This was held in the fall of 2005. I keep it on here as a "reference" and a record of what was predicted. It is interesting to note the errors as well as the points that have been proven true. Different sides, sellers vs. buyers might see it differrently. Anyway, I thought it was keepable for a while. Buck
The Beginning of the End? Not Necessarily in Northern Virginia
I recently attended a seminar where a speaker gave a very good presentation on the changing real estate market in Northern Virginia. A number of important ideas were discussed, like the market "bubble", appreciation, job increases and home sale numbers.
A few facts:
Consumer Sentiment dropped over 12 points between August and September 2005, the highest drop since December 1980.
People are looking for better value by shopping warehouse stores, discounters and places where the interest rate is zero or no interest for an extended period of time. Specialty stores (shoes, novelties, department stores) showed a marked slowdown. Oddly enough, furniture stores showed a decrease of over 6%! Evidently, the buyers, after buying the big homes, had no money left over to furnish them.
New home sales and resales have shown a steady increase over the years. Washington DC had a 26% increase in appreciation. The average home price in Loudoun was $566,549 (up 22%) Fairfax was $602,961 (up 21.9%) Prince William was $425,871 (up 23.7%) while Virginia as a whole was $271,336 (up 44.1%) There are over 34,000 new homes coming on in the next 36 months of which over 15,000 are SOLD.
The Housing Opportunity Index which measures how affordable homes are plummeted between the first quarter 2002 and the second quarter of 2005. Almost 45 points! Translation: home prices have risen to the point that the majority home buyers home buyers cannot afford the average price.
Consumer apprehension has been driven by the price of oil (gas for the car, heating oil, manufacturing costs, etc.), effects of Katrina and other storms and the lack discretionary discretionary spending.
Job increase in the Northern Virginia area is expected to be about 50,000 jobs. Homeland spending in will be about 30 BILLION dollars, most of which will be in the Washington area. Defense spending will be about 500 BILLION dollars.
The largest growing metropolitan area is Washington DC! (that's us folks)
Virginia has one of the lowest unemployment rates in the country. (3.5%) This means that people still move here to get a better job.
There is over 13 MILLION square feet of office space in the Metro area under construction. Divide that by 200 square feet of cubicle space and you get roughly 65,000 offices to fill. The development companies would not build it if they weren't going to fill them!
Conclusions: The real estate market in Northern Virginia has slowed dramatically since about September. The holiday time (October, November and December) statistically show a slowdown. This year has been decidedly worse due to outside effects. ie: energy prices, hurricanes, the war in Iraq, government indictments, very low government confidence as well as extremely low consumer confidence. The very fast rise of the home prices in the early part of this year, combined with the sharp increase in the average home price over the last 3 years has taken its toll. Buyer are waiting to see what is going to happen. The buzz out there is that it is time to wait. The media has just started to make a point of prices coming down and coupled with the news in the business section stating that NVR and Toll Brothers, 2 of the areas largest builders, NOT meeting their projections has again fueled the buyers anxiety and caused them to wait.
However, in the spring, I feel that things will pick up a bit. Home prices should stabilize and the buyers will come out to get their new homes. I do not feel that the days of multiple contracts, excessive bidding wars and the like will return. At least not in the fashion that we had in the first part of this year.
Thanks and give me a call or email if you would like to discuss this.
Buck Simpson
Data and policies discussed here came from the seminar given by Anirban Basu with the Sage Policy Group, Inc. and provided by Winchester Homes. (my favorite builder too by the way!!)
