Sorry For Writing A Millennial Home Buying Column

Question: I’ve read a lot of articles that Millennials are not buying homes and with Arlington being such a popular destination for Millennials, do you see that causing a drop in real estate prices in the future?

Answer: I’m sorry. I can’t stand the constant Millennial click-bait analysis either. I really didn’t want to write a column about Millennials (born early 80s through the 90s), but here we are. Having been asked the same version of this question four times this month during meetings with homeowners, I figured it was worth addressing.

While accusing Millennials of killing home buying isn’t as bad as accusing Millennials of killing Mayonnaise, it’s just as misguided. Millennials are and will continue to seek home ownership like generations before them. Here’s why the “Millennials Don’t Buy” theory is wrong:
 

Most Millennials Are Not Old Enough

It makes sense to study the entire generation for things like media consumption, something that people do at all ages, but not home-buying. Currently, the youngest Millennials are just heading to college and the oldest are in their mid-to-late 30s. Historically, the average first-time homebuyer has been in their early 30s, so we’ve only seen about one-third of the generation reach average home-buying age. Let’s wait for more of the generation to reach their early 30s before we make broad assumptions about their home ownership preferences. I’m confident that 5 years from now, home ownership trends amongst Millennials in the DC Metro will be as strong or stronger than previous generations. The 20-somes I meet with are eager to stop renting and start building equity.
 

The Great Recession

For those that point to Millennials waiting longer to buy their first or second home, historical perspective is important. The oldest third of Millennials (those in their 30s) were in the early stages of their careers during the Great Recession so the generation got off to a slow start saving up for a down payment and building an income to support a mortgage.
 

Tighter Lending Practices

The Great Recession also led to tighter lending practices (rightly so) requiring higher savings, higher incomes, and more restrictions than before. Couple that with the difficulty building a savings and income, as noted above, and even those highly motivated to buy were forced to rent a bit longer.
 

Not Rushing to Major Milestones

Home buying is often aligned with other major life milestones like marriage and having children. As reported by ARLnow last week, the NY Times just released a study showing that Northern VA has three of the top ten counties with the highest average age for first-time mothers. I believe this is tied to us having the most educated population in the US, thus people are spending their 20s focused on education and careers, not thinking about marriage, children, and buying a home until later in life. This does not mean Millennials don’t believe in home ownership, as many news articles have led you to believe, they’re just not rushing to get there.

Whether you are a Millennial navigating your first home purchase, a Boomer or Silent Generation homeowner looking to “right-size,” or anywhere in between, the Eli Residential Group is here to help. Call (703-539-2529) or email (Eli@EliResidential.com) me any time to talk or schedule a meeting.

 

Ask Eli Image.jpg

Renting Your Apartment Furnished vs Unfurnished

Question: I will be renting my condo when I move and don’t need my furniture. Should I rent my apartment furnished, partially furnished, or unfurnished?

Answer: I get this question a lot and it’s common for landlords, especially new ones, to struggle with this decision. There’s not one right answer, rather a few good options, each with its own pros and cons that you should choose from based on your financial goals and what type of landlord you want to be. I’ll go through a few, but you can mix and match strategies to fit your goals. DO NOT furnish anything you want to keep long-term (e.g. family heirlooms).
 

Option #1 Quick rent, flexibility:

Offer unfurnished at market rate and include a comment that it can also be rented furnished for a 10-25% premium (depending on quality and extent of furnishings). Be willing to negotiate for partially furnished because somebody may have a sofa and bed, but want your coffee table, dressers, and silverware. The value of furnished vs unfurnished depends on the type of tenant likely to move in. For example, a recent college grad will value avoiding the expense of buying/moving furniture, but a young family likely has everything they need and wants to keep most/all of it.

  • Pros: largest pool of renters; best chance to rent quickly; more likely to find a long-term tenant (24+ months)
  • Cons: high chance of having to quickly sell-off unwanted furniture at a deep discount or pay to store it; can take a long time to find a tenant who will pay a premium for a furnished apartment for 12+ months
     

Option #2 Top $, unpredictable:

Target the corporate rental market by offering short-term (monthly) rentals at a premium (50+% above market).

