Overview

After a year in which the new home market in RVA began to stabilize by posting solid growth, there was a great deal of optimism heading into 2014. The first half of 2014 has provided few highlights, and the uneven gains discussed in this report reinforce how frag-ile the new home industry remains. Perhaps the most significant event in the first half of 2014 was the weather. A brutal and extended winter took its toll on the new home mar-ket as both closings and permits were down in the first half of 2014. Home prices, which were up compared to the first six months of 2013, were a silver lining and indicate both increased costs associated with building and more demand in the market. As HBAR and Commonwealth Partnerships (CWP) discuss in this report, based on data provided by IRR-Richmond, the housing industry continues to recover, but is far from optimal market conditions. As the country’s broader economy shows increased signs of life, HBAR and CWP expect further improve-ments in the new housing sector as well. This is especially true in the spring and summer months, which are typically busy time periods for home sales and construction. A healthy home building industry remains critical to the broader economy. New home construction brings investments, jobs, and people. It remains a key economic driver in Central Vir-ginia and will play a critical role in our region’s economic vitality.

At A GlanceMid- Year 2014 vs. 2013

Number of closings: 2%

Number of permits: 8%

New home price: 7%

New Home SalesBased on the data provided by IRR for this report, the number of new home closings were down slightly while average prices of new homes were up in the first half of 2014 compared to the same time period in 2013. The number of closed new home sales decreased 2% to 1,169 in the first half of 2014 compared to the first six months of 2013. The average price for a new home in the Richmond region was up 7% in 2014 compared to 2013 and reached $356,607.

Chesterfield County remains the most active local jurisdiction for new home sales. During the first half of this year, the county captured a 40% market share. Henrico County had the next largest share at 28%. The region’s most populous suburban counties -- Chesterfield, Henrico, and Hanover -- accounted for

82% of all new homes sales in the local market. Year over year, Henrico experi-enced the largest jump in sales at 9% while Caroline County saw the steepest drop in the home sales, down 32%. Home prices fared better and increased across the region as Powhatan County led the way with the average new home price up 23%. The cor-responding chart details new home closings and prices.

Photo Credit: LeGault Homes

1Tracking Central Virginia’s New Home Market

RVA New Home Market Report2014 Mid-Year in Review

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2Tracking Central Virginia’s New Home Market

Multifamily

Photo Credit: Property Results

Given the popularity of multifamily developments and the financing available for such deals, HBAR and CWP expect that more multifamily and mixed-use projects, both large and small, are likely in the coming years.

HBAR’s Take: The multifamily boom in Chesterfield can be attributed to a number of large scale apartment developments in the county, including Belmont at Chesterfield Towne Center. The drop in per-mits in Richmond and Henrico does not mean that construction has stalled but that a large number of permits were pulled at the end of 2013.

The multifamily housing market remains the bright spot in the new home industry. As the corresponding chart demonstrates, new construction in the apartment sector continues to rise. The number of permits issued rose 17% in the first six months of 2014 compared to the same timeframe in 2013. The 548 permits issued in the first half of 2014 represents the largest number of permits issued in the first half of the year since before 2006. In 2013, the City of Richmond led the apartment building boom, but in the first half of 2014, Chesterfield County has issued far more multifamily permits than any other jurisdiction. Surprisingly, Henrico County did not issue any permits between January and June this year.

Building PermitsThe number of residential building permits issued for new construction was down 8% in the first half of 2014 compared to the first half of 2013. Not surprisingly, weather played a big factor in the lack of permits. Similar to the number of new home closings, Chesterfield County has consistently been the most active local-ity. The suburban counties of Chesterfield, Hanover, and Henrico have historically issued the vast majority of permits and continued to do so thus far in 2014. These

permit trends are not surprising given the number of new

CWP’s Take: The decline in building permits can be attributed to two key factors: the weather and builders putting up fewer spec homes. The drop in permits also could be a leading indica-tor for a coming slowdown in new home closings as fewer homes are in the process of getting built.

Photo Credit: Mitchell Homes

homes built and sold in those counties.

