The recent spike in mortgage rates has had a more muted effect on Washington D.C.’s new-home sales than when they started their climb from record lows in 2022.
Despite rates shooting past 7%, the average new-home sales rate has been higher than a year ago, suggesting home buyers have adjusted to the new normal and are budgeting a larger portion of their income to housing.
Housing costs as a percent of income have climbed 48%. As total new-home inventory fell to its lowest level in recent history, builders are holding starts steady; however, initial permit issuances for 2024 indicate a drop in activity compared with a year ago.
Strengths
Approximately 2.5 million square feet of downtown office space has been tagged for residential use. The Housing in Downtown Abatement Program will work to convert more offices into housing in a bid to deal with high office vacancy rates.
Weaknesses
High housing prices and the flexibility of remote work are pushing residents farther out of the metro area, and Richmond, Virginia, has benefited from this trend. There has been a sharp increase in migrations along with a corresponding rise in train ridership.
Supply
Quarterly housing starts decreased 6.9% from a year ago, while the number of available vacant developed lots sits at 10,528, down 7.6% from the same quarter last year. In terms of supply/demand balance, the market area is 3.91% oversupplied.
Prices
The average list price for a new detached home in the Washington-Arlington-Alexandria region increased 0.6% from 2023 to $775,550 in March, while the average list price for a new attached home increased 7% over the same period to $615,246. Homes priced under $350,000 experienced the most closing activity over the past year. The new-home affordability ratio for a detached home reached 31.6% in January.
Economy
Total nonfarm employment in the metropolitan statistical area increased 1.4% from the same period last year to 3,379,400 payrolls in December. The local unemployment rate increased to 2.7% in December compared with 2.5% the previous month.
Community
The current population for the Washington-Arlington-Alexandria metropolitan area is approximately 6,491,010 people and is projected to increase by 0.7% this year. There are approximately 2,452,910 households in the region, which is up 1.1% year over year. Forecasts show that household formation is expected to increase by an annual growth rate of 2.3% for 2028. Incomes increased by 4.2% from the previous year to $137,062.
This story appeared on Builder Online
