Ask Eli: Impact of Coronavirus on the Real Estate Market, Part 4

Question: What has been the impact of the Coronavirus/COVID-19 on the real estate market?

Answer: I hope you and your families are healthy and finding some productive ways to remain safely at home. It’s been great to see so much carryout and delivery activity at local restaurants, I hope we can keep our favorite establishments in business.

I want to shout out the Sunday evening manager at the South Arlington Ledo Pizza for the way he was expressing constant, sincere appreciation to every employee hard at work and each customer who came in. It was refreshing to hear such positivity.

This week I’ll cover some real-time market updates and take a look at how past recessions have impacted real estate.

March 30 Stay At Home Order — Executive Order 55

Yesterday afternoon, Governor Northam announced EO 55, at Temporary Stay At Home Order due to COVID-19 to further discourage gatherings and personal contact.

There was an immediate concern across the real estate community that the new order effectively shut down all real estate operations, but soon after Northam’s announcement, the Northern Virginia Association of Realtors (NVAR) and the Virginia Association of Realtors (VAR) announced that under EO 55, real estate business may continue to operate using best practices for social distancing and other measures recommended by the CDC, as well as avoiding any gatherings of 10+ people. Here is a link to the official NVAR comments.

That means that as of this morning showings, inspections, appraisals, closings, lending and other activities critical to a real estate transaction are all still allowed in Virginia/Northern Virginia. Public Open Houses are strongly discouraged and many companies have suspended them.

Personally, I think showings are the most questionable activity because you can make a strong case in both directions. If somebody needs to find a home, it’s fair to say that they need to see the home in person before making an offer. On the flip side, somebody seeing five properties on a Saturday afternoon to prepare for a purchase 6 months from now should not be out on showings. There’s certainly a level of personal responsibility required here.

Arlington Market Update

It seems that much of the Arlington and Northern Virginia market has softened in the past week. This is based on further decreases in showing activity and the negotiations I’ve been directly involved in or aware of via colleagues. We won’t have actual price data available for another 3-4+ weeks when homes start closing that were placed under contract during the COVD-19 lockdown period.

New inventory continued to flow into the market, but was down from the previous week. A healthy 63 homes went under contract, showing that there are still buyers out there, but many of them are likely securing better terms than they would have a month ago, and facing much less competition.

Arlington market activity over the last week

Showing activity is unsurprisingly very low, with the average showings per listing dropping to 2.25 over the past week. With an average of about 15 showings before a ratified contract, expect average days on market to start increasing. However, the showings that are taking place tend to be to ready-buyers so it should take fewer showings than it used to for the right buyer to surface.

Average showings per listing in Arlington last week
Real Estate During a Recession

The economy is in bad shape and it could get a lot worse. It’s way too early to make any predictions about the real estate market 6-24 months from now until we know just how long Coronavirus will keep businesses closed and consumers at home.

What we can do is look at the real-time/near-term impact (what I’m trying to cover every week) and what’s happened in past recessions. The 2008 crisis crushed real estate across the country (Northern Virginia/D.C. Metro fared relatively well) and is fresh on everybody’s minds, but it’s important to note some key differences between the Great Recession and other down markets.

First, that was a mortgage-based crisis so the real estate industry was hit directly. Second, prices were up despite high supply because demand was artificially high due to absurdly irresponsible lending practices that allowed people to buy much more than they could afford via low/easy entry into loans.

Mortgages over the last decade are much more conservative than the mortgages that led to the Great Recession. There are strict debt-to-income and credit limits, and predatory products/practices like zero interest balloon loans are all but eliminated from the market.

So the recent price appreciation is driven by a more natural supply/demand curve. Low supply because we’ve run out of land to build on and strong demand from much more qualified borrowers.

In three of the last five recessions, housing prices actually increased, as illustrated by the chart below from Attom Data Solutions and in a similar study by First American of the last three recessions, showing the dramatically different impact the 2008 crisis had on housing prices compared to other recessions.

Conclusion

I want to be absolutely clear that I’m not suggesting everything is going to be fine or that the real estate market won’t take a significant hit. That type of messaging from real estate “professionals” irks me almost as much as the idea that a market can simultaneously be great for buyers and sellers… that’s not how markets work (can’t help myself from the Esurance meme)!

It seems almost certain that negotiation leverage will favor buyers over the next 4-6 weeks. The critical question is whether or not buyers will have even more leverage months from now or whether markets will begin stabilizing, then return to the hyper-competitive market we had just a month ago.

