Question: How close are the County’s tax assessments to actual market values?
Answer: Last week, Arlington announced that the next round of annual tax reassessments would increase the total residential assessment by 5.8% (this is overall, changes to individual home/land values will vary significantly). This change is meant to align with the increase in market values of Arlington homes, but assessed values remain well below actual market values for most homes. In fact, 88.6% of homes sold in 2021 sold for above their most recent tax assessment value.
Homes in Arlington that sold in 2021 sold for an average of 14% (median 12.3%) above their most recent tax assessment. Last year, that difference came to an average of 18.2% and in 2019 it was 14.2%.
Homeowners in the 22205 zip code benefit the most by underassessments with an average difference between 2021 sold prices and their assessments of 20.9%, or nearly $181,000. Owners of single-family homes and townhouses (17.6% average difference) benefit more from underassessments than condo owners (9.5% average difference).
If County assessments were representative of actual market values, the average Arlington homeowner would pay over $1,000 more per year in property taxes. So don’t forget to send the Department of Real Estate Assessments a thank you card!
If you believe that the County’s assessment of your home’s value is too high, you have the right to appeal the assessed value, but that must be done by March 1.
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.
Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.
Question: Is the single-family home market still as intense as it was earlier this year?
Answer: In January I’ll do a deep dive into the 2021 market performance with a focus on home values, but this week I wanted to dig into some key supply and demand metrics for single-family, townhouse, and duplex homes in 2021 to highlight how the intensity of the market has shifted over the course of the year.
I’m focusing on the single-family, townhouse, and duplex (non-condo/apartment-style) market here because that was the market that exploded locally and nationwide in the wake of COVID. It’s important to note, however, when looking at the Arlington market that we didn’t experience nearly the extreme change as many other regional or national markets because things were already competitive thanks in part to Amazon HQ2 and because COVID-based demand tended to favor less expensive markets and markets that offered more space (land and house).
The trends for Arlington can be summarized below, highlighted by charts to follow:
Supply: Supply usually follows a familiar seasonal trend with low supply early in the year, lots of supply coming to market in the spring, followed by a consistent downward trajectory from summer through the end of the year. This year supply did peak in the spring, but maintained a more consistent volume of new supply through the rest of the year, with a surprisingly high number of homes offered for sale in Q4. My best guess for the strong Q4 numbers is that homeowners witnessed such impressive appreciation of their homes in the first half of the year (and second half of 2020) that they wanted to take advantage of current prices instead of timing the market for peak spring demand. It will be interesting to see if this negatively impacts listing volume in 2022.
Demand: Demand trends were consistent with their normal seasonal trends, albeit above average through the course of the year. Demand picked up quickly in Q1 and peaked in the spring, followed by a tapering of intensity in the 2nd half of the year. I believe that the tapering of the demand metrics in the 2nd half of the year was a combination of factors including, but not limited to, sellers raising prices based on first-half market performance, many of the most desperate buyers finding homes, buyers dropping out, and buyers focusing less on their home search as vaccines allowed people to return to travel and other plans. I expect strong demand in 2022, but without the crazy price appreciation we had in 2021.
The charts below highlight my supply and demand findings. A few notes on the data that makes up the charts:
The data is based on when a property was listed for sale, not when it sold. This gives us an accurate assessment of how the market performed at specific times during the year vs a trailing indicator of demand (using date sold)
I broke the year into two-week periods because I think it gives the right perspective on the information we want from the data
To aid your reading of the charts Period 5 starts on Feb 21, Period 10 starts on May 2, Period 15 start on July 11, Period 20 starts on Sept 19, and Period 25 starts on Nov 28
I removed new construction from the data because the way it’s listed often doesn’t reflect actual market conditions
I removed homes with zero days on market because it generally reflects a pre-market/off-market deal and they aren’t helpful in this type of analysis
The Market Moved Quickly, Gave Buyers Little Time to Think
Many buyers were forced to make significant purchase decisions in a matter of hours or even sight unseen to secure a good home. During peak spring demand, less than 20% of homes listed for sale sat on the market for more than two weeks and nearly 60% went under contract in less than one week.
