Northern VA New Construction Homes Market Updates
2nd Half of 2021
• At the end of November of 2021, there were 566 new construction homes listed in the MLS in Northern VA*.
• 1 Year ago in Nov. of 2020, there were 1,381 listed.
• 2 Years ago, in Nov. 2019, there were 1,829 listed.
This means that new construction MLS inventory is down 59% from November 2020, and 69% from November 2019.
This is a staggering decrease, and although some inventory is sold without being listed in the MLS, it shows the challenges that the market is facing. There are challenges both for new home buyers and the builders.
The factors influencing the market include:
- Increased demand from low interest rates.
- Decreased material supply from backlog in supply chains.
- Increased cost to build.
- Less resale homes for sale, new home inventory has been bought up.
- Increased competition for buildable land.
If you are looking to purchase a new home, it can still be done. Generally, it will just take a little more patience and flexibility.
When you find a home that you potentially like, it is best to move quickly.
If you have a long term goal to live in the home, it is a great opportunity to lock in a low interest rate, which are still near historic lows.
Be aware that the market is in the favor of the builders right now, so you are likely to see less incentives, and possible less negotiation (or none) on the asking price and price of options.
1st Half of 2021
2020 and 2021 have been as crazy for the construction industry as it has been for the rest of the world.
Northern VA is no different. New development of both raw land and existing older homes is a crucial part of the market.
The Northern VA market overall has had an inventory problem for some time. You would think that when there are few homes for sale, builders are incentivised to begin to build and make up the deficit.
However, that has not happen. Delays in material shipments, increases in lumber and other material prices and other supply chain problems made building new homes more of a challenge than usual.
On top of that,1829 builders had to acquire land to build. The real estate market in Northern VA has been red hot and builders have had to compete with other buyers for homes to tear down and land to develop.
So the inventory has been kept extremely low, for both resale and new construction homes.
So where are we now? Let’s have a look.
Northern VA New Home Asking Prices Have Increased
This is not a surprise, as builders cost to build a home rises, so do the asking prices.
And they have consistently been receiving the asking price for homes that are selling, with the average sale-to-list price hovering right around 100% according to the BrightMLS data.
However, if you are buying you will benefit from the fact that the rates are historically low in 2021, so if you are looking to live in a home long term there is still opportunity in the market of new construction.
Low Inventory of New Homes
Just like the rest of the Northern VA market, the inventory has taken a huge hit on the new construction home front.
As mentioned above, builders have struggled to find new land to build on. On top of that, delays with supplies, quick sales of current inventory and permitting backups have caused the supply to fall.
The question is, when will the inventory problem in Northern VA get better?
New Listings of New Homes are Steady
The cure for an inventory problem? More listings for sale. New construction home listings have seen a little increase since April, however there are not a large jump, YET.
“Yet” is the big word there. The number of resale listings in June 2021 were 21% higher than June of 2020.
And the number of new resale listings has increased year over year for the last 4 consecutive months. July is on pace to make that 5 consecutive months.
So how does resale inventory affect new construction?
When there are more resale homes for sale, more new construction homes will stay on the market longer and allow the supply to catch up. But it will likely take awhile to catch up. Especially since other factors still need to be worked out, such as supply of lumber and other materials.
- New homes so far in 2021 continue to be in a state of low inventory, both nationally and in Northern VA. However, there have been signs in the summer that the inventory could increase some time soon.
- As a result of Covid, builders have dealt with material shortages that have affected the cost to construct a home. Permitting also was backed up in many counties as homeowners stuck at home took on new projects.
- The mortgage rates are at historic lows still in mid 2021, and it is generally expected they will hover around, give or take, the 3% mark for the near future.
- There could be a good opportunity for you if you are looking to buy a new construction home in Northern VA, because the rates continue to be low, and the supply of resale homes is increasing.
What Areas are Included?
These stats cover the following “Northern VA” area: Fairfax County, Loudoun County, Prince William County, Alexandria City, Arlington County, Fairfax City, Falls Church City, Manassas Park, Manassas City.
- Here is more information about builder’s material escalation clauses. These have become much more common in new construction contracts since 2020.
- Here is more information about whether to get a home inspection on a new construction property.
- If you want to stay updated on the Northern VA real estate market as a whole, bookmark this page.
- Here is the ultimate guide on new construction homes in Northern VA.
Have a real estate question? In the market to look for a new construction home in Northern VA?
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