The fact is that we have never experienced a complete economic shut-down like this, nor do we know how long it will last, and economic/real estate forecasting models aren’t tuned for this. It’s still too early to say with any level of certainty right now what the mid/long-term fallout will be for real estate or any other industry.

Be smart, be careful, be strategic. And stay home!

Impact of Coronavirus on the Real Estate Market, Part 3

Question: What has been the impact of the Coronavirus/COVID-19 on the real estate market?

Answer: I hope you are all staying healthy and sane(ish). My wife and I are trying to wrap our heads around school being canceled through the end of the academic year…yay!

Over the last two weeks, my Coronavirus columns (one and two) have included mostly anecdotal evidence on the impact of COVID-19 on the real estate market, but now we’ve been in this for long enough that I can start using market data to measure the true effects. It will be at least a few more weeks before we can measure the effect on prices, but we can look at things like supply, showing activity, and contract activity now.

What I’m Seeing/Hearing

This past weekend, most Open Houses were canceled and over the last week showing activity has dropped off dramatically. However, there are still plenty of active, motivated buyers making offers. What I’m seeing/hearing right now in the DC Metro market is that competition is down, prices haven’t taken much of a hit (yet), and new listings are still coming onto the market.

Mortgage rates had their most volatile week ever last week as investors basically stopped buying mortgages on the secondary market, but the Fed stepped in and has promised to stabilize the market until our economy [hopefully] returns to normal. Here are two (one and two) good reads on what happened last week to mortgages.

Impact On The DC-Area Economy

While not real estate specific, I want to share the excellent work of Jeannette Chapman, Director of the Stephen S. Fuller Institute at our very own George Mason University, which takes an in-depth look at how Coronavirus is likely going to impact the DC-area economy, based on current projections. Notably, they determine that the DC-area will not be as insulated from this recession as the 2008 financial crisis. Be smart, be careful with your money folks.

While I’m slightly off the topic of real estate, I wanted to share a great website for tracking global and domestic COVID-19 data in real time, with helpful visuals. This website was shared with me by Arlington resident/Mom Elissa David, who owns the Unbroken Body to help Moms heal their bodies after pregnancy. She has temporarily turned her website into a resource for all of us parents who have suddenly become home school teachers!

Now let’s jump into some relevant real estate market data.

Market Data
SUPPLY

The number of new listings this past week in Arlington jumped 27% over the same week last year and 6% over two weeks ago. The DC Metro experienced less dramatic increases in new listings, but increases nonetheless.

Anecdotally, it seems many homeowners who were planning to sell in the next 4-8 weeks are accelerating their timeline, fearing the uncertainty of the future economy. A boost in inventory from motivated sellers while demand continues to fall (see below) could lead to a drop in prices in the near future.

Nationwide, the number of listings pulled off the market spiked over the past week.

Time PeriodArlington New ListingsArlCo+FfxCo+DC+MoCo New Listings
Past Week841,311
3rd Wk March ’19661,253
Two Weeks Ago791,280
Three Weeks Ago861,315
SHOWINGS

The average number of showings per listing in Arlington (first chart) have dropped each of the last four weeks from 10.44 showings four weeks ago to 2.91 showings this past week.

Showings in Washington DC have dropped by 41.4% compared to this time last year. The tool I have to generate this data only offers statewide info, so I chose to use Washington DC (yes, I know it’s not a state) instead of Virginia because the Washington DC market is much more reflective of Northern VA than the Virginia market. Showings are down 32.9% across North America.

Arlington Data
CONTRACTS

While some buyers still find themselves competing with other offers, the amount of competition in the market is down significantly. From the first week of February through the first week of March (five weeks), 61% of homes listed for sale in Arlington went under contract within seven days. Two weeks ago (first full week of our daily lives being disrupted by COVID-19), that dropped to 52%, and this past week only 33% of homes listed went under contract within seven days (that number will likely increase into the 40s over the next 2-3 days).

It’s worth noting that the market would normally be selling even faster this past week than it did the previous 5-6 weeks as we move into peak buyer demand season.

What Other Industry Service Providers Are Seeing

I spoke with some other industry service providers to see how their numbers looked over the past week. The title attorney and lender I spoke with saw a significant spike in the number of ratified purchase contracts they received. On the other hand, the inspector I work with saw their numbers drop dramatically.

INSPECTIONS

I spoke with Ken Humphreys, the Area Manager of Virginia and Maryland for BPG Inspections, one of the largest inspection companies in the country, and their total inspection in Virginia and Maryland were down 37% last week. They’re currently on pace to be down 45-50% this week.

