A report just released by the Bureau of Labor Statistics entitled, "Housing: Before, During and After the Great Recession" on the subject of the cost of living across the United States has just pegged the Washington, DC Metropolitan area as being the most expensive region in the country to live. We thought this provided a good opportunity to take a look at the regional residential market.
Residential real estate is a key indicator in determining the health of an economy. As it's typically the biggest investment most people will make in their lifetime, increased investment in residential real estate indicates that people are confident in their ability to find and keep gainful employment and accompanies other consumer expenditures. Furthermore, residential construction stats – permits, starts and completions - are leading indicators that can clue us in to whether the business cycle is heating up or cooling off.
A close look at the existing residential sales markets by jurisdiction reveals some positive signs for the DC Metro market overall, but also shows that some jurisdictions are faring better than others. Those jurisdictions that are close to the urban core – Arlington, and Falls Church, VA and Montgomery and Prince George’s Counties, MD are seeing stellar activity – all with greater sales volume than a year ago, average pricing up, and more units sold. Jurisdictions further away from the core – Fairfax and Loudoun Counties and the City of Alexandria, VA, are a different story, with volume down from over a year ago as well as average pricing and units sold flat to negative.
Perhaps this is a function of people wanting to live closer to downtowns in general, but I wouldn’t be surprised if even the suburbs take off soon. With the price of the average single family detached home eclipsing $1 million in Arlington, the District of Columbia and Falls Church, a lot of first time buyers and young families will be forced to move further out for that extra bedroom.
In any case, it will be no small feat for most to come up with a 20% down payment to secure a traditional loan. So, either financing becomes increasing creative (we all know the possible side effects here with some residential markets still recovering from the 2008 crash), or we have renters for perpetuity. With this in mind, maybe taking that down payment on an average house in DC and investing it in multifamily instead might be a good bet.
By: Nathan Edwards
Director of Research, Cassidy Turley - Washington, D.C.
Email Nathan: Nathan.Edwards@cassidyturley.com
Follow Cassidy Turley on Twitter: @CassidyTurleyRE
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