- - Thursday, July 12, 2012

Sales of new homes in the Washington region rose during the first quarter of 2012, something you can’t say every year.

With 1,836 new homes sold, area builders enjoyed an increase of 8 percent over the first quarter of 2011. This is an even bigger deal than it may appear to be. First-quarter new-home sales have fallen in 7 of the past 10 years. Even the years that saw an increase couldn’t slow the steady decline in new-home activity, driven both by market dynamics and by the disappearance of available land on which to build.

If you look back to 2000, you see that more than 9,000 new homes were sold during the first quarter. That is more than area builders sold during all 12 months of 2011.

Enough of the bad news. It is encouraging to see that the increased competitiveness we have noted in the existing-homes market is translating into better sales on the new-homes side.

One strategy builders have employed in recent years to compete with the existing-homes market - where homes typically cost less per square foot than new ones - is to lower their prices.



This isn’t easy, given the rising costs of materials, labor, taxes and various fees.

The median price per square foot of new homes sold in 2011 fell by 7 percent in the District, 10 percent in Montgomery County and 21 percent in Alexandria.

This year, prices increased in most jurisdictions, perhaps a result of the mild improvement in sales.

If the overall real estate market continues to improve and buyers become frustrated by the lack of available inventory in the existing-homes market, we could see things improve further for builders.

Although land is scarcer near the Beltway, counties such as Stafford in Virginia and Frederick in Maryland have plenty of remaining land at a distance that many find acceptable for commuting.

Loudoun County is not too far from Reston and Tysons Corner, yet it offers new homes on more land at a significantly lower cost than other jurisdictions. That’s why it’s the largest new-homes market in the Washington area.

Send email to csicks@gmail.com.

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