TITLE

Sarah Anderson, Managing Attorney for Universal Title’s Arlington Office, shared with me that they received 35 contracts last week. They had received 75 contracts over the previous three weeks combined.

MORTGAGE

Jake Ryon, a Loan Officer with First Home Mortgage, told me that he’s been averaging 2.2 purchase contracts per week this year, and last week he received eight (crazy!).

A local lender I spoke with surveyed their appraisers on COVID-19 related questions and learned the following from 272 respondents:

  • 7.35% are no longer performing interior inspections
  • 47.43% are performing interior inspections but will likely stop if the situation deteriorates
  • 45.22% anticipate being able to perform interior inspections with precautions for the duration of the situation
  • 22.06% have heard from at least 1 borrower, Realtor, or entry contact who will not permit the property to be inspected
Guidance?

While the future of public health and our economy are still extremely uncertain, the best anybody in the real estate industry can/should offer is a pulse on the current market with a very short-term outlook. Be wary of any advice you receive about what markets/life look like 3, 8, or 20+ weeks from now because nobody knows. Be especially wary of anybody promising that this will be a blip in the market and we’ll be back to normal come late summer (I’ve heard a lot of this talk).

In times like these, buying and investment decisions should be made based on long (5+ year) time horizons and you have to plan for best- and worst-case scenarios. If you’re considering selling your home, you have to acknowledge the massive amount of uncertainty even just a few weeks from now.

Be smart, be careful, be strategic. And stay home!

Pierce Condos Pre-Sales

Question: Do you know when Pierce condos sales will begin?

Answer: Penzance’s ambitious Pierce condo project, the high-end 104-unit building that is currently under construction in Rosslyn, began setting pre-sale appointments last week and taking their first deposits this week for condos expected to deliver in 2021. Their sales team set over 50 appointments during an invite-only event last week, indicating plenty of interest in the building…but will that interest turn into the 10% deposit needed to secure a unit in Northern VA’s most expensive building?

When 2000 Clarendon in Courthouse began sales there was no question the demand would be through the roof given the lack of condo supply and that pricing was within range of other condos in the Rosslyn-Ballston Corridor. However, Pierce is a different product and very different price point with over half of the units priced over $2M and many units going for $1,100-$1,200/sqft.

The most comparable building we have to this in Arlington is Turnberry Tower in Rosslyn (the blue glass building) which has had 85 sales in the last five years, 20 of which have been over $2M and only seven at $1,000/sqft or more. Pierce will need to sell 104 units in a lot less than five years with more than 50 units being $2M+.

Is the luxury buyer market in Arlington/Northern VA deep enough to support these sales? I’m looking forward to finding out.

What Will You Get?

The amenity package at Pierce includes a 24hr concierge staff, rooftop pool, two-level gym, and a rooftop club room and terrace.

Each unit is being designed with the same finishes and color package; there will not be any options/upgrades for buyers. The package includes Thermador and Bosch appliances, custom Snaidero cabinetry, hand-scrapped hickory floors, quartz countertops, and many units with direct-access elevators. There have been other high-end condo projects in the region that have taken a similar approach of not offering finish options for buyers, so there is some precedent.

Below are some renderings and finish samples courtesy of The Mayhood Company:

Feature Floorplans

I think there are a handful of units that will sell quickly. The ~$1M 1BR+den and 2BR units on lower floors, a few units with massive terraces, and premier units with unobstructed views of the Potomac River and Georgetown. I included some of those floorplans below courtesy of The Mayhood Company:

This is easily the most ambitious project in the Arlington pipeline and quite possibly all of Northern VA so I’ll be keeping a close eye on it and hope to bring you some updates over the next year or two on how sales are going.

For those of you interested in the building, a sales office is located a block away that include a partial model unit to show off what the kitchen and living space will look like. You can email me at Eli@EliResidential.com to schedule a visit or make a pre-sale appointment.

Early Real Estate Market Conditions Are…

Question: How is the market shaping up for 2020? Have things cooled down or picked up where they left off last year?

Answer: The early Arlington/Northern VA market conditions are…crazy. After a fast and furious 2019 for condos and detached/townhouse properties in Arlington, it looks like we’re in for another year of fast-paced sales and strong appreciation.

In some of the most in-demand markets (e.g. R-B Corridor condos and $800k-$1.2M detached) pre-inspections (buyers do an inspection before making an offer), zero contingencies, and escalations 3-10% over the asking price no longer guarantee an accepted offer because there are multiple buyers offering those terms.

From the activity I’ve seen on both the buyer and seller side of this market, it seems like sellers can safely increase their asking price by 3-5% over what 2019 sales support and soon enough appraisers will have the necessary data points to support these increases, thereby eliminating much of the current appraisal risk for financed purchases.