Most Buyers Paid Over Asking Price
On average, buyers paid .2% over the asking price this year and for those who went under contract during a home’s first week on the market, the average buyer paid 2.8% over asking, peaking at an average of 5% over ask in the 9th Period (homes listed April 18-May 1). Remember, these are averages, there were plenty of people paying significantly more than that over the asking price.
Things have gotten slightly more manageable for buyers in the 2nd half of the year with a lot more homes selling at or below asking price, but even with tapering demand, buyers in the 2nd half of the year who go under contract in the first two weeks a home was listed paid an average of 1.5% over ask.
Supply Unusually High in 2nd Half, Average Days On Market Increasing
As noted above in my summary, supply volume broke familiar seasonal trends with a consistently strong flow of listings coming to market through the 2nd half and even into Q4. Thus, slightly less demand and unusually high new supply has led to modest increases in average days on market and less fierce competition.
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.
If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to Eli@EliResidential.com. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at (703) 539-2529.
Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.
Question: We’re preparing to sell our home and would like to stay in the house for a few weeks after it sells. Can you explain the rent-back concept?
Answer: A Seller’s Post-Settlement Occupancy, more commonly referred to as a rent-back, allows a homeowner to sell their home, collect the proceeds, and continue living in the home for a pre-determined period after closing.
Some common scenarios for a rent-back are:
You need the sale proceeds for the purchase of your next home
You want to ensure the sale closes before you move out
You want to wait-out the end of the school year or last day at a job
How Rent-Backs Are Structured
The Northern Virginia Association of Realtors contract (as well as other regional contracts) provides a standard form for a Seller’s Post-Settlement Occupancy Agreement so you don’t need to worry about hiring an attorney. It functions as a short-term lease including:
How much the seller will pay the buyer for the rent-back
How long the rent-back lasts
A security deposit
A penalty for staying past the rent-back period
Buyers will conduct a pre-closing walk-through before they purchase the home where they have all the rights provided to them in a normal sale. At the end of the rent-back, the new owners will conduct another walk-through once the previous owners move out, which is like that of a walk-through at the end of a normal rental period. If the previous owners caused damage during the move-out, leave junk behind, or fail other property delivery requirements, the new owners can make a claim against the security deposit, which is generally held by the Title Company who handled the sale.
Time Limitations
If the home is being purchased as a primary residence and the Buyers are taking out a mortgage, most loans (and all Fannie/Freddie loans) require that the Buyer intend to move into the property within 60 days of the closing and thus any rent-back is limited to 60 days (I usually recommend 59, just to avoid an issue with underwriting).
If a home is being purchased with cash or as a secondary home/investment property with a loan, the 60-day limit doesn’t apply. However, the contract form you’ll use explicitly states that it’s meant to give the seller the temporary right to use the property after closing and not subject to the Virginia Residential Landlord Tenant Act, so avoid using this form in place of a legitimate lease if the Buyer/Seller intend on a longer-term rent-back.
Not Without Risk
For the new owners, a rent-back carries with it some of the same risks as being a landlord. Disputes over security deposit, damage in excess of the security deposit, or trouble with the previous owners moving out on time are all realities that Buyers need to consider.
As with many decisions in a real estate transaction, a Buyer’s willingness to agree to a rent-back is a matter of risk and benefit. The risk being issues arising like those mentioned before and the benefit being that offering the seller a rent-back can be the difference between them accepting your offer or taking somebody else’s.
Free Rent-Backs?
In “normal” markets, the fee for a rent-back is usually calculated using the new owner’s carrying costs (mortgage + taxes + insurance), but in our hyper-competitive market, many Buyers offer Seller’s a free rent-back as a way to increase the competitiveness of their offer. A free rent-back isn’t worth much if the seller is asking for an extra week, but it certainly adds up if they’re asking to stay for 6-8 weeks past closing.
