Question: Do I have to use my Property Manager if I sell my house?
Answer: This is more of a PSA post than anything else. If you’re a landlord or tenant, it’s crucial to pay attention to the fine print in agreements, especially regarding a future property sale. It’s common for Property Managers or Agents to include language that gives them the right to list your property if you choose to sell it or gives them a right to a commission in the event it sells during the rental period, to the tenant or somebody else.
Property Managers With Exclusive Right to Sell
Watch out for language granting property managers or agents exclusive rights to list your property if you decide to sell. This exclusivity restricts your options and flexibility, limiting your ability to explore alternative selling methods or use the agent of your choosing.
Required Commission Payments
Be aware of language stipulating a commission to property managers or agents if you sell your property to the tenant or another buyer during the rental period. Landlords might be obligated to pay a commission, even if they find an alternative buyer or wish to handle the sale independently. This financial burden can significantly impact both parties.
What If an Exclusivity or Commission Clause Exists?
Like most things in a contract, these clauses are negotiable. If you see something that you believe binds you to certain actions or payments in the event of a sale, ask about it and work to ensure you have the most flexibility if a sale does take place. You may not plan to sell when you sign the paperwork, but life happens and priorities change.
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.
Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH @Properties, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.
Question: What effect do you think Missing Middle will have on the Arlington housing market and community?
Answer: As expected, Missing Middle (MM) aka Expanded Housing Options (EHO) passed unanimously on Wednesday March 22. In short, the new zoning laws will allow development of 2-6 units on any lots previously designated exclusively for one (single-family detached) unit, effecting a majority of Arlington, if certain minimum lot size/requirements are met. Here’s a link to Arlington’s press release with details.
There is so much to digest, investigate, and learn about what MM means for the Arlington community and housing market that will come together in the coming weeks, months, and years as we determine the best implementation of the new zoning code, learn more about how the County will permit MM housing, and most importantly, analyze how the market will respond to different MM products in different parts of the County.
Results will be positive for some, maddening for others. Some results will be expected and others a complete surprise. Over time, slowly, Missing Middle will change our community…but that’s the point.
I will dedicate many posts here to Missing Middle in the coming weeks, months, and years and would love to hear from you (homeowners, renters, investors, architects, community activists, and on) about what you’re seeing and learning as we go.
To kick things off, I’ll share some initial thoughts on the zoning details and answer some questions I’ve received.
What are the highlights?
The code requirements I find most relevant to how MM will be implemented are:
MM is allowed in all residential single-family zoning districts (R-5, R-6, R-8, R-10, R-20) on conforming lots, meaning the lot meets the minimum size (total sqft and avg width), with the exception that R-5 lots must be at least 6,000 sqft instead of 5,000
Same set-backs and coverage requirements apply as previous/existing requirements for single-family development so the maximum building envelops will be similar to what you see now for most new single-family construction
Gross Floor Area (GFA), the total floor area (measured from exterior walls) less any garage space, maximums are determined by project density (number of units) and type (e.g. townhouse vs multi-plex) and will limit how big a project can be, even if the lot coverage and set-backs would allow for larger development (this effectively caps enormous development on large lots).
Where will MM be built?
Much of Arlington’s single-family housing was built prior to the 1960s and has been the target of builders and homeowners to tear down and build new homes for years. Missing Middle housing will follow a similar pattern of replacing existing older homes with new development.
We will likely see a concentration of MM development along transit corridors like Rosslyn-Ballston, Columbia Pike, Washington and Langston Blvd, and National Landing (Crystal/Pentagon City area) where multi-plexes (3-6 unit buildings) can sell for a premium, but MM development will also happen in neighborhoods outside of transit corridors, likely in the form of 2-3 unit offerings.
What will be built?
This is the million (billion?) dollar question: what will be built and where? The reality is that this will come down to what maximizes returns/profit for builders and investors.
The code allows for duplexes (one unit stacked on the other), semi-detached/townhouse (direct-entry homes sharing one or two vertical walls), and multi-plexes (mini condo/apartment buildings).
