- The Washington Times - Wednesday, February 28, 2007

Slightly more than 20,000 new homes were sold in the Washington metropolitan area last year, down 20 percent compared to 2005.

Last year was the slowest year for builders in a long time. My records go back to 1991. Most years since then saw 26,000 to 30,000 sales. Until last year, the slowest had been 2001, when 22,000 new homes were sold.

Why were sales so slow last year, particularly considering the region’s healthy economy and growing population? Are buyers losing interest in new homes?

Not really. Three factors, at least, contributed to last year’s low sales figures:

First, existing-home sales fell 23 percent last year. It was a slower year for real estate overall, not just a bad one for builders.

Second, buyers became more price sensitive in recent years as area home values went through the roof. Because new homes often cost more than resales, some buyers could be shying away from buying new.

For example, in Fairfax County last year, the average sales price for an existing detached home was $741,000. The average base sales price for a new detached home was $860,000.

The gap was smaller, but still present, in other counties. But it was much larger in Prince George’s County. The existing-home average last year was $398,000, while the new-home average was $655,000.

The third factor affecting last year’s new-home sales is the lack of land on which to build. Today’s data refers to the core metropolitan area.

In 1991, the two largest new-home markets were Fairfax and Prince George’s counties. And new-home sales made up 35 percent of total home sales in the region.

Last year, the biggest new-home markets were Loudoun and Prince William counties. Only 18 percent of total sales were new homes.

New homes are still being built, but builders today are driving to West Virginia, Delaware and Pennsylvania to find land for construction.

One more interesting tidbit about last year’s data. Virginia new-home sales slowed much more than Maryland’s did.

Compared to 2003, new-home sales in Virginia were down by 5,400 last year, while Maryland’s sales were only down 550 compared to 2003. This happened with existing-home sales last year, too.

Contact Chris Sicks by e-mail ([email protected]gmail.com).

The metropolitan area includes the Maryland counties of Montgomery, Prince George’s, Anne Arundel, Howard, Charles and Frederick; the Virginia counties of Arlington, Fairfax, Loudoun, Prince William, Spotsylvania and Stafford; the city of Alexandria; and the District.

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