Attached Housing

Photo Credit: HHHunt

What’s Next

CWP’s Take: This mid-year report highlights that the first half of 2014 has been a good one for the new home building industry. Despite the drag from the weather in the first quarter, new home sales were generally flat. More significantly, home prices con-tinue to rise, which underscore the strength of the local market and demand for new homes. We expect that by the end of the year, 2014 will be seen as another solid step toward recovery.

Photo Credit: Biringer Builders

Based on the data provided by IRR for this report, HBAR and CWP conclude that although there were mixed results in the first six months of 2014, multiple signs indi-cate that the new home recovery continues but remains fragile. We expect that prices will rise and new home sales will recover by the end of the year. Builder confidence remains solid in Central Virginia and a number of factors support sustained growth in the new home market, including affordable pricing and favorable financing that is widely available. Despite this optimistic outlook, there are a number of challenges that developers and new home builders face, such as the rising cost of building supplies, availability of new building lots, and regulatory burdens. Looking ahead, HBAR and CWP expect key metrics for 2014 to be positive as building permits, home sales,

and home prices all increase. Although positive, it’s important to keep any gains in the proper context of a long-term recovery. The new home industry has made a lot of strides, but there is still a long way to go on the road to “normal.”

The attached housing sector had mixed results across various local jurisdic-tions. As illustrated in the corresponding chart, attached housing, consisting of condominium units and townhouses, accounted for 25% of all new homes sold in the local market during the first six months of 2014. This market share represents a 2% drop from the first half of 2013 and the lowest level since before 2010. HBAR and CWP believe that the dip in the attached housing market is the result of large communities with significant attached housing components entering the final phases of development, most notably West Broad Village in Henrico County.

3Tracking Central Virginia’s New Home Market

IRR’s Take: A number of attached housing com-munities are currently being planned or developed. The majority of the new devel-opments are located in Henrico County and will offer new townhomes. Lot yields in the new communities range from 22 townhouse lots in The Townes at Ridge-field to approximately 225 lots in Green-Gate.

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About the Report and Methodology

The RVA New Home Market Report is an unbiased and independent report that provides information and insight on the new home industry in Central Virginia. A collaboration of the Home Building Association of Richmond (HBAR) and Commonwealth Partnerships (CP), with data provided by Integra Realty Resources-Richmond (IRR), the report is issued on a semi-annual basis. It offers data and analysis on key market metrics, including new home sales, prices, and building permits.

The information included in this report represents housing market activity in seven Central Virginia jurisdictions: Caro-line County, Chesterfield County, Goochland County, Hanover County, Henrico County, New Kent County, Powhatan County, and the City of Richmond. All exhibits were prepared using sales and building permit data collected directly from various depart-ments of each jurisdiction. Data was gathered by Integra Realty Resources-Richmond. The reported new home closings repre-sent sales of new homes that were closed and recorded during the time periods indicated. The report does not identify the sales of homes built on lots owned by homebuyers, as such sales do not appear as new home sales in public records.

Home Building Association of Richmond (HBAR)The Home Building Association of Richmond is the professional trade association of the home building industry in Central Virginia, serving builders and service providers. HBAR is dedicated to the American dream of homeownership by providing resources and support to the home building community and home buyers. For more information, visit www.hbar.org.

Integra Realty Resources-Richmond (IRR)IRR-Richmond provides complete real estate valuation and advisory services, including mar-ket and marketability studies, highest and best use and feasibility analyses, site location, ac-quisition and development counseling, zoning and land use consultation, investment analysis and tax appeal, and litigation support. The firm also publishes the Integra Residential Report, released quarterly since the late 1980s, which provides a comprehensive analysis of the hous-ing market in the Richmond region with an emphasis on the new construction segment of the market. For more information, visit www.irr.com

Commonwealth Partnerships (CWP)Commonwealth Partnerships works with organizations and professionals in Virginia to de-velop and implement strategic marketing and communications campaigns for industries that support economic development, including real estate, A/E/C, professional services, nonprof-it, senior living, and transportation. With award-winning experience, we focus on eight areas of service: branding and creative, content marketing, public relations, advertising, website development, social media, community relations, and research and analysis. For more infor-mation, visit www.cwpmarketing.com.

4Tracking Central Virginia’s New Home Market