Activity Over The Last 30 Days

The market fired up within the first couple weeks of January, but you know I never like to make statements about the market without also backing it up with data. So here are some highlights on the type of activity we’ve had over the last ~30 days (excluding relisted homes, Coops, and age-restricted housing). The data is of 7AM Tuesday February 18:

  • 223 homes listed for sale
  • Of those 223 homes, 150 (67.3%) are sold or under contract
  • Of the 150 homes sold or under contract, only 16 (10.7%) were on the market for 10+ days and 97 (64.7%) were on the market for 6 days or less (indicative of multiple offers)
  • Of the 73 homes still for sale, 37 (50.7%) are still within their first week on the market (high probability of going under contract soon) and 16 (21.9%) are $1.7M+
  • Of the 25 that sold, only one sold for below the original asking price and it was in a condo building with a major pending lawsuit that makes it nearly impossible for a buyer to get a loan. 7 have sold for over ask.
New Supply Increasing, Total Supply Decreasing Less

There is a glimmer of hope for buyers amongst all the competition and price appreciation. Arlington had a YoY increase in new listings for December ’19 and January ‘20 for the first time since October ‘18 (Amazon HQ2 announced in November ‘18). While demand is still outpacing new supply, resulting in 45(!) consecutive months of YoY decreases in housing supply, the drop in YoY supply was below 20% for the first time since October ’18 (-8.8% drop). So what does that mean in plain English? It’s getting less bad.

Where Do We Go From Here?

Here are some of my thoughts about what the rest of the spring/2020 might look like:

  • Once more of the early sales close, asking prices should adjust upwards to reflect the current market so we won’t see the same volume of offers but I expect prices to maintain the recent increases and buyers will continue offering very attractive terms to sellers (little or no contingencies, quick closes, etc).
  • In many cases there are 5-10 losing offers for every sale so those buyers are still active and possibly even more motivated, hence why I don’t see the market slipping in a couple of months after an early surge
  • I think there’s a good chance that we continue to see YoY increases in the number of new listings as homeowners decide to take advantage of the price increases over the last 18 months to move up, downsize, or relocate to a less expensive market
  • Low interest rates, strong stock market/economic performance, and the long-term local growth potential from Amazon, Nestle, and others will keep demand high
  • I’m interested to see how the elections impact market conditions this year. Usually buyers freeze up and sellers hold back on listings in the months leading up to a national election. I wouldn’t be surprised to see demand dip this fall given how much negativity will surround this year’s campaigns. However, with so much momentum in the market and if supply also drops, I’m not confident that it will result in buyers paying less.

For those of you currently looking or planning to look outside of the Arlington/Alexandria markets hoping for an easier buying experience, I’m sorry to say that homes are moving quickly with multiple offers and favorable contingency terms (for sellers) all over Northern VA. Expect this level of activity/competition to last through May/June.

If you’d like to discuss the best buying or selling strategies in the current market, feel free to email me at Eli@EliResidential.com to schedule time to talk.

Resale Value of New Construction

Question: We bought a new home in Arlington five years ago and are considering selling, but we’re concerned about the resale value of new homes given the amount of newer homes being built in the market. Do you have any data on how new homes do when they resell for the first time?

Answer: The new/newer construction market is the only Arlington sub-market that is anywhere close to properly supplied, with almost 4.5 months of inventory available (number of homes for sale divided by average sales per month = months of inventory).

Most housing economists say that a market is at balance for buyers and sellers when there is six months of inventory. For comparison, sub-markets like one-and-two-bedroom condos, <$1M detached homes, and townhouses each have between one and three weeks of supply.

New Homes Are Appreciating…

There’s a logical case to be made that when a new home (built within the last decade) gets resold, it will struggle to compete with other brand-new homes given how similar these homes have been over the last ten years, combined with the amount of supply in the market. Fortunately for owners of recently built homes who may sell in the near future, that logic does not prevail and new homes are being sold for more the second time around.

…But Just A Little

There aren’t a ton of data points yet (most people buying expensive new construction will be there for a long time), but just enough that I think we can start to get a good idea of how new homes (that aren’t new anymore) from the past decade perform when they’re resold into a market with many similar new homes.

To study this, I identified homes built since 2012 that have since resold, excluding homes that sold within one year of their original purchase or any homes with major improvements since the original purchase or clearly left in disrepair. Here’s a summary of my findings:

  • 53 homes met the criteria, nearly all in North Arlington
  • Average appreciation on resale was 6.7%
  • Average annualized appreciation was 2.1%
  • Only seven homes sold for less than they were bought
  • Sixteen homes sold for at least 10% above what they were bought
  • On average, it took 64 days for these homes to go under contract, about 30% longer than the entire detached home market during that same period
Cause For Concern?