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.
Question: Do you expect Arlington to suffer from an urban migration to less populous areas due to COVID?
Answer: There has been no shortage of articles written about COVID’s impact on desirability of urban living and areas like NYC and SF have already seen drops in demand. I wrote a couple of weeks ago that demand (measured by absorption rate) in Arlington seemed to be tapering slightly, while increasing across Northern VA. This could be a sign that some buyers are choosing more distant/less populous communities, but it could also be a result of how little inventory there is and how quickly prices have gone up.
POLL
Are you more or less likely to be an Arlington resident five years from now due to the impact COVID has had on you or your partner’s life/commuting requirements?
I don’t think we’ll know how COVID will impact long-term demand in Arlington until we see whether or not it results in substantial changes to where/how people work. Most people I’ve spoken to don’t know whether their employers will make permanent changes to telework schedules or flex hours, or whether they will return to their pre-COVID work routines once life returns to normal.
Commute times are a top-three consideration for most Arlington residents so it’s hard to argue that a trend towards 50% or more telework days per month won’t reduce housing demand in Arlington. The next decade is also likely to bring major improvements to autonomous driving and the commuting experience which will allow some to bear longer commutes by increasing productivity during the drive.
But just how much would net demand change? I can also see a scenario where Arlington residents who leave for more space and/or less expensive housing are replaced by new residents from cities like DC, NYC, or SF looking for a better balance of urban and suburban life.
Major shifts in telework and commuting may reduce long-term demand for Arlington housing, but I think it’s far from a doomsday scenario where the bottom drops out of the market. Commuting is still just one factor of a much larger set of needs and wants that Arlington offers its residents so it’s more likely to result in tapered housing appreciation over the long-term, rather than negative growth.
Let’s check back in on this in 2025 to see how we’re doing…
Question: The last time I bought a house, the market was much more favorable for buyers. I’ve heard so much about competing offers and the need to submit a strong offer, but what exactly does that mean?
Answer: Other than price, there are about a dozen terms included in your offer that will determine its strength — the value/appeal it has to the seller. Of course, every home owner wants to get the most money possible, but they also care about when the sale is executed, the likelihood of getting to settlement, renegotiation periods, risk and more.
Sometimes a seller takes a lower offer price in exchange for better supporting terms. Understanding what type of offer is appropriate/necessary for a property and how certain terms change your (buyer or seller) risk exposure on the transaction is critical.
Let’s take a look at some of the terms included in most contracts that have the biggest impact on the actual or perceived strength of an offer.
Price/Escalation Addendum
This is an obvious one. Higher price = stronger offer. Escalation Addendums are common when there are multiple offers, but how and when to use them is a nuanced, yet critical, decision.
The Escalation Addendum allows you to beat any competing offer by a specified amount, up to the highest amount (ceiling) you’re willing to pay for a property. Used correctly, it prevents you from leaving money on the table, while not paying too far above what the rest of the market is willing to offer.
Contingencies
The three most common contingencies are for the home inspection, appraisal, and loan. Each provide the buyer with a set of protections that allow them to renegotiate and/or terminate the contract, without losing the deposit. Removing a contingency or shortening the contingency timeline increases the strength of an offer.
Home Inspection: It used to be standard for Arlington buyers to include a negotiation period in the home inspection contingency, allowing them to negotiate for repairs or credits based on the results of the inspection or terminate the contract. Now it is much more common for buyers to forego the negotiation period and simply retain the right to void (aka a pass/fail inspection), which is much more attractive for a seller. Even more attractive is when buyers perform a pre-inspection on the property (inspect before submitting an offer) and remove the home inspection contingency altogether.
