State of the Housing Market
2020Presented to NVBIA
January 17, 2020
Dan Fulton703.447.7171
MULTIFAMILY PERMITS AT ALL-TIME HIGH
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Today’s movers are attracted to convenience and lifestyle
Source: ESRI
Old Town
National Landing
Mosaic District
RichmondHighwaySpringfield
Town Center
Tysons
Fairfax County’s
New Walkable Neighborhoods
Embark Richmond Highway
Richmond HighwayPotential Development
18,000 dwelling units(+13,000 over 2005 plan)
23,500 jobs(+10,740 over 2005 plan)
8.7M SF of non-res development
Multimodal and Sustainable Development
Ecological Spine
Livability Spine
Bus Rapid Transit
Huntington Club
IDI Group
South Alex
Combined Properties
City Life. Suburban Ease.®
BOOMERS & MILLENNIALS ARE MAJOR FORCES
8Source: ESRI
Each segment will drive demand for a new type of housing
-6,000
-4,000
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84
Population Change by Age
DC Metro Area - 2019 to 2024
Growth: 157,00029-45
Growth: 199,00060-84
Source: ESRI, U.S. Census
BUYERS UNDER 45 ARE PRIMARY SEGMENT
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Much of that housing demand met by resale market
Source: Fulton Research, U.S. Census, iPUMS, ESRI
GROWTH/DECLINES PRESENTS OPPORTUNITIES
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The decline in age 45-64 housing demand will affect home value appreciation
Source: Fulton Research, U.S. Census, iPUMS, ESRI
34% INCREASE IN HOUSING DEMAND FOR 75+
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We see an emerging segment for home builders
SENIOR LABOR FORCE IS GROWING
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More seniors will move and stay near employment centers.
Source: BLS
MODERATE JOB GROWTH MOVING FORWARD
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Political risk is high due to potential impact on defense spending
3.00
3.50
4.00
4.50
5.00
5.50
Inte
rest R
ate
(%
)
30-Year Fixed-Rate Mortgage Rates2010-Current
Low Mortgage RatesRising mortgage rates keeping homeowners in place:
• 160bps increase = 25% to 50% loss of repeat buyers
• Crossing the 4.5% mortgage rate threshold slowed down the housing market last year.
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3.67%
Jan20
Rates over 4.5%
slowed home buyers
CHI/DC HAVE LOWEST APPRECIATION RATES
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Low wage growth has kept DC home value appreciation stable
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0%
ChicagoWashington, DC
New YorkMiami
ClevelandLos Angeles
DallasSan Diego
PortlandSan Franscisco
AtlantaMinneapolis
BostonDetroit
CharlotteDenverTampa
PhoenixSeattle
Las Vegas
Annual Appreciation
3-Year Average Annual Home Value Appreciation20 Major Metros
Source: Case-Schiller Home Price Index, St. Louis Federal Reserve
LOW APPRECIATION HAS REDUCED VOLATILITY
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Metro DC housing market is the most stable major metro
-6.5% -6.0% -5.5% -5.0% -4.5% -4.0% -3.5% -3.0% -2.5% -2.0% -1.5% -1.0% -0.5% 0.0% 0.5%
Las VegasSan FransciscoSeattleLos AngelesDenverNew YorkDetroitPortlandChicagoSan DiegoDallasBostonTampaMinneapolisAtlantaClevelandMiamiPhoenixCharlotteWashington, DC
Change in Home Value Appreciation Rate
Home Value VolatilityChange: 1-year to 3-year Home Value Appreciation Rate
Source: Case-Schiller Home Price Index, St. Louis Federal Reserve
LISTINGS INVENTORY AT 1.5 MONTHS
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Low Inventory will result in higher prices and strong rental demand
Source: Zillow, Core Logic
EXISTING HOME SALES AT PEAK LEVELS
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This growth is expected to widen as we move past the 4Q2018 numbers
Source: Zillow ; LTM: Last 12 Months ending November 2019 (Oct.19 and Nov. 19 are preliminary)
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 LTM
Sales 66,376 61,491 59,367 64,440 74,795 74,770 84,789 95,639 100,191 97,124 101,081
Median SP ($000) $301 $305 $284 $318 $340 $351 $346 $357 $367 $377 $391
$250
$270
$290
$310
$330
$350
$370
$390
$410
0
20,000
40,000
60,000
80,000
100,000
120,000
Media
n S
ale
s P
rice (
,000s)
Num
ber
of
Sale
s
Closed Sales - Median Sales Price - Washington MSA
WEAK SF PERMITS, STRONG MF PERMITS
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Supply constraints affect SF permits in VA and MD
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 LTM 2019P 2020P 2021P 2022P
SF Units 9,466 9,032 9,597 9,795 11,145 13,498 12,411 12,638 13,384 13,968 13,322 12,632 13,500 14,000 13,500 12,400
YOY Growth -5% 6% 2% 14% 21% -8% 2% 6% 4% -5% -6% 1% 4% -4% -8%