For those who own a new(er) home, you may be underwhelmed by these numbers relative to what the rest of the market is doing — compared to other detached homes in the Arlington market, new homes are appreciating at a noticeably slower rate.

Part of that is due to the fact that there’s a much higher supply of similar new/newer homes for sale so that will naturally keep prices more stable. Another reason is that it takes longer for the upper end of the market to appreciate, so the growth we’ve seen <$1.25M hasn’t impacted the $1.5M+ market as much.

So is a new home a bad investment because it appreciates less than other homes? Not at all.

First, one of the reasons buyers pay a premium for new/newer homes is because your maintenance and repair costs should be significantly lower for the first 10-15 years. Investment value isn’t only about what you buy and sell for, it’s also about how much you spend between the two transactions keeping the house operating (often more valuable than appreciation).

Second, for most families, a new/newer home offers square footage and a floor plan they can’t find anywhere else so the non-financial/quantifiable benefits are significant. Opportunities to customize to taste also factor into the non-financial/quantifiable return that owners may receive.

The new construction market operates differently from the rest of the housing market. If you have any questions, don’t hesitate to reach out to me at Eli@EliResidential.com. And a quick plug for two custom homes on ¼ acre lots I’m selling in Bellevue Forest, being built by James McMullin, Arlingtonian and third-generation Arlington developer/builder. Demolition and excavation will start in the next month!

2020 Home Design Trends

Question: What changes are you seeing in design trends this year?

Answer: Every year I look forward to the Pantone Color of the Year selection (released annually since 2000) and this year is one of my personal favorites – Classic Blue. I’ve noticed blues showing up a lot more in homes lately, especially in kitchens (it makes for a beautiful cabinet color, in my opinion).

Pantone Color of the Year 2020 Classic Blue & Steve

But trends go well beyond colors so for an expert opinion on the latest design trends, I’d like to re-introduce Caroline Goree (caroline@madiganschuler.com), a Designer with a boutique Residential Interior Design Firm, Madigan Schuler, located in Alexandria Virginia, to provide insight into what trends we should expect to see in 2020.

In 2018, Caroline introduced us to one of my favorite design quotes from Matthew Frederick’s book 101 Things I Learned in Architecture School, “Being nonspecific in an effort to appeal to everyone usually results in reaching no one.”

Take it away Caroline… 

Thank you, Eli. I am really excited for the trends we see happening in 2020 primarily because people are experimenting with color, textures and patterns much more than in the past few years. While those “safe” design decisions like all white kitchens aren’t necessarily going to go of style, I like seeing more personal flare and individuality come through. Below are some of my personal favorite trend hello’s and goodbye’s of 2020.

Goodbye One-Stop Shoppin’

Thanks to Restoration Hardware, the “all gray everything” trend was popular for the better part of the last 5+ years. Thankfully, that “one-stop shop” mindset is shifting to consumers wanting a more collected look.

Maybe that means a sofa from a known store, such as Restoration Hardware, mixed with vintage velvet club chairs found at Miss Pixies in Washington DC. Add in your grandmother’s fabulous antique chest for a coffee table (hard to believe you once referred to is as old “brown” furniture) and a natural fiber rug so your room has that layered, collected look.

Personally, I am thrilled the trend is moving towards an appreciation for a well curated space using unique items that are not all new and mass produced. Interior Designer, Nate Burkus, once said “Your home should tell the story of who you are, and be a collection of what you love.”

Hello Square Tiles

Thanks to Chip and Joanna Gains (and 90% off the local flippers) subway tile is officially overused and seen in just about every kitchen or bathroom completed since 2015. While timeless (after all, it is named after the 3×6 tiles installed in 1904 in the New York Subway Station) we are ready to explore other shapes and textures.

My personal favorite, square tiles, offer a more unique look but keep the space simple and sleek. From matte concrete tiles in mudrooms, to hand painted terracotta tiles for kitchen backsplashes, many manufacturers are using this traditional shaped tile with an artistic or creative twist. If square tiles still feel a bit out of your comfort zone, try playing with the scale of rectangular tiles such as sizes 2×9 or 3×12. 

Goodbye Gray Walls

Walk into just about any house on the market in the last five years and you will notice one similarity – gray walls. Many Realtors, Interior Designers (including myself) and Homeowners had their go-to list of grays that would cover entire house interiors top to bottom.