Appraisal: If you’re using a mortgage to purchase a home, your lender will almost always require a property appraisal. The appraisal contingency allows you to renegotiate or terminate the contract in the event the home appraises for less than the purchase price. It is common for buyers to remove the appraisal contingency or agree to cover up to a certain amount on a low appraisal to increase the strength of an offer.
Financing: The financing contingency allows you to terminate the contract without losing your deposit if your loan isn’t approved. Many buyers who have undergone a thorough pre-approval process have enough confidence in their ability to secure the mortgage that they remove this protection, thus conveying a strong financial position to the homeowner.
Speed of Sale
Most sellers want to close (executed sale) as quickly as possible so cash-buyers have the biggest advantage here because they can usually close in a week or less. For the more than 80% of Arlington home buyers relying on a mortgage, many choose to work with smaller, local lender who can sometimes close in as little as 2-3 weeks. Offering a quick-close to a seller can give your offer a significant boost.
Financing
If you’re relying on a mortgage, sellers are usually more drawn to higher down payments. That’s not to say that a 3-5% down payment (or 0% on a VA loan) can’t win in a competitive scenario, but you are at a disadvantage and will often get passed over when all other terms/pricing are relatively equal.
A thorough pre-approval process by a quality/reputable lender can provide the seller with confidence that if they accept your offer, there is very little risk of the deal falling apart due to financial issues. Sometimes sellers take less money work with a buyer they have more confidence in.
Earnest Money Deposit (EMD)
This is money held in escrow (usually by the Title Company) as security for the seller that you’ll perform under the obligations of the contract. It gets applied against what you owe at closing for down payment + closing costs, but is at-risk if you default on the contract (terminate outside the legal means/contingencies).
Traditionally, a reasonable deposit ranged from 1-3% of the purchase price, but some buyers are electing to make substantially larger deposits in an effort to establish financial strength. Instances of buyers offering deposits of 10% or more are becoming more common.
Rent-Back
Oftentimes if the homeowner is still living in the house during the sale, their preference is to close as quickly as possible and then have some time to move out after the sale is complete – this is called a rent-back. It used to be common for the seller to cover the buyer’s daily carrying cost (mortgage + taxes + insurance + HOA fee) for the length of the rent-back, but in this hyper-competitive market, a strong offer often includes a free rent-back for the seller.
The use and structure of each of these terms is dictated by many factors including demand/competition, days on market, seller-preferences, and buyer priorities/risk tolerance. As a buyer, being prepared with the right offer strategy and understanding the risk-benefit tradeoffs for each term can be the difference between landing your dream home or going back to the drawing board.
If you’d like to discuss buying or selling strategies, don’t hesitate to reach out to me at Eli@EliResidential.com.
Question: Can you provide some clarity on how mortgage forbearance works and whether that will negatively affect my credit score?
Answer: I’ve received quite a few emails from folks considering mortgage forbearance or asking for clarification on (usually) incorrect information provided to them from friends or family about the process. We don’t have all of the answers yet, but enough information is available to help people make more educated decisions about forbearance.
To explain forbearance and some of the unintended consequences, I asked one of the top mortgage lenders in the DC Metro, Jake Ryon of First Home Mortgage, to join as a guest columnist. If you’d like to talk with Jake about a loan, refinance, or any other mortgage related question you can contact him at JRyon@firsthome.com.
Take it away Jake…
What is Mortgage Forbearance?
Congress passed the CARES Act, allowing those facing financial hardship due to COVID-19 to request a mortgage forbearance (pause in mortgage payments) for 180 days, with the option to extend for an additional 180 days.
The bill does not require you to provide proof that you’re suffering a hardship, but the CFPB makes it clear that if you can pay your mortgage, you should. However, not everyone is following that guidance and some borrowers who are able to pay are choosing not to and may suffer unintended consequences.
Mortgage forbearance is a temporary pause in payment; it is NOT forgiveness. All missed payments by the borrower must be paid back.
