whose improvement is more modest.”

Annual New Home Starts and Closings

Looking at 2Q16 starts activity in the region by county, Loudoun County remains the most active market area in Northern Virginia, despite its 6% decline in annual starts YoY, generating 2,851 annual starts ending 2Q16. Ranked by starts, the top 6 communities in Northern Virginia – led by Brambleton, Loudoun Valley, Moorefield, Virginia Manor, and Willowsford – are all located in Loudoun. Prince William is the second most active county in the region with 1,496 annual starts, which is up 4% from one year ago. Wentworth Green and Potomac Shores recorded the most starts in Prince William over the past year, followed closely by Eagles Pointe and Dominion Valley. Frederick County experienced the largest increase in annual starts over the past year, plus 152 units. This growth was led by Shenandoah at Lake Frederick (Shea and Ryan), but Canter Estates (K. Hovnanian) and Lynnehaven (Richmond American) also contributed to the increased activity. Fairfax/Arlington experienced the largest decline in starts, minus 194 units, but this is due more to a lack of new-home supply than a drop in demand.

The overall inventory of vacant developed lots (VDL), or finished lots, numbered 20,469 at the end of 2Q16. This represents 31 months of supply, which is a little high overall, but it varies greatly by geography. VDL supply is low in the closer-in suburbs of Fairfax/Arlington, Prince William, and Loudoun, each of them with less than 18 months of supply. Some of the more distant suburbs tend to have an ample supply of lots, including Jefferson, Frederick, and Spotsylvania, each with at least 50 months of supply.

Finished vacant new homes in Northern Virginia numbered 1,147 units in 2Q16, flat compared to one year ago. Current inventory would last 1.7 months based on the annual closings pace. This is only slightly above the equilibrium range of 1 to 1.5 months of supply, and it is improved from 2015 levels.

Finished Vacant New Home Inventory

“Northern Virginia is on track with our forecast of a modest 5% increase in new-home demand this year,” said Sage. “New-home demand has been relatively weak over the last couple of years, but there is anecdotal feedback from builders that demand has improved this year. Unemployment is low enough that it should begin to drive wage growth, which has been relatively flat in the region for the last two years, much like the rest of the country. The market appears to be on solid footing and Metrostudy expects further expansion of the new-home market next year.”

For further analysis of the Northern Virginia market, reach out to senior director Ben Sage: