New home construction is up markedly across the nation. In the Washington region, new residential construction activity has been on the rise for a couple of years. The majority of the new building has been in the multi-family rental market in the District of Columbia and Arlington County.
Recently, however, there has been more single-family construction activity and new home starts have spread out to the region’s suburban jurisdictions. The numbers of building permits regionwide are about back to 2006 levels. However, the locations and types of housing being built differ considerably from the boom period. Loudoun County offers an instructive case of the shift in the region’s housing market and an indication of the trends we will likely see in the years to come.
Following the housing boom and bust, new residential construction basically ground to a halt. Since 2010, the number of new building permits issued across the 22 jurisdictions in the Washington metropolitan area has risen steadily. Over the first eight months of 2012, there were more than 19,000 building permits issued in the region, nearly double the number issued in the first eight months of 2011 and on pace to meet 2006 levels.
While the number of new building permits pulled is about what it was back in 2006, the composition of housing being built has changed. In 2006, about 8 percent of housing construction was in the District while in 2012 nearly 20 percent of all new building permits regionwide were in the District. Six years ago, about one-third of new building permits were for multi-family housing. In 2012, that share had jumped to nearly half. The current housing market is different. Households are different. Demand is different. Financing options are different. And builders are constructing different types of housing.
This shift is particularly noticeable in fast-growing Loudoun County. During the housing boom, there was a substantial amount of new housing being built. However, new construction in 2012 is far-outpacing Loudoun’s 2006 new housing construction levels. There were more than 4,000 building permits issued in Loudoun County over the first eight months of 2012, compared with about 2,400 in the first eight months of last year and 2,600 in the first eight months of 2006. The county accounted for 22 percent of the metro area’s new building permits in 2011 and 2012, compared with just 13 percent in 2006.
Using data from MRIS, the region’s multiple listing service, it’s apparent that the types of new housing for sale in Loudoun County have shifted pretty dramatically from six years ago. (MRIS lists new homes for sale that have been entered into the multiple listing system by a real estate agent or broker and does not include homes sold directly by the builder without use of the multiple listing service. However, the figures presented here give a good idea of the changing new home market.)
In Loudoun County, there were 866 new homes listed for sale between January and September of this year, up from 775 during the first nine months of last year but considerably lower than the 1,379 new homes for sale in the county in the first nine months of 2006.
Compared to 2006, the new homes being sold in Loudoun County are much more likely to be townhouses, condominiums and smaller units. For example, in 2006, only 20 percent of the new homes for sale in Loudoun County were townhouses. In 2012, townhouses comprise 36 percent of the new home inventory. Condos are a fairly small share of the market in Loudoun County, but they comprise 11 percent of the new home market in 2012, compared to just 5 percent in 2006.
As a result of a new home inventory with more townhouses and condominiums, the market in Loudoun County also contains smaller and less expensive housing. In 2006, nearly three-quarters of the new homes for sale in Loudoun County had four or more bedrooms. In 2012, just 58 percent of the new home inventory has four-plus bedrooms. And in 2006, three-quarters of the new homes were priced above a half million dollars. In 2012, just 47 percent of the Loudoun County new housing market has a list price of greater than $500,000.
Suburban Loudoun County is a harbinger of suburban housing that will be built in the coming years — smaller units, more townhouses and condos and lower price points.
Lisa A. Sturtevant is an assistant research professor at George Mason University’s Center for Regional Analysis.