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Market Insight

Market Insight. October 16, 2009. John Birge, Regional Director Washington, DC. Washington, DC. Washington, DC Area Quick Facts. Large, growing population of 5.4 million residents comprising over 2 million households. Government presence has buoyed economy during recession.

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Market Insight

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  1. Market Insight October 16, 2009 John Birge, Regional Director Washington, DC. Washington, DC

  2. Washington, DC Area Quick Facts Large, growing population of 5.4 million residents comprising over 2 million households. Government presence has buoyed economy during recession Ranked #7 Healthiest Housing Market out of the top 200 MSAs in 2009 Strong technology sector Highly Skilled, Educated workforce High per capita income Lots of families Sources: Census Bureau, Hanley Wood Market Intelligence Market Health Report and Washington, DC Market Snapshot

  3. Washington, DC Area Quick Facts Labor market better than most places, but still contracting High Co$t of Living Severe Traffic Congestion Impacts Lifestyle Strong anti-development movement can make for challenging conditions Sources: Census Bureau, Hanley Wood Market Intelligence Market Health Report and Washington, DC Market Snapshot

  4. Current SituationWhere have come from and where we are today • Economic Factors • Market Health • Jobs • Population • New Construction • New Home Trends • Builder Market Share

  5. Current SituationEconomic Factors Source: Hanley Wood Market Intelligence Market Snapshot

  6. Current SituationWashington DC Outperforms in Market Health MARKET HEALTH INDICATOR INDEX BY MONTH, WASHINGTON DC-MD-VA-WV VERSUS TOP 200 MSAs Source: Hanley Wood New Home Market Health Report

  7. Current SituationWashington DC Ranked #7 out of Top 200 in Health MARKET HEALTH INDICATOR INDEX TOP 200 MSAs, SEPT. 2009 UPDATE Source: Hanley Wood New Home Market Health Report

  8. Current Situation: JobsJob Losses not nearly as bad as in 1990 TOTAL NON-FARM JOB GROWTH BY YEAR, WASHINGTON DC-MD-VA-WV 2009* Job Growth -30,000 Note: 2009-2011* is projection. Data is year over year change. Source: U.S. Bureau of Labor Statistics, Hanley Wood Market Intelligence, Economy.com

  9. Current Situation: JobsGovernment and Services Sectors Largest Job Sources Source: U.S. Bureau of Labor Statistics. As of 2nd Quarter 2009.

  10. Current Situation: JobsGovernment And Services Lead Job Market, Mitigating Losses Source: U.S. Bureau of Labor Statistics. As of 2nd Quarter 2009.

  11. Current Situation: Population Stable Growth Good Foundation for Future Housing Demand POPULATION GROWTH BY YEAR, WASHINGTON DC-MD-VA-WV Source: U.S. Bureau of Census, Hanley Wood Market Intelligence

  12. Current Situation: New ConstructionStrong Pullback in Supply Since 2005 RESIDENTIAL PERMIT ISSUANCE BY YEAR, WASHINGTON DC-MD-VA-WV 2009* Total Residential Permits: 11,854 Note: 2009* is projection. Data for West Virginia only contains Jefferson County. Source: Census Bureau, Hanley Wood Market Intelligence Market Monitor.

  13. Current Situation: New Home SalesRising off Bottom, Breaking 3,000 for 2nd Quarter NEW HOME SALES BY QUARTER, WASHINGTON DC-MD-VA-WV 2Q09 New Home Sales Washington DC-MD-VA-WV: 3,007 Note: Data for West Virginia only contains Jefferson County. Source: Hanley Wood Market Intelligence Market Monitor

  14. Current Situation: New Home SalesRate Per Project Back to 2007 Levels NEW HOME SALES PER PROJECT BY QUARTER, WASHINGTON DC-MD-VA-WV Source: Hanley Wood Market Intelligence Market Monitor

  15. Current Situation: New Home PricesMedian Detached Prices Start to Stabilize NEW HOME DETACHED MEDIAN PRICE BY QUARTER, WASHINGTON DC-MD-VA-WV 2Q09 Detached Median Price Washington DC-MD-VA-WV: $411,122 k k k k Source: Hanley Wood Market Intelligence Market Monitor

  16. Current Situation: New Home PricesMedian Attached Prices Still Slipping NEW HOME ATTACHED MEDIAN PRICE BY QUARTER, WASHINGTON DC-MD-VA-WV k k k 2Q09 Detached Median Price Washington DC-MD-VA-WV: $309,900 k k Source: Hanley Wood Market Intelligence Market Monitor