Repayment
Unfortunately, the repayment terms for a forbearance are vague. Statements from Fannie and Freddie indicate that you do not have to repay the missed payments all at once, but that it is for the borrower to work out with the servicer. If the payments are not paid back in a lump sum or over a designated period, but instead added to the end of the loan, the borrower is agreeing to a loan modification.
*Please note this is based on the most up to date information I could find and is subject to change as this is a fluid situation. Please reach out to your loan servicer directly for your options. *
Refinancing: This may vary by lender, but as I understand it, to be eligible to refinance, borrowers must be out of forbearance and current on their mortgage. This is a big concern if rates continue to fall throughout the year.
Repayment Terms: As mentioned earlier, there are options to repay the missed payments via a lump sum, over a repayment period, or modifying the term of the loan. Keep in mind the servicer must agree to the repayment plan.
I’m hearing that modifications are only being offered if there is documentation to show you’ve been adversely affected by COVID-19. This is going to be problematic for borrowers who didn’t lose their job and assumed their skipped payments would be tacked onto the end of their mortgage or forgiven.
Buying Your Next Home: Since this is so new, we haven’t seen any credit reports reflecting modifications as a result of COVID-19. It’s unclear how lenders and investors will treat these modifications when evaluating new loans.
For example, most investors want to see borrowers pay their mortgage on time for a minimum of 12 months after their modification begins. If someone takes the full 12 months of forbearance, they could be looking at a minimum waiting period of 2 years before obtaining a new loan.
Residual Effects toYour Credit: While the CARES Act says mortgage lenders won’t report you as delinquent during a forbearance, they can’t control how other lenders will view it. For example, if you’re a credit card company and you see a borrower is in forbearance, are you inclined to increase their credit limit or issue a new card? If your credit card debt is increasing and your available line of credit is staying the same or decreasing, it will most likely lower your score.
Weekly Arlington Market Snapshot
Thank you very much for your insights Jake!
Here’s a quick look at how the Arlington market performed over the past week, compared to the prior week. New inventory and the inventory pipeline dropped down to some of the lowest one-week levels we’ve seen this spring, while contract activity remained relatively strong.
Past Seven Days (Arlington)
Seven Days Prior (Arlington)
If you’d like to discuss buying or selling strategies in this market, don’t hesitate to reach out to me at Eli@EliResidential.com.
Question: What has been the impact of the Coronavirus/COVID-19 on the real estate market?
Answer: What a difference a week makes. Last Tuesday I started off semi-apologetic for writing what felt like a click-bait article at the time and this week it feels like writing about anything else would be absurd.
Last week I wrote that the impact of COVID-19 on real estate thus far was business as usual with a few big “What Ifs.” Those What Ifs came to fruition within 24-72 hours of Tuesday’s column – major changes to our daily routines (school closures, work closures) and significant changes in the global/domestic economy.
It is no longer business as usual in real estate, but the show still goes on for most buyers and some sellers…for now.
This week and in the following weeks I will do my best to communicate the impact of the Coronavirus on the local real estate market through my experiences, experiences shared by my colleagues/industry partners (inspectors, lenders, etc), and market data.
What I’m Seeing/Hearing
Combining the reactions of my clients and clients of the 15-20 agents I’ve spoken with over the last few days to gauge shifts in supply (sellers) and demand (buyers), it seems that many/most buyers are staying the course with their purchase but the jitters seem to be setting in more over the last couple of days, especially for those who also need to sell a home. Sellers are much more nervous, understandably so, and many are questioning their need/plans to sell their home.
Most agents experienced noticeable drops in Open House and showing traffic over the weekend, although I spoke with a few agents who hosted 20+ groups during an Open House. My guess is that there are fewer people visiting homes who aren’t serious/ready buyers and that usually makes up a large percentage of total foot traffic.
