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Charting the market: Builders hit by lack of land
Question of the Day
The recent woes of the housing market have been harder on homebuilders than almost anyone else.
When people stopped buying existing homes in large numbers, it simply meant those homes weren't changing hands from one owner to another. When people stopped buying new homes, however, it caused home construction to slow. And that meant homebuilders weren't making profits, buying materials and hiring workers.
Another thing working against builders is that new homes typically cost more than existing ones. Price-conscious home shoppers often prefer existing homes, which is one reason new-home sales fell further and faster when things slowed down.
The last year of the real estate boom was 2005. Since then, existing-home sales have fallen 24 percent. New-home sales, on the other hand, have fallen 68 percent since 2005.
For this reason, Washington-area builders have reason to celebrate even the modest 5 percent rise in new-home sales during the first three quarters of 2012.
Yet even in 2007, when the slowdown was under way, area builders sold twice as many new homes as they did the same period last year. That is mostly because of less demand among homebuyers, but there is another thing working against builders in our area: a shortage of land.
Fairfax County was the area's largest market for new homes in the mid-1990s. Nearly 4,000 homes were sold there during the first three quarters of 1996. Last year? Just 228, because most of the buildable land has been built on.
Construction has moved farther outside the Beltway because of land shortages. Yet even Loudoun County, the current leader in Washington-area new homes, saw just 1,439 new-home sales by the end of September. Compare that to 4,100 during the same nine months in 2003.
That drop in sales figures is a result of a decline in both buyer activity and available land. The first is increasing. The second is harder to address because the only available land now is much farther from the job centers, making it less attractive for development.
As a result, it is hard to imagine that Washington-area builders will ever again see the level of sales activity they did 10 to 20 years ago.
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