  17. Current Situation: New Home PricesPrice and Interest Rate Declines Mean Big Affordability Gains % OF HOUSEHOLDS THAT CAN AFFORD A MEDIAN PRICED NEW HOME ASSUMING CONFORMING LOAN GUIDELINES BY YEAR AND CURRENT QUARTER WASHINGTON DC-MD-VA-WV 2Q09 Affordability Ratio 40.3% Source: Hanley Wood Market Intelligence Market Monitor

  18. Current Situation: New Home PricesDistribution Shows Majority in $300K-$400K Price Range NEW HOME NET SALES BY BASE ASKING PRICE, 8 MONTHS YTD 2009 WASHINGTON DC-MD-VA-WV Source: http://www.hwmarketintelligence.com

  19. Current Situation: Sales Cancellations Both Attached and Detached Well Off Peak NUMBER OF NEW HOME SALES CONTRACTS CANCELLED BY QUARTER, WASHINGTON DC-MD-VA-WV Source: Hanley Wood Market Intelligence Market Monitor

  20. Current Situation: New Home ProjectsWatch Pipeline for New Projects as Demand Recovers ACTIVE NEW HOME PROJECTS BY QUARTER, WASHINGTON DC-MD-VA-WV Total Active Projects:888 Source: Hanley Wood Market Intelligence Market Monitor

  21. Current Situation: Months of SupplyStanding Inventory Decline and Sales Stabilization Helps MONTHS OF STANDING INVENTORY IN NEW HOME PROJECTS BY COUNTY AND BY QUARTER, WASHINGTON DC-MD-VA-WV Source: Hanley Wood Market Intelligence Market Monitor

  22. Current Situation: Monthly Sales MCBIA Counties Largely Follow Greater MSA Trends NET NEW HOME SALES JAN 2006-PRESENT WASHINGTON DC-MD-VA-WV * D.C. MSA Coverage Excludes Falls Church, Fredericksburg, Manassas, & Manassas Park Source: Hanley Wood Market Intelligence Builder InfoTools

  23. Current Situation: Monthly Inventory Standing Inventory Falling More Slowly in MCBIA Area UNITS OF STANDING INVENTORY JANUARY 2006 - AUGUST 2009 WASHINGTON DC-MD-VA-WV * D.C. MSA Coverage Excludes Falls Church, Fredericksburg, Manassas, & Manassas Park Source: Hanley Wood Market Intelligence Builder InfoTools

  24. Current Situation: Monthly Prices MCBIA Counties Doing Slightly Better This Year MEDIAN NEW HOME BASE PRICE OF UNITS SOLD, 8 MONTHS YTD 2009 WASHINGTON DC-MD-VA-WV * D.C. MSA Coverage Excludes Falls Church, Fredericksburg, Manassas, & Manassas Park Source: Hanley Wood Market Intelligence Builder InfoTools

  25. Current Situation: Monthly Cancels MCBIA Counties Doing Slightly Better This Year NEW HOME SALES CANCELLATIONS JANUARY 2006 – AUGUST 2009 WASHINGTON DC-MD-VA-WV * D.C. MSA Coverage Excludes Falls Church, Fredericksburg, Manassas, & Manassas Park Source: Hanley Wood Market Intelligence Builder InfoTools

  26. Current Situation: Builder Share Entire MSA – Top 10 Capture 50% of Market BUILDER MARKET SHARE JANUARY 2006 – AUGUST 2009 WASHINGTON DC-MD-VA-WV

  27. Current Situation: Builder Share MNCBIA Counties – Top 10 Capture 55% of Market BUILDER MARKET SHARE JANUARY 2006 – AUGUST 2009 MNCBIA COUNTIES ONLY

  28. The Good News for New Home Sales in the DC Market • Trailing 12 month net sales up 8.5 % ! • YTD net sales up 21.2% !! • Trailing three months net sales up 36%!!! • Sales rates per project up 18.6%, 39.8% and a whopping 60.9 percent over the same three periods

  29. Good News Also for New Home Sales in the Six MNCBIA Counties • Trailing 12 month net sales up 18,2% ! • YTD net sales up 22.2% !! • Trailing three months net sales up 30.2%!!! • Sales rates per project up 22.2%, 35.3% and a whopping 50.5 percent over the same three periods

  30. Not Quite as Good of News for the Asking Median Prices Across the Region • Trailing 12 month median asking price down 9.7% • YTD median asking price down 8.6% • Trailing three months median asking price down 10%

