The 15th Annual GMU Economic Conference The Washington Region Housing Market in 2007
John C. McClain, AICP Senior Fellow and Deputy Director Center for Regional Analysis George Mason University January 11, 2007
Where Is the Market?
• Record inventory levels in 2006 • Month-over-the-year price changes turned negative in July • Inventory returning to normal levels at end of year • Price changes likely to remain in negative territory through the winter
What Is the Outlook?
• Increased demand in spring from normal seasonal cycle and spurred by lower prices • Prices flat to + 5% by the summer of 2007 • Region’s job growth is still out-pacing the supply of housing • A housing affordability crisis continues
$
500,000 400,000
Average Sales Price All Housing Types Washington Metro
373,000 313,000 275,000 207,000 219,000 242,000
+ 124% Since 1999
454,000 463,000
300,000 200,000
+5.8% +10.5% +13.6% +13.8% +20.1% +21.7%
+2.2%
100,000 0 1999 2000 2001 2002 2003 2004 2005 2006*
Source: MRIS, GMU Center for Regional Analysis
Total Units Sold Washington Metro Area
Thousands
120 100 80 60 40 20 0 76 79 87 93
116 105
111
80
1999 2000 2001 2002 2003 2004 2005 2006
Source: MRIS, GMU Center for Regional Analysis
Days on Market Washington Metro Area
Days
120 100 100 80 60 40 20 0 1999 2000 2001 2002 2003 2004 2005 2006
Source: MRIS, GMU Center for Regional Analysis
57 43 36 35 28 28
64
Total Sales Volume Washington Metro Area
$ Billions
60 50.5 50 40 30 20 10 0 1999 2000 2001 2002 2003 2004 2005 2006
Source: MRIS, GMU Center for Regional Analysis
43.4 36.9 32.3 25.4 15.5 17.2 20.8
Average Sales Price Percent Change Month-over-the-year, 2004 - 2005 - 2006
Washington MSA All Housing Types
%
30 25 20 15 10 5 0 -5
28.1 25.5 25.0 25.0 22.9 23.4 23.9 22.2 20.3 19.8 18.1 16.6
2004 - 2005
2005 - 2006
12.4 9.1
7.2
5.4
3.8 4.7
28-yr Avg. = 7.2
-1.4 -0.6-1.8-2.1 -2.5 -2.9
p Se
M
M
p Se
M ar
M
l Ju
v No
n Ja
l Ju
v No
Source: MRIS, GMU Center for Regional Analysis
n Ja
ar
ay
ay
Average Sales Price Percent Change Month-over-the-year, 2004 - 2005 - 2006 Washington MSA
%
30 25 20 15 10 5 0 -5
M M ar p Se M M n Ja l Ju n Ja v No ay ay ar
-1.5 -1.4 -2.7
Single Family Detached
2004 - 2005
24.4 24.4 22.6 21.8 20.4
2005 - 2006
23.9 22.7 21.1 19.6 17.8 17.5 16.4 16.9 14.1 13.7 10.6 7.0 7.6 1.3 0.8 0.3
p Se
l Ju
v No
Source: MRIS, GMU Center for Regional Analysis
Average Sales Price Percent Change Month-over-the-year, 2004 - 2005 - 2006 Washington MSA
%
40 35 30 25 20 15 10 5 0 -5 -10
Single Family Attached
2004 - 2005
33.8 31.2 28.9 27.3 26.3 25.4 20.9 20.7 22.2 17.8 17.2 15.4 16.2 10.5 6.7
2005 - 2006
3.8 4.6 5.2 0.2 0.7 -2.4 -0.7-0.7 -3.2
ay M ar M
p Se
ay M ar M
p Se
Source: MRIS, GMU Center for Regional Analysis
n Ja
l Ju
ov N
n Ja
l Ju
ov N
Average Sales Price Percent Change Month-over-the-year, 2004 - 2005 – 2006 Washington MSA
%
35 30 25 20 15 10 5 0 -5 -10
31.8 28.4
Condos
2004 - 2005
2005 - 2006
29.5 26.9 25.2 24.4 24.0 22.9 21.8 20.3 17.9 16.3 11.2 6.8 8.5 6.9 1.4 -2.0 -4.1 -6.1 1.9
-3.0 -5.3-4.8
p Se
ay M
ar M
ay M
ar M
p Se
ov N
l Ju
n Ja
ov N
l Ju
Source: MRIS, GMU Center for Regional Analysis
n Ja
%
140 120 100 80 60 40 20 0 -20 -40 2000
Percent Change in Inventories of Existing Homes Month-Over-the-Year-Change 2000 – 2006, MSA
Dec 23%
2001
2002
2003
2004
2005
Source: MRIS, GMU Center for Regional Analysis
2006
Monthly Sold Units as a Percent of Active Listings 1999 – 2006, MSA