The Gross Floor Area maximums and standard set-back/lot coverage requirements significantly limit the size of the units that can be built, likely resulting in most MM units being ~1,000-2,400 finished sqft. If that’s the case, I think the code falls short of how the consumer would define “middle” housing and if there’s a disconnect between demand and what the code allows, developers may not like the returns enough for MM development to take off.
The GFA maximums (e.g. 7,500 sqft for three townhouses and 8,000 sqft for 5-6 unit multiplexes) have a limiting effect on larger lots that otherwise support a bigger structure based on set-back and coverage requirements and the set-back/lot coverage requirements likely prevent builders from reaching the GFA limits on smaller lots (e.g. you won’t get anywhere close to 8,000 sqft GFA on a small 6,000 sqft lot).
Minimum off-street parking requirements of .5 or 1 off-street space per unit, depending on proximity to transit, have been established but I think developers will ultimately build to demand rather than code minimums and demand will likely be for 1+ off-street parking in all locations and two off-street spaces in locations away from transit corridors.
Who will be building?
Projects will cost millions when factoring acquisition, construction, and selling costs which is too expensive and complex for most one-off “hobbyist” developers/flippers. I think that’s a good thing for the community because it means a more professional, thoughtful approach from developers who intend to do business many times over in the community and it means fewer chances for mistakes – building the wrong product in the wrong location.
The other concern is that we’ll be overrun by deep pocketed investors/private equity funds who will load up our neighborhoods with cheap 6-unit rentals. I don’t see this being the case. There are much easier ways to put $100M+ to use than buying 100 Arlington lots, each with different zoning requirements and market factors, spending 12-18+ months permitting and building, only to manage 100 separate locations for modest ROI (Arlington has very low rental ROI compared to other markets because property values are so high). We’ve seen very little national-level real estate activity here while it’s become popular in many other parts of the Country the last few years, and I expect it to remain that way.
I think that, for the most part, MM will be built by local and small regional developers like we currently see in the single-family market.
Will rentals take over my neighborhood?
I’ve heard a lot of concerns about 4-6 unit rental buildings popping up all over neighborhoods, but my initial assessment suggests the returns in non-transit oriented locations will be far too small to justify the amount of capital needed to build dedicated rentals and this is likely also true for many transit-oriented locations/lots.
There are bound to be some outliers where a rental makes sense or a mistake is made that lands a rental multi-plex in the wrong location that produces poor returns and devalues surrounding homes (this is the part of Missing Middle I hate most), but I don’t see MM leading to widespread development of dedicated rental properties, the land and construction costs are simply too expensive and unit sizes in multi-plexes too similar to what’s already widely available for rent in apartment/condo buildings.
How will lots be valued?
Lots being acquired for single-family development have mostly traded at 35-45% of the resale value of the house that replaces it. Local builders and agents have a good idea of what their costs and resale value will be so the valuation of lots has been straightforward. The cost of building MM housing won’t be too difficult to calculate, but projecting resale value/demand will be a much more difficult for a while to come and other risks, such as unknowns working with the County on something so new, also must be priced in.
Understanding the most efficient, and sometimes creative, way to construct MM to deliver the right product to the market based on location and assumed consumer demand will play a huge role in determining lot values. Some developers will be ultra conservative and prefer to stick with the tried-and-true approach of single-family development and others who have more experience in MM products (e.g. DC-based developers) may be more aggressive in their projections and valuations.
Many homeowners in older homes have just seen their property (land) values jump overnight, possibly by 10-20%, but there will also be plenty of homeowners whose lot and location don’t support MM as it’s currently defined and will see no change in land value.
When will they be built?
We’re probably 16-18+ months away from seeing the first MM properties delivered to market. The County won’t start taking permit applications until July 1 and I’m certain that the permit process for MM will take longer than the already cumbersome, months-long permit process for single-family development, then add 8-10+ months for construction.