With a new decade ahead of us it is time for a new paint color trend (finally).  White paint brings a sense of sophistication to a space, allowing the walls to highlight artwork, architecture and give a bright yet quiet background to your beautifully collected furniture (see topic one above).

From bright white to milky white and crisp white to creamy white, there is a white for everyone. If you are considering going with a white wall, it is important to keep in mind your trim and cabinetry colors. All whites are not the same so be sure to use samples and see how they blend with your existing paint colors. 

Hello Color and Florals!

Tired of seeing the same styles over and over again? Us too. For example, one of the patterns I have been ready to retire since 2015 is Geometrics. Thankfully, with this 2020 concept of originality and pushing the envelope, we are seeing people much more willing to experiment with color and patterns such as florals.

From Peacock Blue velvet sofa’s to floral fabric covering barstools, furniture is being used to express clients style and favorite colors. For years, many folks associated floral fabric with that Chintz Living Room sofa never to be sat on at an elder family member’s house. Not anymore! We encourage and welcome the new wave of florals as they add incredible interest and naturally create wonderful color schemes in a room.

Thank you, Caroline! I’ve been seeing a lot of these trends pop up lately myself so it’s pretty clear that homeowners and buyer tastes are shifting back to an older generation of design, with a more 21st century touch. Caroline and her team at Madigan Schuler are excellent design resources so feel free to reach out to Caroline at caroline@madiganschuler.com for advice on your own interior redesign or remodeling efforts.

2019 Arlington Real Estate Market Review: Condos

Question: How did the Arlington real estate market do in 2019?

Answer: Arlington’s real estate market made the national news cycle more than a few times in 2019 with some pretty extraordinary references to rapid appreciation – some accurate and some not. I’ve seen prices in some pockets of the market surge 15-20% in 2019, but for most of the market, appreciation was strong but not eye-popping.

Overall, the average and median price of a home sold in Arlington in 2019 was $705k and $610k, a 6.3% and 8.9% increase over 2018, respectively. Average days on market dropped by one week and an incredible 61.4% of buyers paid at or above the seller’s original asking price. The number of homes listed for sale in 2019 dropped about 17% compared to 2018 and demand surged, with buyers absorbing about 67% more inventory in 2019 than in 2018.

This week I will dig into how Arlington’s condo market performed in 2019 and next week I’ll do the same for the detached single-family home and townhouse market. I did separate write-ups on the 22202 (Amazon zip code) condo and detached home markets last month.

Arlington Condo Market Performance

First we’ll take a look at some of the key measures for market performance across Arlington and within North and South Arlington. This data excludes age-restricted housing (The Jefferson), Cooperatives (River Place), and townhouse-style condos (Fairlington).

  • The condo market seems to have appreciated 7-8% in 2019, after experiencing barely any growth from 2013-2017 and modest growth in 2018
  • South Arlington beat out North Arlington in every key category, which makes sense because it’s an easier price point for homeowners and investors who wanted some sort of real estate position in Arlington before Amazon’s hiring picks up
  • The average condo buyer in South Arlington paid .8% over the seller’s asking price
  • Condos in North Arlington sold twice as fast as they did from 2015-2017. In South Arlington they sold more than three times faster than 2015-2016.
Performance of Different Sub-Markets

I took a look at some of the sub-markets that make up large cross-sections of Arlington’s condo market to see how they performed compared to the overall market.

For “standard” 1BR and 2BR condos in the Rosslyn-Ballston (R-B) Corridor I specifically looked at condos in buildings constructed during the 2000s condo boom with 650-800sqft (1BR) and 950-1,200sqft (2BR).

  • “Standard” R-B 1BRs appreciated 4% in 2019
  • “Standard” R-B 2BRs appreciated 5% in 2019

For “older” 1BR and 2BR condos, I looked at those constructed in the 1940s-1960s. This category of condos had been slow to appreciate and as of 2018, a lot of owners were still trying to dig out from 2005-2007 prices.

  • Older 1BRs appreciated 7.4% in 2019
  • Older 2BRs appreciated 10.5% in 2019
Performance Within Different Price Ranges

Appreciation in Arlington’s condo market was pretty evenly distributed between the upper, middle, and lower price ranges as evidenced by the change in the average price of the lower 25%, middle 50%, and upper 25% of sales from 2018 to 2019.

