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2018 Market Wrap-Up & Panel Discussion
Presented to NVBIA December 11, 2018
1
Dan Fulton, Senior Vice President703.447.7171
RESALE MARKET PERFORMANCE AND FORECAST68
,987
76,399
81,744
84,913
83,452
82,900
82,000
78,000
77,000
$380,000$390,000$400,000$410,000$420,000$430,000$440,000$450,000$460,000
60,000
65,000
70,000
75,000
80,000
85,000
90,000
2014 2015 2016 2017 Current 2018P 2019P 2020P 2021P
Resale Sales and PricesResale Sales Median Resale $
2
Resales dropped 1.7% YOY, but gained market share
$477K
$420K
NEW HOME PERFORMANCE AND FORECAST11
,889
11,771
12,175
12,920
11,601
11,400
12,900
13,600
13,400
$440,000
$460,000
$480,000
$500,000
$520,000
$540,000
10,00010,50011,00011,50012,00012,50013,00013,50014,000
2014 2015 2016 2017 Current 2018P 2019P 2020P 2021P
New Home Sales and PricesNew Home Sales Median New Home $
3
New homes cratered 11% YOY as rates rose over 4.5%
$529K
$477K
Demand
4
Federal Spending Drives the Local Economy
‐60,000
‐40,000
‐20,000
0
20,000
40,000
60,000
80,000
Job GrowthWashington MSA
5
17K
64K61K
6
0:15
1:05
0:55
0:50
1:15
1:30
1:20
1:30
POPULATION GROWTH WILL BE 25–44 AND 65+
7
Population growth by age group, 2018–2023
+172K3K
+151K
25–44 45–64 65+
Supply
8
PERMIT SUPPLY WILL REMAIN STABLE
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Current 2018P 2019P 2020P 2021P
Single‐Family and Multifamily Permits
SF Permits MF Permits
9
Intense competition among builders will continue
9K
13K
4K
11K
16K
Source: HUD, JBREC
LOW INVENTORY AFFECTS SALES
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
10,000
11,000
12,000
13,000
14,000
15,000
16,000
17,000
18,000
19,000
20,000
Mon
ths o
f Sup
ply
Listing Inventory
10
Low inventory is due to low housing turnover rather than higher sales
Equilibrium –4 months
2.2 mos
1.6 mos
2.8 mos
Source: National Association of Realtors, JBREC
Affordability
11
MORTGAGE RATE BASELINE – 4%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
Fixed Rate Mortgage – 20 Years
30Yr FRM
12
Survey: 180‐160 bps rate increase results in 24% to 49% drop in repeat buyers
6.4% to 3.7% over 10 years
3.0%
3.5%
4.0%
4.5%
5.0%
5.5%
Fixed‐Rate Mortgage – 2 Years
30Yr FRM
5.2%2021P
4.9%Oct. 2018
3.5%Oct. 2016
Source: Mortgage Bankers Association, JBREC
APPRECIATION AND RISING RATES
$1,800$1,900$2,000$2,100$2,200$2,300$2,400$2,500$2,600$2,700$2,800
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Mon
thly Paymen
t ($50
0K hou
se)
13
Payment on same house up 19% since 2016
$1,818
$2,498
$2,661
$2,107
+37% since 2012
+19% since 2016
Source: JBREC
COSTS RISINGS FASTER THAN PRICES
6.3%6.7% 7.0% 6.9%
8.0% 8.2%
5.2%5.7%
6.1% 6.2%6.8%
6.2%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
Construction costs Net price increasesComparison of National Construction Cost* and Net Price Increases12-month weighted averages
*Construction costs include labor and materials, but exclude the lot.
Source: John Burns Real Estate Consulting, LLC independent survey of ~16% of all US new home sales, NSA (Data: 3Q18, Pub: Oct-18)
14
Gap in Northeast is nearly 2X greater than the nation
7.5%
3.6%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
Cost Increase Price Increase
Northeast Region3Q 2018
Cost Increase Price Increase
390 bp
200 bp110 bp
Source: JBREC
Our Panel
15
PURCHASING POWER WEAKENS AS RATES RISE
‐8%
3%2%
‐3%‐2%
3%
9%
1% 1% 1%
$2,200
$2,300
$2,400
$2,500
$2,600
$2,700
‐10%
‐5%
0%
5%
10%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
PIT Paym
ent
Chan
ge in
Paymen
t
Change Payment
16
Payment on $500K loan increased 12% since 2016
$2,258
$2,613$2,540
APPRECIATION AND RISING RATES
‐3%
10%
5%
‐1%
1%
6%
12%
3% 3%1%
$1,800
$1,900
$2,000
$2,100
$2,200
$2,300
$2,400
$2,500
$2,600
$2,700
‐18%
‐13%
‐8%
‐3%
2%
7%
12%
17%
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Paym
ent
Chan
ge in
Paymen
t
Change Payment
17
Purchasing power down 19% since 2016
$1,818
$2,498
$2,661
$2,107
+37% since 2012
+19% since 2016