If you’re interested in how your lot fits into Missing Middle or have a project you’re working on that you’d like to discuss, you can reach me at Eli@EliResidential.com.
You can read the full details of the code changes in the County’s press release and reference a library of information on Missing Middle here.
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 Eli Residential channel. Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH @properties, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.
Question: I found data that shows housing prices in DC are back down to the 2018 levels but anecdotal evidence suggests they are not. Can you explain whether the data I found is accurate or something is off?
Answer: The median price ($545,500) for homes sold in January ’23 in Washington DC showed a 15.4% year-over-year drop and was the lowest median price for any month going back to January ’19.
Did DC Lose Four Years of Appreciation?
Given the economic and real estate climate since this summer, with endless headlines about market corrections, it would be easy to interpret the latest DC median price data as proof that the bottom is falling out of the real estate market. Unfortunately for our bear-market prognosticators, or those waiting for a market crash to buy property, the chart above is misleading and not representative of the actual market.
The drop in median price is due to an unusual data set and does not mean that real property values have fallen 15.4% year-over-year and/or lost four years of appreciation.
How The Data Steers Us Wrong
Real estate data can be tricky to use correctly (aka draw accurate conclusions) so if you want to make data-driven decisions, make sure you are leveraging the right data and working with somebody who understands the strengths and weaknesses of real estate data in your local market. Here’s why the January median Washington DC pricing data steers us wrong…
Timing: Pricing data lags by about 30-60 days, meaning the pricing data published in January is mostly made up of contract activity in November/December and is thus an indication of what happened in the market, not what is happening in the market. November and December are traditionally the slowest months of the year, with the least demand and lowest volume of homes being listed for sale. Sellers during this time of year also tend to be under more pressure to sell.
Combine that with the market deceleration in the 2nd half of the year due to rapidly rising interest rates and it made for an unusually slow real estate holiday season.
By the time the January pricing data was published in early February, market demand had already picked up significantly.
Sales Volume: Only 352 homes sold in DC in January compared to the 10-year monthly average of 718. Other than December ’22 (432 sales), no other month for the past 10+ years had registered under 450 sales and only five months registered less than 500 sales.
The unusually low sales volume means that the median price data can be skewed by unusual balances of less (or more) expensive homes in a given month, which is why most January pricing data comes in much lower than other months and why January ’23 was such an extreme version of that scenario.
There were just 46 single-family homes in the January data. As you can see from the chart below that shows the number of sales by price points, the distribution of sale prices skewed significantly lower in the January data with a big drop in the number of $1M+ homes sold but a more consistent number of homes under $600k sold. This leads to a much lower median price, but doesn’t mean home values are dropping, just that fewer expensive homes were sold.
Average Price: The chart of monthly average prices tells a different story about price trends, showing a clear upward trend since 2019/2020. However, as you can see, using average price presents its own set of data challenges because of how much variability there is on a month-to-month basis based on the type/balance of sales included in the data for any given month.
Buyers Still Won During Q4
I’ve shown a bunch of reasons why the low median price for January sales wasn’t an accurate representation of the market (home values not down 15.4% year-over-year or to 2018-2019 levels), but I should still point out that it was objectively a more favorable time for buyers to negotiate better deals, just not to the tune of double-digit price drops.
The average home that sold in December ’22 and January ’23 sold for 4.2% less than the original asking price, which is pretty good when you consider the average home in the spring of ’22 was selling for nearly 1% over ask. In my opinion, this is the best measure of how much home values actually dropped from spring ’22 to November/December ’22, which is likely about 5%.
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.
Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH @properties, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.
Question: How did the Arlington single-family housing market perform in 2022?
Answer: The 2022 housing market came in like a lion and left like a lamb. The way things were reported in the news, one may be led to believe the 2nd half of the year was a disaster, with home values crashing because of higher interest rates, falling stock portfolios, the Ukrainian war, and buyer fatigue.
The truth, at least locally, is that the aggregate of the first half/second half, yin and yang housing market was still marked by strong price growth across all single-family sub-markets (I’ll analyze the condo market next week).
