Northern Virginia Building Industry Association 2021 Industry Impact Report

• Home prices are up, but the year-over-year increase is declining from a peak of +17 percent in June 2021.The fevered demand for homes has subsided in the face of higher prices. • Home prices are rising faster in the suburbs compared to closer-in locations, which are up modestly. Along with the resale market, the new-home market in Nor thern Virginia accelerated in the last 21 months, a surprising result of pandemic-related lockdowns.We entered into the COVID era under-supplied on the resale side, and this was exacerbated post COVID as demand increased at the same time sellers took their homes off the market.This resulted in a surge in demand at new-home sales offices. Demand quickly outstripped the industry’s ability to deliver product, as there is a shor tage of lots and not enough incoming supply to replace communities that were selling out more quickly than anticipated. Supply chain bottlenecks (windows, doors, garage doors, appliances, etc.) fur ther limited builders’ ability to star t and complete new homes, so aggressive price increases ensued in an effor t to control demand.The below summarizes the new-home market in Nor thern Virginia so far in 2021. • Year-to-date star ts ending September number 7,254 units, up 13 percent from last year. • Year-to-date new-home sales of 4,501 (excludes I-81 corridor) are down 20 percent from last year as many of this year’s star ts, which are up, date back to contracts written in 2020. • New-home sales on a per-project basis are largely unchanged from last year at 2.7 per month, which was propped up this year by a smaller community count. • Similar to the community count, lot supply is dwindling as the 11,260 vacant developed lots in Nor thern Virginia are down from almost 20,000 in 2015. • Our tracking of future lots, including those that are under development, indicate continued strain on new-home supply levels. In the last few months, the new-home market in Nor thern Virginia has “normalized,” and seasonal demand patterns have returned. Builders are now being much more cautious about raising prices, and fewer locations are capping sales. Supply-chain issues are expected to persist for most of next year, and inflation may threaten these historically low mor tgage rates that the industry has enjoyed since mid-2020. If we can avoid/ overcome these hurdles and keep home prices steady, home shoppers are likely to return for a solid spring selling season. Overall, new-home demand in 2022 will be good, but supply constraints will make it difficult to match 2021 output. Figure 4: NoVA Annual Starts and Closings Figure 3: NoVA Annualized Base Price Increase Each Quarter Figure 2: Fannie Mae Housing Survey – “Good Time to Buy a Home” Figure 1: NoVA Production Builder Community Count Advocacy. Networking. Education. Philanthropy. | 19