In the District of Columbia, limited land supply means new single-family construction is largely restricted to redevelopment by homeowners and investors, says Ben Sage, Metrostudy regional director for the Mid-Atlantic. The nation’s capital has zero vacant developed lots on record, according to Metrostudy data. As a result, the area’s home builders have made their mark within subdivisions in Northern Virginia and Maryland, which Metrostudy tracks separately.
RealPage notes that D.C.’s population and job bases have both expanded substantially in this cycle, with a population change of 613,587 from 2010 to 2018 and 354,000 new jobs. Unemployment sits below the national average at 3.2%, while median income is above the national average at $105,000.
In the Maryland market, which includes Baltimore and its surrounding counties but excludes much of the Eastern Shore, there were 10,973 new-home starts for the year ending in Q3 2019—up less than 1% from one year ago. Despite this, builders are reporting 37% increases in per-subdivision sales.
The median price of a new home in the Maryland market was $443,000 in Q3 2019 and has remained about level in the past few quarters. The overall inventory of vacant developed lots was 10,585 in Q3 2019, down 14% from the prior year. Prince George’s is the top county for new-home starts in Q3 2019 at 2,068, followed by Anne Arundel County at 1,840.
School capacity issues and new regulations in some Maryland counties are expected to stem the flow of home construction moving forward. Both Montgomery and Anne Arundel counties have restricted the development and construction of subdivisions in the near future. “What that’s going to do is further limit supply, raise prices even further, and it’ll push growth, which is already expanded a bit into the likes of Frederick County, even more so,” Sage says.
Home starts in Northern Virginia numbered 8,696 in the year ending in Q3 2019, and the overall inventory of vacant developed lots was 13,722. Loudoun County is the most active area in Northern Virginia, with 2,414 new starts for the year ending Q3 2019, down 10% from the prior year.
Metrostudy observed 1,083 finished new housing units on the ground in September, up 15% from one year ago but down from the previous quarter. The median price of a new home was $523,000, down from one year ago but generally flat since 2017.
The coming of Amazon’s HQ2 to Virginia has already had a pronounced effect on the submarket surrounding the area that has been dubbed National Landing, which encompasses Crystal City, the eastern portion of Pentagon City, and the northern portion of Potomac Yard.
Listings for resale homes in Arlington and Alexandria have fallen 53% over the year ending in September 2019, compared with a 25% drop across Northern Virginia and a 30% drop in Fairfax and Prince William counties.
“There is a lot of speculation,” Sage says. “I wouldn’t necessarily call it a bubble forming since we have a huge employment base coming. There’s going to be 25,000 jobs, but they’re going to be spread out over 12 years. But it’s still going to be a huge job base, and that place is going to be transformed. For every 1.2 Amazon jobs, a related job will be created, according to George Mason.”
Amazon effect aside, Sage expects that builders will need to look for “creative ways and creative ideas” to draw out consumers who are less willing to live in the suburbs, given the area’s long commute times.
“It’ll probably involve more density, perhaps smaller homes to reach the affordability levels for consumers more willing to go out into the suburbs,” Sage says. “I haven’t given up on the suburbs, but I think the next expansion, instead of being driven by single-family and townhomes, which has historically been the case here, I think we’re going to see some attempts at density to help meet affordability and location desirability of the next generation of homeowners.”