Strong, Stable Growth Continues for Arlington Single-Family Homes (SFH)
Like a blue-chip stock, the Arlington housing market is reliably strong and stable. We didn’t experience the double-digit annual appreciation of other national housing markets from ’20-’22 but we also benefitted by excellent growth prior to the pandemic buying craze (Amazon HQ2 and overall strong local market conditions). You can also count on the likelihood of stable growth to continue even if other markets struggle as they transition out of their reliance on pandemic-buying and ultra-low interest rates.
The average and median price of a SFH in Arlington increase 4.4% and 7%, respectively
Over the last five years, the average and median price of a SFH in Arlington increased by 25.3% and 29.1%, respectively
The average buyer paid 1.9% over asking to purchase a home in 2022
Homes that sold within ten days of being listed sold for an average 5% over asking and 57% of homes sold in 2022 were sold within ten days
Low supply was a big driver in keeping prices elevated despite difficult second half market conditions. There were 30% fewer SFHs sold in 2022 than in 2021.
22205, 22201 Zip Codes Lead Growth
If we drill down into performance by zip code (note: 22206 and 22209 don’t have enough SFH sales to be included), we find some really good insights:
22204 is the only remaining zip code with an average price below $1M. It was only 2017 that the entire County’s average price was below $1M.
22201 extended its lead as the most expensive zip code to purchase a SFH, costing an average of over $100k more than the next most expensive zip code, 22213, and finishing the year with an average price of nearly $1.6M
22201 and 22205 experienced the most appreciation, with YoY increases of 9.3% and 8.2%, respecively. The next highest zip code, 22203, grew by 4.9%.
22205 was the most competitive/frustrating for buyers, with the average home selling for 4% over ask
Over the last five years, the 22202 zip code (area surrounding HQ2) has, unsurprisingly, benefited from the highest appreciation at 33.8% growth since 2018 due to the Amazon HQ2 boost followed by the pandemic buying craze
New Construction: Bigger Homes, Bigger Prices
New builds have outpaced the appreciation of the rest of Arlington over the past two years, gaining 21% since 2020. New homes are also bigger than they’ve ever been with the average home claiming over 5,100 SqFt of finished living space, nearly six bedrooms, and more than five full bathrooms. Buyers are now paying almost $400,000 per bedrooms to own a new home.
You may notice the sharp drop-off in the number of new homes sold in 2022. This drop does not align with County data for new construction starts/completions and I think is more representative of the number of homeowners building outside of what’s being offered on the market – demolishing a home they already live in, acquiring their own lot and hiring a builder, or securing a lot/build with a preferred builder prior to it being marketed for sale.
Price and Bedroom/Bathroom Distribution (for my Missing Middle friends!)
The biggest change in price distribution in Arlington has been at the ends of the spectrum, with the percentage of homes seller for under $800k dropping from 35% in 2018 to 11% in 2022. On the other end of the spectrum, the percentage of homes selling for $2M+ has increased from 3% in 2018 to 11% in 2022.
Most sales in Arlington fell between $800k and $1.2M. The median household income in Arlington is about $128,000 which at current interest rates, limited personal debt, and a 20% down payment qualifies for a roughly $900k purchase. If rates drop to 5%, the median income qualifies for roughly $1M.
Nearly 2/3 of SFHs sold in 2022 had three or four bedrooms, most of which had at least two full bathrooms, and the price of those homes averaged $940,500 and $1,155,000, respectively.
If we add townhomes and duplexes to this data, we’ll see an even higher concentration in the 3-4BR range and lower average prices, so we see here that the term “Missing Middle” is a bit of a misnomer…it’s not missing and the average costs generally align with median household income, but the supply simply of “middle” housing isn’t as high as County leadership and MM proponents would like it to be. I also expect that most Missing Middle housing built would be more expensive than the current average prices for 3-4BR homes, certainly when comparing existing “middle” housing and new Missing Middle housing in the same location.