Many of the agents I spoke with who submitted an offer this weekend still found themselves competing against multiple offers with strong terms, but the number of competing offers seemed less than what they would have expected a few weeks ago. I experienced this on a house in South Arlington that 2-3 weeks ago would have probably gotten 5-10 offers, but my client was up against just one or two, albeit strong, offers (they won!).
I think one of the best measures of buyer demand/activity is home inspection bookings. 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 he shared some valuable insights on his activity, as well as regional and national activity.
Almost all of Ken’s business is in Northern VA and during a hot market (like the last 8 weeks) he’s often booked out for 5-7 days. His schedule is full this week Monday-Wednesday but wide-open starting Thursday, which never happens.
In Virginia and Maryland, their bookings are down 15% from where they were last week and they were projecting a 10% increase in bookings this week over last, given the time of year. Bookings are down about 20% nationally.
Transactions Still Going
There was some concern that transactions would be halted due to courts, appraisers, and loan underwriters shutting down due to Coronavirus but so far everybody is operational, with some adjustments to adhere to social distancing practices.
Arlington County courts, like many others, have restricted walk-in business but essential services are still available which includes e-recording of deeds (allows property ownership to officially transfer). Lenders and appraisers are still operational, but people should prepare for longer turn-around times. The slowdown on appraisals is actually due to the massive spike in refinancing over the last few weeks when mortgage rates dropped to all-time lows (spiked back up last week due to heavy volume).
Unfortunately, virtual closings aren’t widely accepted yet so buyers and sellers do need to sign in-person in the presence of a notary, so somebody in quarantine or older buyers/sellers who don’t want to mix with the rest of the population will need to take steps to ensure safe distance and cleanliness in order to sign paperwork.
What To Expect
Nobody knows what life and the economy will look like 4-8 weeks from now, but at this point in time, it’s my takeaway that supply is likely to take a bigger hit than demand, but both will have a noticeable drop-off.
It’s still a little too early for me to use listing and contract activity data to see how the market is reacting, but I’ll have enough to work with by next week’s column to present actual market data.
Question: How will the threat of Coronavirus impact the real estate market in 2020?
Answer: I wasn’t planning to write this, it seems a little click-baity (now my “Trump’s Impact on Real Estate” column has some competition!), but I got the question four different times in under 24 hours last week so here I am writing about it.
Too Early To Know
Nobody knows how Coronavirus is going to impact the real estate market over the next month or the next ten months because we don’t know what the real impact of the virus will be on public health and markets. According to President Trump, it could disappear one day “like a miracle” and according to others, we could face a devastating pandemic.
Yesterday’s stock market closed down nearly 8% and this morning, the Futures were up almost 4%. Uncertainty slows the real estate market down and the only certainty right now is how uncertain the markets and public are about COVID-19. It’s hard to see how this type of uncertainty doesn’t create a drag on real estate across the country, the question is how long it will last.
Beyond the uncertainty, you have the very real impact of a sharp decline in investment/retirement accounts that many people use for down payments. With many accounts down double digits over the last two weeks, some buyers may reconsider their decision to sell stocks right now.
On the other hand, interest rates are historically low, hitting all-time lows last week, and the real estate market across the greater DC Metro has been on fire since January so it’ll take a major shift in demand to slow things down as we head into peak buying season.
What I’ve Heard
So far, what I’m hearing from clients, colleagues, and other industry partners (lenders, title, etc) is that buyers are hoping the Coronavirus slows the market down so they can have a better opportunity to buy, but there seems to be very few people actually pulling out of the market or reducing offers because of it.
Currently, buyers still seem more motivated by historically low rates and lack of buying opportunities than they are concerned that the likely impact of the virus. It seems that long-term confidence in local real estate is still a stronger influence on people’s decisions.
I think this mindset could change quickly, having broad negative effects on the local real estate market, if markets continue to tank, systematic failures in the market appear (e.g. Mortgage-backed Securities in 07-08), or people begin experiencing more direct effects of the virus like work/school closures or people they know testing positive. This is an important change to watch for if you’re considering putting your home on the market in the coming weeks.
