Those who say that Prince William County should slow down on building new homes until the current infrastructure has time to catch up may get their wish, but not at the county’s request.
In a budget presentation to the County Board of Supervisors, Director of Finance Steven Solomon explained that developers are telling the county it would not be financially beneficial for them to continuing building homes within the county at the same rate they had in the past.
As home appraisals have risen within the county, developers are finding it more difficult to compete with existing homes. This year’s home values rose a 7.5 percent, a full 4 percent higher than the county had predicted.
Solomon said the normal turn-around for a house for sale is 60 to 90 days, but in Prince William County homes are now selling within 30 days on average.
“The county has very low inventory and very strong demand, especially under the price points of $450 thousand,” Solomon said.
Supply and demand are making it a seller’s market right now in Prince William. One would think this would be a good time for new builds to come in and fill that void, but developers say there is less room for profit in this kind of market.
“The price point between what is happening on the existing homes verses new homes is pretty significantly different,” Solomon said.
Apparently Prince William consumers are choosing existing homes over new builds because they are less expensive than new builds. The fact that most homes in Prince William, especially in western Prince William, are relatively new makes them even more appealing to homebuyers.
In order to compete, developers would have to sell their new homes at prices comparable to those homes already on the market; that would mean lowering their prices. That is not what they want to do but what they are being forced to do if they wish to sell those houses at all. Realizing this problem, they are choosing to build fewer homes in Prince William.
“Developers are telling us is that the amount they would have to charge to build new homes would not be competitive in terms of building at the values they would need to go in,” said Solomon, “and those values are significantly higher than what we are getting for our new home prices right now.”
The result of this situation is that 59 fewer homes will pop up in the county next year. Of the projected 1,260 new units, Solomon said they are seeing 1,201 as preliminary numbers. That is a 4.7 percent projected drop for FY15. He expects the county will see a similar drop throughout all 5 years of the 5-year plan.
Solomon clarified that when he refers to “homes” that includes single-family homes, townhouses and condos, but not apartments.
He also specifies that he is only addressing the number of homes planned to be built during the upcoming year, not all of the homes “in the pipeline,” meaning that have been approved to be built
Chairman Corey Stewart (R) clarified Solomon’s distinction.
“Just because something has been approved, doesn’t mean it makes business sense to develop the property,” Stewart said.
As Solomon noted, in Prince William County homebuyers have more options at a low price than they would in most other places in Northern Virginia. Perhaps that has developers thinking they would be better off investing in building closer to the Beltway, or perhaps they would rather go farther South where there are fewer existing homes built in the new millennium as their competition.
If fewer new homes come into the county, one would think that is great news for current homeowners. It ought to push Prince William home assessments even higher. Should this become the new norm, the county can stop building new schools and children will not have to change schools every few years. Of course, residents might have to get used to living with outdated kitchens and bathrooms or call in their own contractor.
Then, again, even good news seems to have unforeseen circumstances [as proven by the strange way in which higher appraisals are hurting tax venues for the county.] One never knows with complex economic systems.
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