Do we have sustainable growth in our market?

It appears that based upon recent news about our market we can!  Sales of new condos rose to their highest first quarter levels in three years with 630 sales posted – last year there were just 316.  This allows the inventory levels to shrink which is good on all levels for real estate sales.  We have inventory levels of unsold condos that match inventory levels of 2003.  As new homes starts slow and as financing remains tough to obtain for builders and demand increases, look for conversions to become popular again if demand continues.

Additional good news is that the vacancy rates on apartments also have dropped locally and regionally and the month’s supply of rentals owned by individuals is also at recent lows of just 1.5 months.  As a result, lower concessions are being made to tenants as well – are increased rental rates next?  This should be attractive to investors who are savvy and want to take advantage of today’s lower house prices and see a great return on investment as long term real estate investors. 

There is also renewed interest in Harbor Station in Prince William County.  The board of supervisors is reporting that virtually every major developer is interested in the 2,000 acre parcel along the Potomac River which is anticipated to be a 20 year project.  A golf course, VRE stop as well as the right mix of retail and housing is planned for the mixed use development.  The last few years the project has been mired in financial disaster but it is now in control of the bank and Compass LLC and they are making quick decisions on moving the property forward for development.

We are also experiencing near historic lows in interest rates.  The Fed got out of the purchasing of mortgage backed securities and rates did not skyrocket as previously predicted they would by so many industry experts.  The Federal Reserve has vowed to keep the funds rate at 0 – .25% for the foreseeable future to keep mortgage rates low and keep the housing market moving forward.  This too will help allow us to maintain growth in the housing sector!

Unemployment rates continue to hover in the high 9% range nationally but we are well below that here locally and houses are where the jobs go at night.  As long as we continue to keep people employed – we will have strong housing numbers.  There is nothing that indicates we will lose jobs as we are insulated with DHS, the Federal Government, defense contractors, as well as the hospitality, technology, and communication industries coupled with their support services, we will be in good shape for some time.

The housing affordability index will reach 160 this year – the highest level since 1972!  This index measures what percent of households can afford to purchase a home based upon median income, median house prices and interest rates.  For more details visit: http://www.realtor.org/research/research/hameth

The HAFA program will also help facilitate more sales as it will streamline the short sale process which is approximately 25% of our market in most areas and even higher in suburbs further out from DC.  Additionally, foreclosures are higher in Maryland versus Virginia further suggesting we can sustain the growth we are experiencing.

These factors coupled with the fundamentals of our region – low unemployment, relatively affordable prices in relation to 2004-2007, excellent school systems, international and cultural attractions, and so much more will help us remain a viable housing market for many years.

It appears that the extension and expansion of the homebuyer tax credit has not had as much impact on the housing market as the original tax credit.  Builders are selling homes beyond the June settlement deadline and many sellers and buyers are unaware that the credit affects them despite our efforts and the efforts of media outlets and NAR.  The elimination of this program should have little effect on our market if everything else stays equal – consumer confidence remains high, jobless claims continue to decrease, and pending home sales continue to increase (up 8.2% – highest in 8 years) we will have sustainable growth in the housing sector.

Know the market, know the trends, and know how to communicate this to clients and you will succeed in any market.  Get it?  Got it?  Good! 

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