Fairfax County elected officials are still threatening not to build Metrorail stations at Reston Parkway, Herndon-Monroe, and Route 28.   However, the Washington Business Journal reports that landowners along the Metro extension to Dulles, who have been fighting a special taxing district  because they’re not guaranteed increased density, are seeing some positive movement by the Fairfax County Board of Supervisors.   The Board is now conducting a special study of the increased density requests for each land parcel.  

There are two elements to this situation that should be addressed:

First, haven’t we learned our lesson from the Vienna Metro Station?  Higher density development is necessary within one-quarter to one-half mile of a Metro station to fill the demand for walkable residential neighborhoods (i.e. Transit Oriented Development)  and employment centers.  

Second, building this rail line without these stations would be a travesty that will live on for decades.  One primary reason to build the line is to alleviate traffic along the Dulles Toll Road - Route 7 corridors — and the residents who live beyond Wiehle Avenue are those who need it most. 

Our housing market is undergoing a seismic demographic shift.  Home builders and developers, being part of a demand-driven industry, have met the needs of the aging Baby Boomers for the last several decades.  This massive population have demanded suburban single family home development — until now.  Now this population demands closer-in, walkable, more lifestyle-oriented communities.  

There is only one way to build the Silver Line:  with the three stations and with increased density.   Otherwise, Metro and Fairfax County are building a monumental missed opportunity.

Over the last couple of months, I have heard incredible news come out of the resale housing markets in Northern Virginia. Resale listings are sold within 1-3 weeks on market and are seeing multiple offers, some at higher than list price. Foreclosure inventory is low and the process of buying a foreclosure is a hassle, so bargain hunters are now looking to market-priced listings. 

The latest listing inventory numbers in the Fulton Research Market Trends report, show that the three northern Virginia markets have less than six months worth of inventory.  Prince William County has 3.5 months inventory. 

This strong sales activity is likely due to the release of pent-up demand, low rates and government stimulus.    The limited supply of existing homes for sale leaves room for home builders to add new homes into the market — even pushing prices up a bit.  Enjoy this strong activity while it lasts, but don’t expect it to last forever.

-Dan

Don’t let current positive market conditions lull you into a false sense of security.  While Fulton Research called “the beginning to the bottom” of the Washington area housing market in April 2009, that statement came with a few qualifiers that may have been overlooked.  There is a minefield of economic problems ahead of us which we have to maneuver and we run the risk of a third leg to this downturn to begin later this year.    What are those problems?

• Rising unemployment into 2010 will result in declining housing demand.
• Alt-A and Option-ARM mortgages resetting this year, resulting in many high end properties hitting the foreclosure markets.
• There is a real threat of inflation, and skyrocketing interest rates, in 2010 and beyond. 
• Commercial real estate industry has a mortgage mess to deal with.  Many commercial loans are maturing this year and many will default as the credit markets are still frozen.  Those initial loans were made with aggressive underwriting, and now the pendulum has swung the other way.  Some analysts predict that commercial real estate values may drop as much as 30 percent. 

The housing activity we’re seeing today is largely government-manufactured, with low interest rates, tax credits and other stimulus.    Fulton Research analysts continue to look past the manufactured demand to see what the real economy has in store.

Today’s Case-Shiller report is doom and gloom nationally, but there is a positive angle to the local numbers.  

The Case-Shiller Composite-20 Index (i.e. the national sample) saw March home values drop 2.1% from the previous month, which is approximately the same monthly percentage decline as February.  In Washington, however, the trend is encouraging as home values decrease only 1.2% from February, an improvement from last month which saw Washington home values lose 2.3% from the previous month. 

This month-over-month improvement is the indicator that we have reached the bottom of the housing market.

Nationally, home values are on a rapid decline.  However, the Washington metro area is seeing signs of stability and improvement.  Washington is the strongest housing market in the nation and the current Case-Shiller numbers demonstrate that.  I anticipate greater improvement in the coming months as we continue to work our way through our excess inventory.  At that point, we may even begin to see some appreciating home values.

Here’s an interesting blog posting regarding foreclosure activity.  Realty Check, by CNBC’s Diana Olick, is one of my favorite blogs.

-Dan

OK, it sounds like a joke, but this was the format for today’s fascinating ULI Breakfast Meeting. For me, the most interesting part of today’s discussion was Generation-Y. Specifically, women of this generation will be better educated than men and are higher paid. Gen-Y women will make the critical decisions and are more fiscally conservative.

Other items of interest:
• Immigrants will account for one-third of the Washington-area’s population growth in the coming years.
• Households-with-children will drop from nearly half of the households in 1960 to one-quarter of households in 2040.
• We should expect a 35-year economic boom cycle to begin around 2015.
• The lifespan of US residents will reach 120 years. Today’s younger generation can expect to live past 100.
• In the future, organ replacement will be as common as replacing a transmission in an old car.

There are some interesting and thought-provoking forecasts to hear; but we can be assured that a paradigm shift is underway that will change the way we do business to meet the market demand.

-Dan

Welcome to the Fulton Research website and our new blog, called On Target.  If you have ever developed a website, you know how much time and effort goes into a project like this.  The entire Fulton Research team contributed to this effort and that hard work is much appreciated.

As you browse through our list of services, you will see that Fulton Research is much more than a residential housing market research firm.  Our team members have expertise in most real estate uses, and have served in many roles in the real estate development process.  Please call to discuss your projects or any question regarding the market.

I’m especially proud to announce the latest addition to the Fulton Research team, Margarita Foster, as Vice President of Office Markets and Sustainability. Having studied the regional office market for years as Vice President of Market Research for Cassidy Pinkard Colliers, Margarita brings a wealth of knowledge of the commercial real estate market. The press release announcing her joining Fulton Research can be found here.