The housing market continues to be strong in the Mid-Atlantic and throughout the eastern United States as rates remain low and home sales continue. As the sixth most populous metropolitan area in the country, the DMV market has had increasing price gains in the past decade and dwindling availability of new single-family housing stock close to the District itself. The rise of telework and older millennials beginning their transition from rental units to owned homes has meant that demand for new homes continues to be met in the suburbs and exurbs with the Allegiance Surety subdivision group of Marsh & McLennan Agency, known locally as Insurance Associates continuing to see strong demand. Unlike previous growth, which was dominated by single family housing tracts, today’s growth revolves around smaller mixed use hubs such as the Merriweather District in Columbia, MD, the Mosaic District in Fairfax, VA or existing towns such as Frederick, MD. The housing mixture around these hubs is changing with developments including combinations of townhomes, small and large single family homes and even apartments. Although one might think of new construction in DC itself as only apartments, some townhomes are being built as the former Walter Reed site and areas in the eastern part of the District show.
The changes in housing approach applies geographically as well as is shown with the Baby Boomer generation as they approach and reach retirement. The decades of retiring to south Florida next to a golf course have been replaced to a degree by moving to coastal areas where we are seeing increased subdivision surety demand such as Myrtle Beach, the Carolinas, Savannah, GA or Charleston, SC. There, residents have access to many of the same amenities, apply less of their fixed income towards housing, and can be closer to friends and relatives in the Northeast/Mid-Atlantic. That same desire to maintain closer ties and distance to family and friends is helping fuel the growth of the 55 and over market in inland Delaware with new housing that gives residents an easy drive to the beach, major cities and a favorable state tax rate. This growth is borne out in census numbers showing Myrtle Beach metro area having the second highest rate of growth in the country of any metro area at 3.8% and Delaware with the tenth highest migration rate for those over 60+ in age.
So, where is development going from here? Despite the growth that continues in the Mid-Atlantic, the western and southern US have continued to see the highest rates of growth and migration with new homes constituting a much higher percentage of housing, partly due to the historical stock not being as available as it is in the east. The Great Recession showed that growth can quickly snap back in a downturn though as locales such as Las Vegas took years to work through its housing stock. That general pattern is likely to repeat itself in a future downturn, especially one that as many predict, focuses on the technology sector. Many western metro areas have a high concentration of jobs and net worth in big tech and any downturn will affect not just the higher valued northern California and Northwest areas where headquarters such as Google and Microsoft are located, but also their offices in Arizona and Utah. Having less diversification in employment sectors means that trends seen in the last downturn, such as larger swings in housing values are likelier to affect the south and west with smaller effects in the Mid-Atlantic and Eastern seaboard.
The recipe for this area then should continue to be steady growth with an emphasis on walkable, mixed use hubs and infilled population density rather than chasing the growth rates of some other US regions. Not only are those rates not likely to be feasible based on our existing density but the lower upside will likely be matched by lower downside as well.
Our subdivision group has continued providing the needed bonds through both good times and downturns for several decades and will continue to do so with our unmatched expertise in the subdivision surety world. While other surety providers dabble in providing subdivision bonds, only the Allegiance Surety division of Marsh & McLennan Agency, known locally as Insurance Associates has the depth of experience and track record of working with developer clients in good times and bad. For more information on how construction and development surety bonds can help you improve your surety structure, please contact me at the number listed below.
Reference: Growth rates taken from census.gov, https://www.census.gov/newsroom/press-releases/2018/popest-metro-county.html
About the Author: Rush is an Account Executive specializing in in development and construction with the Allegiance Surety division of Marsh & McLennan Agency, known locally as Insurance Associates. Prior to joining the company, Rush worked in commercial lending and finance at DC area banks such as EagleBank and BB&T, where he started in their exclusive management training program. He has worked with large and small development and construction firms at every stage of their process and uses his experience and underwriting skills to help clients grow their companies by matching them with the surety and financial solutions that meet their unique needs. In addition, Rush is also the current chair of membership for the Washington Building Congress Association which supports many of our clients.