Question: We have been searching for a home for over 6 months and have expanded both our criteria and budget, but still not finding something we like. We have heard that the housing supply is low, is that true for Arlington?
Answer: The housing supply shortage in Arlington is a big problem and it’s not just Arlington that is feeling the pain, it’s most of Northern VA and the greater DC Metro (nationwide as well).
You’re not alone in your experience either, we have a handful of clients who have been looking for the better part of a year while also expanding their search area and budget, but unhappy with what’s available.
So, is the housing shortage mostly anecdotal and buyers are just too picky or to cheap? Nope… here are some charts that highlight the alarmingly low housing inventory in Arlington:
Eight Consecutive Quarters of Fewer Homes For Sale, Year over Year (YoY)
After seven straight quarters of YoY decreases in the number of homes for sale, Q1 2018 brought us the largest drop in YoY homes for sale with 21.1% fewer homes for sale than Q1 2017, which was already 7.2% lower than the number of homes for sale in Q1 2016. The chart below represents all homes for sale in Arlington.
Existing Housing Supply Would Only Last 1.5 Months
Months of supply measures how long the existing housing inventory would last given the last 6 months of demands (absorption). Most economists say that 4-6 months of supply represents a well balance housing market and Arlington has hovered around 1.5 months of supply for the last 6 months.
I broke out the chart below by housing type (detached, townhouse, and condo) to highlight the fact that the problem exists across all housing types, but town-homes have historically been the least supplied type of housing in Arlington.
Good Homes Are Selling Much Faster
This chart shows the YoY change in the number of homes sold within the first 10 days on market, which has increased the last six quarters in a row. There was an impressive 53.4% YoY increase from Q1 2016 to Q1 2017, followed by yet another double digit increase in homes sold within the first 10 days from Q1 2017 to Q1 2018.
The $1M+ Home Market Is Healthy
The only sub-market in Arlington with a healthy supply are homes listed for over $1M, with around four months of supply, while everything priced from $300k-$800k is under one month of supply.
However, the $1M+ sub-market is only “healthy” on paper, take a deeper look and you’ll see two major problems (cue comments that the problem with $1M+ homes is that they are $1M+). First, most of those homes are actually $1.5M-$2M and second, most of those homes are tear down/new construction with very similar size and design, leaving wealthy buyers who don’t like new construction with very few options.
Tips For Buyers
Here are some tips for buyers searching for hard-to-find homes in a tough market:
- There are few, if any, great deals in an under-supplied market. In this market, good value is finding a home that meets most of your criteria, that you’ll be happy in, that you can afford.
- If you want to negotiate, your best bet is to find something that has been on market for at least 2-3 weeks otherwise you’ll accumulate more rejected offers than homes currently on the market
- Put in the time early in your search to understand the market so you can recognize the right home when it comes on market
- Base your offer on what the home is worth to you, not just the asking price
- Understand how Escalation Clauses work and use them to your advantage
- Find out if there are offer deadlines (usually the Monday or Tuesday following the first day on market)
- Understand the cost-benefit of contingencies (inspection, financing, appraisal are the standard contingencies) and how you can maximize the strength of your offer with limited risk exposure
- Consider doing a pre-inspection — a home inspection before you make your offer
- Have a strong financing approval letter from a reputable lender
A lot of readers have reservations about the value real estate agents provide in buying or selling homes, but without coming off as too much of a salesman for my industry, difficult markets like this are where having a strong agent makes a big difference. Not just somebody to open doors for you and draft a contract, but somebody who understands your needs that you trust to advise you on making the right offer, at the right time.
If you have an agent you trust, rely on them. If you’re looking for somebody, I’m available every day of the week to talk or meet, just send me an email at Eli@EliResidential.com and I’ll be happy to help.