Don’t Overvalue Speculation
It’s important to distinguish between fact and speculation and not overvalue speculation. If you spend 30 minutes online today, you’ll be able to find an assortment of well-supported reasons why the markets is on the brink of another recession as well as well-supported reasons why everything will be just fine, with growth ahead.
Your decision should be rooted in things you can rely on like how long you can live happily in a home (nothing creates value like longer ownership periods) and what your best alternatives are to buying (renting, staying put) or selling (do you have a better utilization of your equity?).
Of course, you want to consider the national, regional, and local economy as well as neighborhood trends, development pipelines, and other factors that will influence appreciation/depreciation potential, but be careful not to overvalue speculation.
Question: The County significantly increased the assessment value of my home this year, should I appeal it?
Answer: It’s that time of year again…time for homeowners to find out they’ll be paying more in real estate taxes this year due to an increase in the assessed value of their homes. Arlington increased the assessed value of residential real estate by an average of 4.3%, which is less than the 6.3% increase in average sold price in 2019 and much less than the 8.9% increase in median sold price.
Tax assessments are based on the sum of the County’s determination of the value of the land your home sits on and the value of the improvements made to that land (your home). The County adjusts each of these values every year to generate the total assessed value, of which Arlington homeowners pay about 1% of each year to the County in real estate taxes.
Based on conversations I’ve had with homeowners around the County, it sounds like most of the increase in assessments this year were driven by increases in the land value, which makes sense.
Assessed Value vs Market Value
While it is frustrating to see your assessment increase so much, costing homeowners an average of a few hundred dollars in additional tax payments, it’s highly unlikely you’re in a position to challenge your assessment. Over the last 14 months, the County’s assessed value was an average of 14.2% below what homes actually sold for.
Here’s a breakdown of how the County’s assessment compared to actual sold prices since 2019, broken out by zip code, property type, and price range. Here are some highlights from the data:
If the County’s assessment matched actual market values, homeowners would pay an average of about $800 more per year in taxes
Unsurprisingly, the zip codes with the greatest difference between market values and assessed values were all three South Arlington zip codes (22202, 22204, 22206), with homes in 22202 (home to Amazon HQ2) selling for nearly 20% more than the County’s assessment
The County has the most difficult time assessing home values in 22205 compared to other zip codes and, unsurprisingly, detached homes compared to condos or townhouses
Residents who own homes worth over $1M benefited the most by the County’s low assessments, with market values nearly 19% higher than their tax assessment, resulting in an average annual savings of about $1,900 if the County’s assessments were on par with market values
Zip Code
Avg Sold $ to Assessment $
StdDev Sold $ to Assessment $
Avg Difference Sold $ vs Assessment $
22201
12.3%
8.7%
$71,412
22202
19.7%
15.9%
$108,083
22203
13.1%
10.7%
$72,268
22204
15.4%
13.7%
$62,933
22205
15.4%
19.3%
$126,150
22206
18.1%
11.9%
$71,783
22207
11.1%
14.4%
$106,188
22209
10.7%
8.8%
$57,149
22213
10.4%
9.7%
$40,016
Arlington
14.2%
13.0%
$79,434
Property Type
Avg Sold $ to Assessment $
StdDev Sold $ to Assessment $
Avg Difference Sold $ vs Assessment $
Condo
13.9%
10.6%
$50,659
Detached
14.0%
17.0%
$118,925
Townhouse
15.0%
9.9%
$81,220
All
14.2%
13.0%
$79,434
Price Range
Avg Sold $ to Assessment $
Avg Difference Sold $ vs Assessment $
<$1M
13.3%
$58,720
$1M+
18.6%
$187,718
Total
14.2%
$79,434
As reported by ARLnow last week, the County will not increase the tax rate (percentage of assessment homeowners pay in annual taxes) and may still decide to reduce the tax rate to offset increased assessments. The hope for many homeowners is that as commercial vacancy rates drop from the historic highs over the past decade, the increased tax revenue from businesses will allow the County to ease the tax burden on homeowners by reducing the residential real estate tax rate.