  • The average price of the middle 50% of Arlington is now well north of $400k
  • Over the last two years, Arlington’s least expensive housing has appreciated the fastest, with the average price of the lower 25% increasing by more than 12% since 2017. You can likely attribute this to investor activity.
  • If you’re curious about the max sold price in 2019 of $4,750,000, it was a top floor 4,400+sqft condo at Turnberry Tower (link). It was first offered for sale three years ago for $7M. If you remove this sale from the data, the upper 25% appreciated 7.4% in 2019.
Inventory Shortage

A lot of real estate conversation in 2019 revolved around inventory shortages. The number of condos offered for sale dropped nearly 21% in 2019 and the increased demand (higher absorption rate) pushed available inventory down by more than 57%. The chart below shows the YoY quarterly decrease in new condo listings and available condo inventory in Arlington.

https://cpp1.getsmartcharts.com/chart/mls/1/getreport.php?rid=2,3&ftid=2&fid=1005&gty=4&ltid=4&lid=51013&gid=2&cc=05c500,ffc000&sid=1&mid=2&tt=2&mode=4
Looking Ahead

I will be keeping a close eye on inventory levels as this year starts off. Last year a lot of homeowners decided to withhold homes from the market in anticipation of higher Amazon-related appreciation. Now that much of the market has experienced significant appreciation, it will be interesting to see if more homeowners decide that now is the right time to sell. I expect demand will be able to keep pace with an increase in new inventory, but more inventory should keep prices a bit more level this year.

With rates remaining low through last year and projected to do so again this year, couples with a strong employment and stock market, buyer confidence is high. On the flip side, markets usually stagnate heading into an Presidential election so it’ll be interesting to see if/how the election effects counter the current momentum.

I predict that condo values will grow steadily in the 2-5% range over the next 5-10 years, but that no year in the 2020s will outpace 2019. Some possible exceptions to this are major zoning changes by Arlington to allow for more condo development (increased supply), the conversion of some large apartment buildings into condos (increased supply), or a national economic crisis (decreased demand).

Thanks for reading along! If you have any questions or I can be of any help with your real estate needs, don’t hesitate to reach out to me at Eli@EliResidential.com. Next week we will dig into the detached single-family and townhouse markets!

If you’d like a question answered in my weekly column or to set-up an in-person meeting to discuss local Real Estate, please send an email to Eli@EliResidential.com.

2020+ Interest Rate Predictions

Question: Do you expect interest rates to remain low in 2020?

Answer: Mortgage rates increased sharply in 2018, peaking at 7+ year highs in the fall of 2018, and most experts expected that trend to continue into 2019 and for 30yr rates to clear the 5% mark for the first time since spring 2010. However, changes in economic policy and financial markets pushed rates down at the end of 2018 and throughout 2019, coming close to all-time lows in the 2nd half of 2019.

Average 30yr Fixed Mortgage Rate Since 1971
Average 30yr Fixed Mortgage Rate Since 2010
Rates in 2020+

The Mortgage Bankers Association and Freddie Mac each predict that rates will remain low, right around current levels, through 2021 with an average 30yr Fixed Rate hovering around 3.7-3.8% through that period. The Mortgage Bankers Association predicts that rates won’t start increasing until 2022, when they’re predicting the average rate to increase modestly to 4.1%.

If these projections are accurate, it should support strong price growth over the next few years in Arlington, Northern VA, and the greater DC Metro.

However, keep in mind that just over 12 months ago, most experts predicted that mortgage rates would be over 5% by 2020 and, according to Freddie Mac, the average 30yr Fixed Rate last week was 3.64%. Changes in the global or US economy, the election, and the stock market can all change the course of rates in 2020 and beyond.

Lender Advice

If you’re considering purchasing in 2020, I wrote a column a few years ago about the value of a good lender that I’d encourage you to review. If you’d like to talk to somebody, I suggest reaching out to Jake Ryon of First Home Mortgage at JRyon@firsthome.com.

If you’d like to meet to discuss buying or selling in the area, don’t hesitate to reach out to me at Eli@EliResidential.com.

The Real Story About 22202 Property Values (Amazon Zip Code), Part 2

Question: I have read articles about the 22202 zip code suggesting everything from extreme appreciation to homes now selling for pre-Amazon prices. Can you shed some light on what’s actually happening in that market?

Answer: A few weeks ago, I wrote part one, focusing on the performance of the 22202 (Amazon Zip Code) condo market so this week we’ll take a look at how the detached single-family market performed in the neighborhoods bordering Amazon HQ2.

One of the issues I mention in Part 1 is how much misinformation has been published elsewhere about price appreciation in 22202 and the Arlington/Alexandria markets.

