December 2019

Metro DC’s strong employment growth, and the resulting housing demand, will send home prices higher as our supply dilemma worsens.  Single-family permit volumes declined in supply-constrained Virginia and Montgomery County, Maryland.  Multifamily development activity booms in the District with a 63% year-over-year increase.  Affordability remains strong in the region with low interest rates that follow years of low home value appreciation.

Job Growth

Strong: DC Metro’s November 2019 employment grew by 61K jobs compared to November 2018, an impressive 1.8% annual increase.  The growth rate increased from revised 1.5% in October when the economy added 51K jobs. The resulting housing demand will meet lower for-sale housing supply and result in greater home price appreciation and greater rental demand.

Permit Growth

Moderate: Single-family (SF) permit volume slowed -6% year-over-year to reach 12.6K permits issued in the 12 months ending October 2019.  Much of this SF lowdown was due to supply constraints resulting from lack of rezoned properties rather than lack of demand.  Permit volumes declined 22% in Stafford County, 13% in Loudoun County, and 33% in supply-constrained Montgomery County. Conversely, multifamily (MF) permits issued in Metro DC surged 30% to reach 14.5K for the LTM, a 30% increase from same period in 2018.  Overall, the DC Metro area issued 27K permits for the LTM, a 10% annual increase and the highest permit volume since 2008.

Employment-to-Permit Ratio

At Equilibrium: A 1.2 E/P ratio suggests that the market is at equilibrium with strong job growth matched by strong permit growth.  However, 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: Inventory dropped to 1.5 month-supply in November 2019, a drop from 2.3 months from November 2018.  The drop in month-supply resulted from nearly 4K fewer listings and 1.4K more home sales.  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

Strong: Major increase in existing home sales are meeting lower supply and sending home prices higher. Home sales increased to 101K for the LTM ending November 2019, a 4.1% increase from 2018.  Much of this increase is due to the slow months in late 2018 that are moving out of the 12-month average.  Median sales prices have increased from $377K average in 2018 to $391K average for the past 12 months.  Low mortgage interest rates will help increase sales volume by keeping homes more affordable. 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.

Affordability

Strong: While national home price appreciation slowed significantly over the past two years, DC’s prices remain stable at around 2.5% to 3.0% annual appreciation due to slow 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.