As always, if you are considering buying, selling, or investing in Arlington/Northern VA real estate, feel free to email me at Eli@EliResidential.com if you’d like to discuss your strategy and/or current market trends.
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.
Last week I looked at how Arlington’s condo market performed in 2019 and this week we’ll dig into the performance of the detached and townhouse/duplex markets. I did separate write-ups on the 22202 (Amazon zip code) condo and detached home markets last month and decided not to include data from 22202 in most of the analysis for this week.
Arlington Detached/Townhouse 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. I’ve listed some highlights below, followed by a summary data table:
Median detached home prices increase by 6.7% from $890k in 2018 to $950k in 2019
Median townhouse/duplex prices increased 8.5% from $530k in 2018 to $575k in 2019
Average detached homes prices increased by an average of 5.1% and townhouse/duplex homes by 3.6%
South Arlington appreciated more than North Arlington, particularly in the less expensive townhouse/duplex market
On average, a detached home in North Arlington is 55.5% more expensive than a detached home in South Arlington and 76.9% more expensive for townhouse/duplex homes
Buyers accomplished very little trying to negotiate with sellers, averaging just 1.1% off original asking prices on detached homes and paying an average of 1% over the original asking price on townhouse/duplex homes
The number of new detached homes sold in 2019 was just below the trailing five-year average. Note that not all new homes make it in the MLS, so the actual count is likely a bit higher.
Performance By Zip Code
Next let’s take a look at average prices for both detached and townhouse/duplex homes by zip code:
Over the last five years, the top performing zip codes have been 22202 (National Landing) and 22209 (Rosslyn area), with Amazon HQ2 and Nestle leading the way in the commercial sector for those zip codes, I wouldn’t be surprised to see this trend continue over the next five years
Nearly all of the appreciation for 22202 came from 2019’s Amazon bump
If I remove new construction sales from the data, the appreciation percentages remain relatively similar for every zip code except for 22203 and 22213. Without new construction included, 22203 gained 4.5% (instead of zero change) and 22213 gained .5% (instead of dropping 2%), in 2019.
Additional Charts/Market Highlights
In each quarter last year, the market produced an average of 15% fewer detached homes in 2019 than it did during the same period in 2018. Interestingly, the market produced more townhouse/duplex homes in the 1st and 4th quarters of 2019 than the same periods in 2018.
Within the detached home market, lower (+5%) and mid-priced (+6.4%) homes appreciated more in 2019 than the upper-end (4.3%) of the market. I think we will see an even sharper appreciation in the lower 25% of the market in 2020.
Since bedroom count is such an important factor in most homebuyer’s criteria, I thought it’d be interesting to take a look at the average cost of a home in 2019 by the number of bedrooms it had. Not much explanation needed for this one!
Looking Ahead
I will be keeping a close eye on inventory levels as this year starts off. However, I think demand is so high that it would take a significant increase in inventory to slow price appreciation in 2020.
With rates remaining low through last year and projected to do so again this year, coupled with strong employment rates and stocks, buyer confidence is high. On the flip side, markets usually stagnate heading into a Presidential election so it’ll be interesting to see if/how the election effects counter the current momentum.
I think that over the next 5-10 years, detached home prices will appreciate significantly as demand rapidly increases with employment growth, yet we will not be able to introduce any meaningful supply increases due to limits on available land. Condo supply and even townhouse/duplex/triplex supply can be increased with development and changes to zoning laws, but it’s unlikely we will be able to add more supply to the detached market other than one-for-one replacements (tear-downs) and the occasional subdivision of a larger lot.
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.