  31. Not Quite as Good of News for the Asking Median Prices for the MNCBIA Counties • Trailing 12 month median asking price down 7.0% • YTD median asking price down 6.6% • Trailing three months median asking price down 8.8%

  32. Inventory Levels are Improving across the MSA

  33. Overall Supply and Absorbsion for MNCBIA Counties

  34. Looking Ahead: Forecasting 3-5 Year Forecasts on Key Metrics • Households • Non-farm Employment • Unemployment Rate • Median Income • Median Existing Home Price

  35. Looking Ahead: Households Stable Growth Exceeds Average NUMBER OF HOUSEHOLDS (THS.) THROUGH OCT 2013, WASHINGTON DC-MD-VA-WV VERSUS AVERAGE OF TOP 200 MSAs WASHINGTON, DC-MD-VA-WV AVERAGE MARKET Source: Hanley Wood New Home Market Health Report

  36. Looking Ahead: Employment Short-term Outperformance Will Eventually Wane NON-FARM EMPLOYMENT (THS.) THROUGH OCT 2013, WASHINGTON DC-MD-VA-WV VERSUS AVERAGE OF TOP 200 MSAs WASHINGTON, DC-MD-VA-WV AVERAGE MARKET Source: Hanley Wood New Home Market Health Report

  37. Looking Ahead: Unemployment Local Sector Strength to Keep More People in Jobs UNEMPLOYMENT RATE THROUGH OCT 2013, WASHINGTON DC-MD-VA-WV VERSUS AVERAGE OF TOP 200 MSAs UNEMPLOYMENT RATE Source: Hanley Wood New Home Market Health Report

  38. Looking Ahead: Median Income Strong Income Trends Expected to Continue MEDIAN INCOME THROUGH OCT 2013, WASHINGTON DC-MD-VA-WV VERSUS AVERAGE OF TOP 200 MSAs MEDIAN INCOME Source: Hanley Wood New Home Market Health Report

  39. Looking Ahead: Existing Home Price Expected to Trend Upward Slightly Faster Than Average MEDIAN EXISTING HOME PRICE (THS.) THROUGH OCT 2013, WASHINGTON DC-MD-VA-WV VERSUS AVERAGE OF TOP 200 MSAs Source: Hanley Wood New Home Market Health Report

  40. Looking Ahead: Consumer Demand Providing for the Home Buyers of Tomorrow • Why Study Consumers? • Identifying Consumer Groups • Market Heat Map

  41. Looking Ahead: Consumer Demand Why Study Consumers? • Source of real demand • Enable quantitative and qualitative insights • Help optimize financial potential • Basis of focus from concept to delivery • Simple demographics can be very misleading as different types of consumers have different needs and preferences for housing ≠ ≠ ≠ ≠

  42. Looking Ahead: Consumer Demand How Do We Use These Groupings? • Understand market conditions • MSA • County • Identify and understand Demand • By consumer group • By price point • Identify competition and Supplyby price point • Builder/community market share • Prior 12 months absorptions • Inventory • Developed lot pipeline • Forecasted supply

  43. Looking Ahead: Consumer Demand The Wide View Is Just The Beginning • Providing for the Home Buyers of Tomorrow Requires Detailed Local Analysis: • Household counts down to census block groups and estimated 5 year growth • Localized demographic profiles, including: • Age • Income • Home values • Presence and age of children • Occupations • Rich behavioral, psychographic,and lifestyle profiles: • Media usage • Shopping habits • Hobbies • Home ownership and home purchase plans

  44. Looking Ahead: Consumer Demand Who are the Homebuyers of Tomorrow? 2010 CONSUMER DEMAND BY GROUP WASHINGTON DC-MD-VA-WV

  45. Looking Ahead: Consumer Demand Who are the Homebuyers of Tomorrow? 2010 CONSUMER DEMAND BY PRICE WASHINGTON DC-MD-VA-WV

  46. Take Aways What We Have Covered Today • Washington DC area economy has its issues, but is better than most • New Home Market is stabilizing, improving slightly • Metro is forecasted to outperform other areas in the near term as reflected in 3-5 year forecasts • In order to meet the needs of future home buyers, examining the lifestyles and behaviors of specific consumer groups will be increasingly important

  47. Questions? For more information on the content of this presentation, please contact: John Birge Regional Director Hanley Wood Market Intelligence 202.729.3590 jbirge@hanleywood.com Or visit us online: www.hwmarketintelligence.com www.hanleywood.com

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