Home Permits: From Plunge to Dip

By Jonathan Mummolo
Washington Post Staff Writer
Sunday, February 3, 2008

The number of residential building permits issued in Loudoun County fell again last year as the housing market remained dismal, county figures show.

But the decrease was much smaller than the drop in 2006, indicating that the development plunge might have run its course, some economists said.

"It's gotten down to where it's going to be for a while," said Peter Morici, an economist at the University of Maryland. "It's not about to recover anytime soon . . . but at least it won't get much worse."

In 2007, 2,840 residential building permits were issued, a drop of 7.8 percent from the previous year and the lowest total since 1995. In 2006, the number plummeted by nearly 40 percent.

Because a building permit is the final authorization to put up a housing unit, the annual totals are considered a reliable indicator of the state of residential development. The latest figures, released last month, are based on county estimates, and final figures will be issued in the spring, officials said.

Morici said the decline was largely the result of an excess of homes left from a seven-year housing boom. Many newer houses are far from the District, making them less attractive as gasoline prices have risen, he said.

"It's just an overhang of houses," Morici said, adding that it will take some time for the market to absorb the inventory of unsold new homes.

Commercial development, however, continued to climb in Loudoun last year. The amount of retail, industrial, office and other commercial space for which permits were granted in 2007 was 4.3 million square feet, the most since 2001 and an increase of about 5 percent from 2006. The increase from 2005 to 2006 was about 8 percent.

Analysts said the county remains an attractive location for businesses, offering relatively cheap land and proximity to Dulles International Airport.

"It's cheaper to build in Loudoun County than it is to build in Arlington and Fairfax," said Stephen Fuller, director of the Center for Regional Analysis at George Mason University. "So [for] companies looking for nice buildings for lower rates with good transportation access to the rest of the world, Loudoun County is very well positioned."

Among the commercial projects granted permits last year was Salamander Resort & Spa in Middleburg, a project that includes the 168-room resort and 49 houses, commercial office space, apartments, and hiking and riding trails.

Prem Devadas, president of Salamander Hospitality, said the property was chosen because it is in the heart of Virginia's pristine horse and wine country yet is near the airport.

"The feasibility of a luxury, destination resort was clearly enhanced by our proximity to Dulles Airport," he said. "That definitely was a factor."

Analysts said they expect a bit of a slowdown in commercial development in 2008, however, in part because the drop in housing permits probably will be followed by a decline in new retail space. The growth of the retail sector is closely linked to spurts in the number of new homes.

"We had some really strong retail growth in the past couple years, and that was expected because of the housing growth," said Robyn Bailey, the county's manager of business infrastructure. "I think we will see some slowdown in the retail for a while because of the residential slowdown."

Still, analysts said, the downturn in home-building won't continue indefinitely. County figures show there are nearly 38,000 approved but unbuilt housing units in the pipeline.


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