MF Units 4,411 3,375 3,577 10,015 11,424 10,759 12,393 10,369 12,303 12,461 12,107 14,474 15,300 15,200 14,000 11,000
YOY Growth -23% 6% 180% 14% -6% 15% -16% 19% 1% -3% 30% 26% -1% -8% -21%
Total 13,877 12,407 13,174 19,810 22,569 24,257 24,804 23,007 25,687 26,429 25,429 27,106 28,800 29,200 27,500 23,400
-11% 6% 50% 14% 7% 2% -7% 12% 3% -4% 10% 13% 1% -6% -15%
Source: Department of HUD, Fulton Research
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
LT
M
20
19
P
20
20
P
20
21
P
20
22
P
Pe
rmits Issu
ed
Permits by Year - Washington MSA
SF Permits MF Permits SF Forecast MF Forecast
DC AND MOCO ARE CORE MF MARKETS
0 2,000 4,000 6,000 8,000
Alexandria
Arlington
Fairfax
Loudoun
Prince William
Spotsylvania
Stafford
Fredericksburg City
Montgomery
Frederick Co (MD)
Frederick City (MD)
Prince Georges
Calvert
Charles
Washington, DC
Multifamily Permits Issued by County, Year ending October 2019
Multifamily
20
YOY change shows inherent volatility in MF development
-3,000 -2,000 -1,000 0 1,000 2,000 3,000
Alexandria
Arlington
Fairfax
Loudoun
Prince William
Spotsylvania
Stafford
Fredericksburg City
Montgomery
Frederick Co (MD)
Frederick City (MD)
Prince Georges
Calvert
Charles
Washington, DC
Number Change in Multifamily PermitsYear-over-Year, October 2019
Multifamily
MD
VA
DC
PGC AND LOU ARE TOP SF MARKETS
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Declining numbers show supply constraints in MD and VA
0 500 1,000 1,500 2,000 2,500
Alexandria
Arlington
Fairfax
Loudoun
Prince William
Spotsylvania
Stafford
Fredericksburg City
Montgomery
Frederick Co (MD)
Frederick City (MD)
Prince Georges
Calvert
Charles
Washington, DC
Single-Family Permits Issued by County, Year ending October 2019
Single-family
-400 -300 -200 -100 0 100 200
Alexandria
Arlington
Fairfax
Loudoun
Prince William
Spotsylvania
Stafford
Fredericksburg City
Montgomery
Frederick Co (MD)
Frederick City (MD)
Prince Georges
Calvert
Charles
Washington, DC
Number Change in Single-Family Permits IssuedYear-over-Year, October 2019
Single-family
MD
VA
DC
Local Market Fundamentals
1. Low supply of new and existing homes
2. Strong demand conditions: moderate job growth and demographic tailwinds
3. Good affordability conditions with low rates, low appreciation, stable values
Trends for 2020Notable product designs and other trends
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HOUSEHOLD GROWTH WILL BE 25–44 AND 65+
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Household growth by age group, 2019–2024
+17%+6%
25–4445–64 65+
-2%
Source: ESRI, Fulton Research
YOUNG COUPLES/SINGLES
• Great segmentation –condo and townhome from mid-$300s to high-$400s
• Front-load towns allow for rear decks with premium views
• Little competition in the Crofton submarket
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Riverwalk at Crofton offers central location and well-targeted designs
Source: Builder websites, Fulton Research
MULTI-GEN HOUSING OPTIONS
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Private space for up to 3 generations
✓Main-level suite with privacy entry
✓ Lower-level suite with finished rec room
✓ 3-car garages
✓Plans with private entrances
Source: Builder websites, Fulton Research
COST-CONSCIOUS EMPTY NESTERS
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Garage version of Ryan’s popular Chambord condominiums
• Meets deep market for product targeted to cost-conscious empty nesters
• 1-car garage plus surface parking
• Large units with 1,489 to 1,783 square feet
• Private outdoor living area
Source: Builder websites, Fulton Research
CLOSE-IN EN: BIRCHWOOD AT BRAMBLETON
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Miller & Smith provides SFD alternative with single-level living
• Innovative courtyard designs at density of 6 Du/Ac
• Segmentation comes with plan dimensions (50’ and 67’ wide) and yard features.
• Both plans are same size (2,491 SF) and same price ($594K)
Source: Builder websites, Fulton Research
1Fed rate hike process
begins
Began rising then
droppedOK
2Unemployment reaches
low/full employment
levels
2.8% Local
3.5% NationalConcerning
3Treasury Yield
Inversion
Inverted briefly in
March then returned to
normal
OK
4 Housing starts falling
Stable at all-time low
when looking at starts
per population
OK
5Leading Economic
Indicators fall 4-6
months into a recession
Currently stable, but
slightly negative for 4
months
Concerning
6Sector Overheating
(housing, auto, CRE)
Watch list
Auto credit
Manufacturing
Trade war
Middle East tension
OK – for
now
Economy Watch
We watch six indicators that could suggest the US economy is moving closer to a recession.
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