  • Pros: great returns when occupied; low probability of late or non-payment; lower risk of excessive wear & tear during occupancy; may find long-term corporate client
  • Cons: high turnover; unpredictable cash flow due to more vacancy days; high cost of renting (prepping for new tenant to include cleaning service and possibly handyman); smaller pool of potential renters
     

Option #3 Daily rental, active management:

The extreme version of #2. Use a site like AirBnB or VBRO to capture the massive tourism and business traveler market by turning your apartment into a daily rental. I’ll leave income fluctuation/predictability out of the pro & con list because ratings, pricing, marketing, and experience because they’ll likely start as a negative and develop into a positive, over time. If you aren’t living in the immediate area, this becomes a less appealing option.

  • Pros: potential for huge return; opportunity to meet interesting people and be a local tour guide
  • Cons: requires constant attention/management; high cost of operation; increased wear & tear; Arlington County requires owners to occupy the dwelling for 185+ days per year
     

A few notes to help with your decision:

  • Fully Furnished = everything from couches to silverware to a TV
  • Property Managers handle things like rent collection, service/handy calls, and the eviction process if necessary. On average, they charge 6-10% of the rental income for their services.
  • If you choose to list through a Realtor, expect to pay anywhere from 75-100% of one month’s rent, but make sure you’re getting things like a full MLS/MRIS listing with professional photos

Our team also handles rentals so if you are thinking about renting a property you own or would like help finding an investment property to rent, feel free to send me an email at Eli@EliResidential.com to find out how we can help.

 

 

Ask Eli Image.jpg

What’s Driving Arlington’s 2018 Condo Growth?

Question: Are there specific buildings or sub-markets in Arlington that were responsible for the jump in condo values in the first half of 2018?

Answer: The most interesting data point that came from last week’s mid-year real estate review was that, for the first time in years, condo prices appreciated significantly from the first half of 2017 (9.1% growth). I received a number of emails from readers asking if this growth occurred across the entire condo market or in specific locations or buildings so this week’s column takes a deeper dive into the 2018 mid-year data for condos in Arlington.

 

Growth and Demand Increase Across the Market

The good news for condo owners in Arlington is that appreciation and demand increased across all markets in the first half of 2018. In fact, 63 of the 79 measures for appreciation and demand improved (if you’re a homeowner/seller). To test the market, I looked at average price and three demand indicators (days on market, purchase price to asking price ratio, and number of sales) broken out by zip code, building age, and price range. The data compares pricing and demand trends in the first half of each year for all condos sold in Arlington. Cells highlighted in green indicate improvement (for homeowners/sellers) in that category for 2018.

 

All Eight Zip Codes Appreciated

Demand indicators supported the price growth, with most zip codes seeing a faster pace of sale and buyers negotiate less off original asking prices. For those tracking new construction in Arlington, only 11 of the 98 sales in 22209 were in Key & Nash and it’s important to note that builders do not enter all of their sales into the MLS, so a large percentage of those sales are missing from the data. Note that 22205 is not included because of the lack of volume.

Table 3.jpg
 

 

Older Properties Surged

Many older buildings in Northern VA are struggling to recover from their peak pricing from 2005-2007, which has left many owners in a difficult financial position. The strong appreciation seen in condos built before the 1970s will be a much-needed relief for many and proves that Arlingtonians and investors are seeing value in older, less expensive condos compared to their newer, amenity-rich neighbors built in the last 20 years. Check out the huge drop in average days on market for condos built in the 1950s or earlier!

 

 

Higher Demand at Every Price Point

Demand picked up the most for less expensive condos, but every price range saw at least two demand indicators increase in the first half of 2018.

 

 

If you own a condo in Arlington and would like to take advantage of the recent appreciation of your property, feel free to email me at Eli@EliResidential.com to schedule some time to talk about your options.

 

Ask Eli Image.jpg