September 2019

DC’s housing market conditions are moderate-to-strong for single-family and multifamily construction. Demand fundamentals (job growth and sales) are solid while supply fundamentals (permits, inventory) are mixed. Affordability remains reasonable due to the current low mortgage rate environment and moderate home value appreciation over the past few years.

Job Growth

Strong: Employment surged in July with 45K new jobs compared to July 2018, a 1.4% annual increase.  Suburban Maryland employment is flat while Virginia and the District are showing strong growth. Metro Washington’s employment corridors are complicated and should be carefully evaluated for their impact on your projects.

Permit Growth

Moderate: Multifamily permits outpaced single-family permits by 11% for the last 12 months, which breaks a four-year trend of more SF than MF permits initiated in 2015.  Compared to same period last year, MF permits rose 14%, from 12,459 to 14,153 permits. During that same period, SF permits declined 7.5%, from 13,802 to 12,769 permits.

Employment-to-Permit Ratio

Moderate: Declining E/P ratio suggests that supply is matching demand with MF permits filling much of that demand. With low existing home inventory, new homes and the rental market will be in demand and the E/P ratio may dip below 1.0 without affecting home values.

Housing Inventory

Weak: The combination of disturbingly low inventory and declining housing turnover is a major concern.  This is likely a generational issue as more empty nesters are aging-in-place.  Inventory differs by submarket and price band and should be evaluated carefully for your specific project.  Please call us for a detailed inventory and demand analysis for your specific project.

Existing Home Sales and Prices

Moderate: Existing home sales are flat, due in part to the low inventory levels. However, median sales prices have increased from $377K in 2018 to $383K for the past 12 months, due in part to low mortgage rates that are currently 3.62% for a 30-year FRM. Sales volume will differ by price band and by submarket and should be evaluated alongside a market depth analysis.  Please call us for a detailed supply and demand evaluation for your specific project.

Home Value Appreciation

Strong: While national home price appreciation slowed significantly over the past two years, DC’s prices remain stable at around 3% due in part to limited wage growth in the MSA. We expect the slow home value appreciation over the past few years will limit the risk of Metro DC going through a major housing cycle downturn. The employment growth due to HQ2 and its high-wage jobs should push demand and home values higher in the coming years.