This two-part column is one of my attempts to provide an accurate picture about what’s actually happening in our real estate market. The key takeaway is that the market performed very well (if you own, not if you’re a hopeful buyer) following the Amazon HQ2 announcement, but prices haven’t skyrocketed the way many articles would lead you to believe.

Market Make-up

The 22202 market offers a diverse supply of housing. This year, condos have sold from as little as $195,000 for a 500sqft studio to $1,250,000 for a 2,900sqft 3BR/3BA penthouse. The least expensive detached home sold for $630,000 to be torn down and the most expensive a 6BR/4.5BA for $1,600,000.

Homes in the area tend to be pretty old with most detached homes being built prior to the 1960s and only one condo building has delivered since 1990.

Of the 139 homes to sell in 2019, 78 were in condo buildings, 50 were detached homes, and 11 were townhouses.

22202 Detached Single-Family Performance

The tables below represent sales in 2018 and 2019 split between those that went under contract before and after Amazon’s HQ2 announcement on November 13 2018:

PeriodAvg Sold PriceAvg Sold to Org Ask PriceAvg Days on Market# SoldTax Assessed Value
Post-Amazon$995,739100.6%1353$829,742
Pre-Amazon$911,47097.6%4172$802,120

Like elsewhere in Arlington and the 22202 condo market, inventory levels took a big hit in 2019, dropping 33% from 75 sales in 2018 to 50 sales in 2019. Sales volume had ranged consistently between 69 and 76 sales since 2015.

The decline in sales certainly was not due to lack of demand, rather fewer properties hitting the market. This is evident from the sharp drop in average days on market (down 63%) and sharp increase in the average sold price to original asking price ratio (up 3%). In fact, the detached home market was so competitive that the average buyer paid over asking price.

Detached home prices in 22202 increased by an average of 9.2%, from $911k to $996k, and the median value increased by 8.5%, from $876k to $950k. Detached homes in the area vary so much from sale to sale that you can’t take the average or median price growth and apply that level of appreciation to all individual homes. When I dug into individual comparable sales pre and post Amazon announcement, I found that homes below ~$1M appreciated noticeably more than those above $1M, by about 12-15% and 5-8%, respectively.

Here are a couple of tables for those of you who want to get really far into the data. The first shows how the lower, middle, and upper quartiles changed between 2018 and 2019. The second shows how sales were distributed between different prices ranges.

Price RangeLow PriceHigh PriceAvg Price2018-2019 Increase
Pre-Amazon Lower 25%$485,000$746,888$669,784 
Pre-Amazon Middle 50%$753,000$1,049,000$869,592 
Pre-Amazon Upper 25%$1,049,000$1,537,250$1,226,846 
Post-Amazon Lower 25%$630,000$825,000$739,30810.4%
Post-Amazon Middle 50%$830,000$1,145,000$975,85212.2%
Post-Amazon Upper 25%$1,162,500$1,600,000$1,319,8227.6%
Price Range# Sold% of Sales
Post-Amazon53 
<$775k1018.9%
Middle2445.3%
>$1,125,0001935.8%
Pre-Amazon72 
<$775k2230.6%
Middle3650.0%
>$1,125,0001419.4%
22202 Tear-Down Sales

I also looked at how the Amazon announcement impacted the cost of homes being torn down (for new construction) and found that the average cost of buying a tear-down increased by 13.7% or 16.2%, depending on which data point you use. Note: I limited the data set to homes sitting on 5,000-10,000sqft lots and not all tear-down sales are entered into the MLS.

PeriodAvg Sold PriceAvg $/Sqft (lot size)# Sold
Post-Amazon$730,556$1159
Pre-Amazon$642,592$9914

I hope anybody living in or hoping to buy into the 22202 zip finds this data useful and the rest of you find it interesting! I’m going to start working on my 2019 Arlington housing market review and hope to have that published in the next few weeks.

If you ever want to meet/talk about the market or your plans to buy, sell, or invest in the DC Metro area, don’t hesitate to reach out to me at Eli@EliResidential.com.

What A Difference A Decade Makes

Happy New Year/Decade! Who would have thought that our little town whose claim to fame 10 years ago was a rap song about how many Starbucks we have would finish the decade as the 2nd home to a little internet book company called Amazon? For those of you who have owned real estate over the last 10 years, congratulations, you deserve your champagne tonight!

Let’s take a look at how the Arlington real estate market changed over the last 10 years:

Arlington 10 Years Ago
Arlington Now

I hope you all end the decade on a celebratory note and I wish you well in the 2020s. For those of you eyeing a real estate move (buying, selling, investing, or renting) in 2020 or beyond, feel free email me at Eli@EliResidential.com.

HAPPY NEW YEAR!!