Northern Virginia has had a so-so housing market thus far in 2015, and David Howell, executive vice president and chief information officer of McEnearney Associates in McLean, says he thinks it will finish out that way, too.
“All of the numbers in 2015 year-to-date have been better than 2014 in Northern Virginia, but frankly, 2014 wasn’t that great,” says Howell. “While sales contracts have been up 8 percent so far in 2015, this year so far is only ranked at the fourth best out of the past seven years.”
Howell says Northern Virginia is still shaking off the impact of sequestration, which slowed the market in 2014.
Northern Virginia’s market is closely tied to the school calendar, says Nela Richardson, chief economist for Redfin in Washington, so the market slowed at the end of the summer but should pick up a little in the fall. She says she thinks this fall’s housing market could be slower than the fall of 2014.
“There’s still a lot of interest and multiple offers for homes priced under $450,000 throughout Northern Virginia,” Richardson says. “But the market tends to fizzle out in the higher price ranges.”
The average home price at the peak of the market in 2005 in Fairfax County was $543,000, and year-to-date in July of this year the average price was $538,000, says Donna Evers, broker and owner of Evers and Co. Real Estate in Washington.
“While Montgomery and Fairfax County prices are almost back to what they were at the peak, D.C. prices have substantially surpassed their peak price of $534,000 in 2005 to an average of $620,000 this year,” Evers says.
However, the dollar volume of total sales is still substantially below the peak in every part of the region, particularly in Northern Virginia where sales volume was $12.5 billion in 2005 and is just $7.2 billion so far this year, according to Evers.
According to Jonathan Hill, vice president of marketing and communications for multiple listing service MRIS in Rockville, Northern Virginia’s inventory has risen 11.1 percent so far in 2015 compared with the same period in 2014 and as of the end of August there is a 3.7 months supply of homes. A balanced market has approximately a six-month supply of homes, so inventory is still tight.
“More inventory is coming on the market but we’re also seeing more demand,” Howell says.
In Northern Virginia, Hill says the largest number of homes is sold in the market segment of single-family houses with four or more bedrooms priced between $600,000 and $800,000.
“We’re seeing more sales in the $300,000 to $500,000 range,” Howell says. “The market has definitely cooled in the upper brackets, particularly above $1.5 million.”
Richardson says demand for homes is much higher in areas close to the city such as Arlington, McLean and Alexandria.
“Some areas continue to do very well, such as Del Ray in Alexandria and Falls Church City, which buyers are realizing is less expensive than Arlington yet offers some of the same amenities,” Richardson says. “Efforts to make an area more walkable or provide better access to public transportation are beginning to attract buyers to neighborhoods outside of Arlington.”
Howell says the list price to sales price ratio — which compares the difference between the asking price by home sellers to the final contract price — is strongest inside the Beltway and near Metro stations. However, he says residential construction, particularly of for-sale properties, is still years away from materializing along the Silver Line.
“The outlying areas in Northern Virginia took a dive during the recession and there are still more homeowners with lower equity as you get farther from the city,” Evers says.
Richardson says that homeowners in Loudoun County who want to sell their homes must compete with new construction, which can make it more difficult to attract buyers.
“New construction in Lorton and in Potomac Yards are selling quickly and adding to inventory in those neighborhoods,” Howell says. “We’re finally seeing development around the Huntington Metro station and in the Springfield and Franconia area, too.”
According to the most recent quarterly housing survey for Northern Virginia from Metrostudy, which provides housing market research, home starts for both attached and detached dwellings in the region were down 10 percent through the second quarter of 2015 compared to that same period in 2014. Loudoun County, which accounts for 40 percent of all new home construction in Northern Virginia, had 20 percent fewer home starts this year. Metrostudy predicts that economic growth will push up home building in 2016, but this year has been another slow year for builders.
Hill says construction permits — which precede housing starts — are up in many areas, particularly for single-family houses.
“We’re following a trend across the country right now that the percent of homes that are sold that are newly built is declining,” says Dan Fulton, senior vice president of John Burns Real Estate Consulting in Reston.
“In the D.C. region, back in the boom housing market about 20 percent of all sales were new homes; now that percentage is down to about 10 percent,” Fulton adds. “In part, this is because a decent amount of resales are available, particularly in the outer suburbs where a lot of new construction takes place. Homes that were built at the height of the housing market a decade ago are starting to come on the market as resales.”
Buyers looking for an affordable home face competition in close-in neighborhoods but will have more choices in the outer suburbs in Northern Virginia.
Michele Lerner is a freelance writer.