During the first five months of 2016, the NVAR region had robust economic growth and modest gains in existing home sales and pricing. Inventory growth stalled after the influx of spring listings occurred in March and may have suppressed closed sales. Closed sales should continue to be above their 2015-levels, albeit slightly, while inventory will continue to weaken.

ECONOMIC TRENDS
After weak activity in 2014, job growth gained momentum throughout 2015 in the Washington Region. The first few months of 2016 built upon that momentum, resulting in the strongest job growth in 15 years and double the 2000-2013 average. Significant job growth in the Washington region, which includes the District, five counties in Maryland, 17 jurisdictions in Virginia and Jefferson, W.Va, often results in increased home sales volume in the NVAR region when the job growth is in high-wage sectors.

In 2015, the average wage in the Washington region continued to climb from its 2013-trough. Between 2014 and 2015, the average wage increased 2.6 percent to $71,534, after adjusting for inflation. The job mix drove some of this growth, as the high-wage sectors of Professional & Business Service and the Federal Government had gains. Even with these gains, the average wage in the region has not yet returned to its 2010 peak level and was 0.1 percent below the average wage that year.

"The first few months of 2016 built upon [2015 job growth] momentum, resulting in the strongest job growth in 15 years, which was double the 2000-2013 average."

Based on job growth in the first four months of 2016, the average wage should continue to rise and surpass its 2013-level. Between April 2015 and April 2016, the Washington region added 71,700 jobs, including 31,700 jobs in Northern Virginia. In the Washington region, employment growth was led by the Professional & Business Services (+16,900). Jobs in this sector generally have high wages, and the average wage in 2015 was $98,022. The other largest gains in 2016 were in lower-wage sectors. The Leisure & Hospitality sector added 14,700 jobs during this period, with an average wage of $25,781 in 2015. The Retail Trade added 11,900 jobs, with an average wage of $34,271 in 2014, which is the most recent available data, adjusted to 2015 dollars.

Employment growth has been concentrated in the high-wage and low-wage sectors since the Great Recession. Despite this bifurcation, the growth in the high-wage sectors has been strong in the first months of 2016 and is likely to result in overall wage growth.

The NVAR region also continued to have low unemployment and steady gains in employed residents. In April 2016, the unemployment rate for the NVAR region was just 2.5 percent and 0.8 percentage points lower than the same time last year. The NVAR region added 1,603 employed residents, or 0.2 percent, between April 2015 and April 2016. 

POPULATION GROWTH
Population growth picked up slightly in 2015 in the NVAR region. Between July 1, 2014 and July 1, 2015, the region added 8,530 residents. This is a significantly smaller gain than the average increase in the 2007-2013 period, but a larger gain than during the prior year. Net domestic migration was a drag on population growth, as it has been since 2011. However, these losses were less severe than in the prior year, and the accelerated job growth this year indicates that 2016 will continue this trend.

"The NVAR region also continued to have low unemployment and steady gains in employed residents."

EXISTING HOME SALES
Inventory and Closed Sales
Inventory gains during the first three months of 2016 slowed and contributed to the tepid closed sales growth. In March, this trend reversed temporarily, and active listings increased 11.9 percent from March 2015, driven by the largest gain in new listings in almost one year.

Closed sales during April and May had the largest year-over-year gains since last summer, rising 8.6 percent and 7.9 percent, respectively. The strong demand, combined with declines in new listings, caused active listings to decline in May, falling 9.7 percent from the same time last year. This was the first year-over-year decline since 2013. In May, new listings had the sharpest 12-month decrease in five years, falling 17.1 percent. Weak inventory growth may moderate sales growth going forward.

During the first five months of 2016, the total number of closed sales was 4.9 percent higher than during the same period in 2015. Closed sales reached the highest level since 2007, surpassing their prior peak in 2013 by 0.9 percent. Single-family detached homes had 4.6 percent more sales, and single-family detached properties had 0.7 percent more sales.

Three jurisdictions in the NVAR region had more closed sales in the first five months of 2016 compared to the same period in 2015: Fairfax County sales were up by 7.3 percent, Fairfax City sales climbed 4.5 percent, and Arlington County sales were 0.3 percent higher during this period. The declines in Alexandria City were mild, down 2.3 percent and sales in Falls Church City decreased 15.5 percent, or by 11 sales, during this period.

AVERAGE SALES PRICE
The average sales price in the NVAR region flattened mid-way through 2015 and prices had mild declines during the first five months of 2016. Compared to the same timeframe in 2015, the average sales price decreased 0.7 percent overall. The average sales price of a single-family detached homes increased by 0.8 percent, while the price for condos decreased 2.2 percent.

"Despite the declines compared to 2015, the overall sales price during the first five months of 2016 was the second highest on record."

Despite the declines compared to 2015, the overall sales price during the first five months of 2016 was the second highest on record. This was driven primarily by the mix of sales, as neither single-family detached homes nor condo properties reached their peak pricing. The average price of single-family detached homes reached 99.9 percent of their peak, and condos reached 96.6 percent of their peak.

Among the jurisdictions, Falls Church City had the sharpest increase in average sales price, rising 9.5 percent during the first five months of 2016 compared to the same timeframe in 2015. The only other jurisdiction to increase was Alexandria, rising 0.2 percent. All other jurisdictions had declines: Fairfax County prices were down 0.5 percent, Arlington County prices fell by 1.7 percent and Fairfax City prices decreased 5.7 percent.

OUTLOOK
The NVAR region should continue to benefit from low unemployment, steady population growth and robust job growth in 2016. These factors lay the foundation for a healthy housing market for the remainder of the year. Increasingly tight inventory will likely constrain the market but has not yet driven up prices. Wage and income growth has been slow to recover, so potential buyers may be willing to wait for more options instead of buying at a higher price-point.