*Note: this table displays the most common BR/BA combinations, but does not show all sales
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 Eli Residential channel. Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH @properties, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.
Question: What were some of the most expensive homes sold this year in the DMV?
Answer: Happy holidays and new year everybody!
It’s always fun to look back at the most expensive homes sold in our nook of the world, so without further ado, let’s take a look at the most expensive homes sold this year in DC, Maryland, and Virginia. Note: this includes what is entered into the MLS, it’s certainly possible (likely) that expensive homes have traded hands privately outside of the MLS.
The most expensive home sold this year in all three DMV states is a beautiful 550-acre estate, with a private 18-hole golf course, in Upperville VA that sold for $23.5M! Despite the hefty price tag, it falls well short of the record sales from 2018, 2020, and 2021 that all cleared $40M.
Arlington’s average and median prices are sky-high, but the area generally likes ultra high-end properties we see elsewhere in the region. Arlington’s most expensive sale this year is a new build in Country Club Hills clocking in at 7,450 SqFt, seven bedrooms, seven full bathrooms, and two half baths. The property sits on an unusually large (for Arlington) .39-acre lot.
The most expensive sale in Alexandria is a townhouse built in 1800 in Old Town that sits on nearly ¼ acre with over 6,000 SqFt and seven bedrooms. Pictured above is the second priciest sale in Alexandria, a waterfront penthouse condo in Robinson Landing with nearly 2,800 SqFt for $4,509,000.
The most expensive sale in Fairfax County comes in at $11M for a 20,000 SqFt home recently built one block from Langley High School. Pictured above is the second most expensive sale in Fairfax County of a sprawling Great Falls residence on five acres, built in 2007, sold for $10.5M.
The most expensive sale in Maryland is a beautiful waterfront home in Annapolis with over 3.5 acres and nearly 12,000 SqFt, built in 2014 for $12,000,000.
I hope this makes for some fun conversation during the holidays about what type of ultra high-end home you would buy if you win the lottery! But I’ll be honest, the most expensive homes this year aren’t nearly as impressive as last year’s (link if you want it).
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. Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.
Question: How has Arlington’s condo market reacted to higher interest rates?
Answer: In last week’s column, I looked at performance metrics for detached homes in Arlington, shared my thoughts on local pricing behavior, and discussed news about the national vs local real estate market. This week we will look at the underlying performance metrics in Arlington’s robust condo market.
Underlying Arlington Market Performance Data for Condos
Here’s how I approached the data used in this week’s analysis:
Low-, mid-, and high-rise condos only
Resale data only, no new construction
All data is presented by the month a home was listed in so we can measure how home sales performed based on the month they came to market
Net Sold = Sold Price less Seller Credits
I used data from 2017, 2019, 2021, and 2022 because I think it offers a helpful snapshot of recent Arlington markets to compare 2022 to. 2017 was our last “normal” market because Amazon HQ2 was announced Nov 2018 and that kicked off a condo craze. 2019 was the first full year with the Amazon bump, but pre-COVID market, and 2021 was a full year of the COVID-driven shift in condo demand.
I either did not use or must caution your interpretation of this year’s August-November data because it is incomplete for purposes of this analysis. There are 13, 26, 39, and 42 condos actively for sale that were listed in August, September, October, and November, respectively, which will influence the performance metrics for those months when they do contract/close and most likely will result in worse performance metrics than those months currently show.
There are only 10 condos still for sale listed January-July that will likely pull down the performance metrics for those months once they contract/close, but not enough for me to be concerned about the resulting data being presented in this analysis.
Business as Usual for Condos
While the detached market was on fire in 2021 and early 2022, the condo market performed mostly along the lines of historical metrics, except for one month, February 2022, when average sold prices climbed slightly above the original asking price. As a result, high interest rates have led to a more modest reversal in pricing behavior over the last six months, compared to the detached market.
The only time in the last 15 years that we’ve seen a real acceleration in condo prices was during 2019 (and pre-COVID 2020) as a result of Amazon’s HQ2 announcement.
