Question: What impact is Coronavirus having on the real estate market?
Answer: COVID-19 has had a similar impact on new listings in Arlington as it has across Northern VA and the DC Metro with each market dealing with a ~30-35% year-over-year drop in April and May. However, demand in Arlington has tapered off from 2019 highs, while demand in Northern VA and the DC Metro is steadily increasing, despite everything we’ve gone through with Coronavirus.
The tapering of Arlington demand, which is still very strong relative to historical numbers, is bringing the Arlington market more in-line with supply/demand readings of the Northern VA and DC Metro markets. The below chart shows Months of Supply (a good supply/demand ratio) for each market. Months of Supply calculates how long it would take for the existing housing inventory to sell out, if no additional inventory was supplied.
Prices Up Regionally
Year-over-year prices for May sales and year-to-date sales are up significantly across the region. Across all of the counties/regions listed below, Arlington’s year-over-year growth is the lowest, which is almost certainly due to the significant appreciation in Arlington last year, after the Amazon announcement.
Keep in mind that sales data lags actual market activity because it usually takes 30-45 days for a property to close, so May sales are more reflective of March and April activity than what we’re currently seeing. This is particularly interesting because March and April were the peak of Coronavirus concerns/lockdowns. Barring any major shifts in the DC-area economy, I expect year-over-year prices to show even more growth as we get further into the year and sales reflect an even stronger buyer market.
Arlington New Listings Down
We’re used to seeing new listing supply peak from March-June, after November-February lows, with April and May almost always exceeding March’s supply. Unfortunately for many home buyers, new inventory tumbled in April and continued dropping further in May.
The May 2020 drop in new inventory represents a 32.1% decline compared to May 2019, which is particularly concerning when you consider that new inventory in May 2019 was already down 21.3% from May 2018, giving us a 47% decline in new inventory from May 2018 to May 2020.
The decline in new inventory was distributed pretty evenly across property type (single-family vs condo) and price point.
Arlington Demand Down
Absorption is a good indicator of demand, providing the rate of homes going under contract relative to total supply. Demand, and therefore absorption rate, are usually highest from February/March through May/June and have been sky-high since spring 2019, with an absorption rate of 1.0 or more in eight months since March 2019.
While the absorption rate in April and May 2020 remained high relative to pre-Amazon years, there was a year-over-year decline of 37.6% and 25.5%, respectively, indicating a tapering of Arlington demand compared to last year. However, with so few listings coming to market, there’s still high levels of competition for desirable properties that are reasonably priced.
This doesn’t mean that the bottom is dropping out in Arlington. Part of the difference in year-over-year data is due to how sharply Arlington demand rose in 2019 (post-Amazon announcement), but we’re also seeing a lot of buyers being priced out of Arlington and pushing their searches further into Northern VA.
Northern VA New Listings Down, Demand Up
Northern VA has experienced a similar drop in new listings (33.8% and 33.4% YoY decline in April and May, respectively), but is actually seeing an increase in year-over-year demand with a 32.2% increase in absorption rate in May 2020 compared to May 2019 and absorption rates exceeding 1.0 in three of the last four months.
If you’d like to discuss buying or selling strategies, don’t hesitate to reach out to me at Eli@EliResidential.com.