60% 50% 40% 30% 20% 10% 0% 1999 2000 2001 2002 2003 2004 2005 2006
Dec 15.6%
Source: MRIS, GMU Center for Regional Analysis
Monthly Sold Units as a Percentage of Active Listings:
%
70 60 50 40 30 20 10 0
Dec 19.2%
1991 – 2006 NVAR
Source: MRIS, NVAR
06 20 05 20 04 20 03 20 02 20 01 20 00 20 99 19 98 19 97 19 96 19 95 19 94 19 93 19 92 19 91 19
(NVAR: Arlington, Alexandria, Fairfax)
Percent Change in Inventories of Existing Homes Month-Over-the-Year-Change
%
160 140 120 100 80 60 40 20 0 -20 -40 -60 1992 1993 1994 1995 1996 1997 1998 1999 2000
1992 – 2006, NVAR
Jan-Feb-Mar, 2006
Dec 14.4%
2001
2002
2003
2004
2005
Source: NVAR, MRIS, GMU Center for Regional Analysis
2006
Increase in Equity By Year of Purchasing the Average-Priced House Washington Metro
2000 2001 2002 2003 2004 2005
0
$
244,000
221,000 188,000 150,000 90,000 9,000
50,000 100,000 150,000 200,000 250,000 300,000
Impacts from the Increased Prices of Housing in the Washington Region • Supply being cut back – slowdown in homebuilding and new condo projects • Rental rates now rising • Buyers in the last 4 years vulnerable due to non-traditional mortgages? • Housing affordability was a problem – now a crisis
Building Permits Washington Metro Area
Thousands
50 40 30 20 10 0 1999 2000 2001 2002 2003 2004 2005 2006 34.2 36.0 35.3 36.3 35.8 34.6
-26 % From Peak
32.8
26.7
%
25 20 15 10 5
Percent Change in Sales Prices and Rental Rates: 2000-2006
s ale S e ri c P s
Re
2001 2002 2003
R a te s ntal
2005 2006
0 2000
2004
Metro Comparisons Mortgage Foreclosure Rates Q3 2006 Foreclosures /10,000HH
WASHINGTON
Minneapolis Boston Seattle NY Los Angeles SF-Oakland Philly U.S. San Diego Phoenix Chicago Houston Detroit Atlanta Miam i Dallas
8 13 14 21 22 24 27 27 28 39 41 54 56 81 93 100 100 0 20 40 60 80 100 120
Source: RealtyTrac, GMU Center for Regional Analysis
Percent Change in House Prices and Median Household Income, Washington MSA: 1999-2005 %
140 120 100 80 60 40 20 0
119
21
House Prices
Median Income
Number of Units Sold by Price Range Fairfax County: 2000-2005 All Housing Types
%
100 80 60 40 20 3 0 < $250K $250K - $500K > $500K
Source: MRIS, GMU Center for Regional Analysis
64 50 29 7 47
2000 2005
Proportion of Existing Housing Affordable For Median Income Households, 2000 and 2005, Fairfax County %
70 60 50 40 30 20 10 0 2000
5% Down, 6.5% 30-yr mortgage
64
7
2005
Percent of Income Required to Purchase Median-Priced Housing, Median Income Households % 2000 and 2005, Fairfax County
60 50 40 30 20 10 0 2000
5% Down, 6.5% 30-yr mortgage
54
26
2005
Annual Change In Housing Demand vs. Housing Supply
1995 - 2010 Washington MSA
Thousands
80 70 60 50 40 30 20 10 0
10 20 09 20 08 20 07 20 06 20 05 20 04 20 03 20 02 20 01 20 00 20 99 19 98 19 97 19 96 19
Demand
47,700 32,600
Supply
Major Metro Area Housing Market Slumps Since 1977
Annual Rate of Job Time Period Change During Decline
Metro Area
Housing Price Index Decline
Los Angeles Detroit Boston Washington
- 22 % - 14 % - 11 % -3%
90 – 93 81 – 83 90 – 92 91 – 93
- 120,000 - 24,000 - 46,000 9,000
Housing Outlook for 2007
• Market Adjustment nearing end – inventory stabilizing and prices will begin stabilizing • 2007 Prices will increase in the range of 0 - 5 % - by 2008-9 returning to long-term normal of 7% • Sales volume will drop back to 1998 – 1999 levels • Days on Market leveling in the 90s
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