Washington-area home builders are having an even worse year than they did in 2010. Unfortunately, there are just too many affordable existing homes out there, making the additional cost of a new home less attractive to many buyers.
Just 3,901 new homes were sold in the Washington region during the first half of 2011. That’s 25 percent fewer than we saw last year, and a precipitous decline compared to 2007, when 10,080 new homes were sold from January through June.
Loudoun County is the one bright spot in the region. With more than 800 sales during the first half of the year, sales in Loudoun make up half of the total for the Northern Virginia area. Sales in Loudoun were down just 7 percent, compared to a 48 percent drop in Stafford County.
I compare these two because they are both well outside the Beltway. Both counties attract residents who want to escape the crowds and congestion of the communities closer to the District. They also are “bedroom communities” that attract workers who commute to their jobs from these more rural settings.
Despite these similarities, I think there’s a very simple explanation for the disparity in new-home sales figures. Loudoun County has the highest median income of any county in the nation. People there can afford to buy expensive new homes. Note that the median closing price for new homes in Loudoun was $600,014, compared to $414,644 in Stafford County.
Many of the commuters who have bought homes in Stafford over the years were looking for something more affordable than the homes in Fairfax, Prince William and Alexandria.
But prices have dropped a lot in those Northern Virginia jurisdictions. It is no longer necessary to drive all the way down Interstate 95 to find something you can afford. In fact, you can see that new homes in Prince William County are less expensive than those in Stafford, which is farther away.
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