Pace of the Condo Market Slightly Below Normal
We had a few months during the peak of the 2022 market where the pace of sales came close to the craziness we experienced in 2019, after Amazon announced HQ2, but average days on market has returned to its normal seasonal trends. As more data rolls in for closings in August-December, I expect the average days on market for the last 3-4 months of 2022 to exceed historical averages, but not by much.
One of my favorite performance metrics is the percentage of homes that sell within 10/30 days. I think it beats average and median days on market for a true understanding of the pace of a market.
As opposed to average days on market, these charts indicate that high interest rates have slowed the pace of the condo market beyond the usual seasonal slowdown, with a notably slow October where just 38% of condos listed sold within 30 days. Expect to see these metrics fall even further as more condos listed after July contract and close.
Looking Forward
Condo pricing tends to be pretty stable and movements up or down are relatively small, with the exception of major events like Amazon HQ2 (rapid appreciation) and COVID (rapid, temporary depreciation), so expect a return to stable and predictable pricing in our condo market where we’re used to seeing 0-2% appreciation year-over-year.
The effect of high interest rates will likely be felt most in the slow pace of the market. The pace will almost certainly increase in Q1 2023, which means we can expect about 1/3 of condos to sell within the first 10 days and about 2/3 to sell within the first 30 days during the spring selling season.
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. Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH @properties, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.
Question: How have you seen the Arlington housing market react to higher interest rates?
Answer: I hope everybody had a fantastic Thanksgiving. The results of last week’s Dark Meat vs White Meat poll were impressive. With 559 votes in as of this morning, only three votes separated white meat as the preferred part of the turkey over dark meat! We may have found the only vote closer than a Georgia Senate Race!
National vs Local Market Expectations
With daily news about the nationwide (and global) housing collapse resulting from parabolic price appreciation followed by parabolic interest rates, I want to use this week’s column to check-in on what we’re seeing locally and remind everybody that what you read in the news is generally going to be the most attention-grabbing data points and that our market is likely to experience a much more modest correction than many other markets nationwide, as we saw during the Great Recession.
My Take on Local Pricing Behavior
I shared some detailed thoughts and observations last month in a column addressing price drops in Arlington and the TL;DR version is that 1) yes prices have dropped relative to their peak this spring, 2) there’s not nearly enough data available locally to say with any statistical confidence how much that drop has been, and 3) my observation was/is that market-wide in Arlington we’ve lost most/all of the appreciation we saw in the first 4-5 months of 2022 ,but 2021 prices are still mostly holding up. Keep in mind that in a volatile, low inventory market (current state) pricing is more randomized and case-by-case than it usually is, so you’ll see plenty of individual examples that buck the aggregated trends/assumptions.
Underlying Arlington Market Performance Data for Detached Homes
This week, I thought I’d share some charts of underlying market performance metrics to help illustrate what our market is experiencing. Here’s how I approached the data this week:
Detached (single-family) homes only. I’ll probably look at condos next week.
Resale data only aka no new construction because performance metrics used in this column for new construction aren’t usually representative of the market
I used data from 2017, 2019, 2021, and 2022 because I think it offers a helpful snapshot of recent Arlington markets to compare 2022 to. 2017 was our last “normal” market because Amazon HQ2 was announced Nov 2018 and that sent data in unusual directions. 2019 was the first full year with the Amazon bump, but pre-COVID market, and 2021 was a full year of COVID frenzy buying with normal seasonal behavior (2020 was totally out of whack on seasonality).
All data is presented by the month a home was listed in so we can measure how home sales performed based on the month they came to market instead of the month they closed (closed data is a lagging performance indicator)
Net Sold = Sold Price less Seller Credits
**An important caveat to this data is that I either did not use or must caution your interpretation of this year’s September, October, and November data because it is incomplete for purposes of this analysis. There are 15, 22, and 19 homes actively for sale that were listed in September, October, and November, respectively, which will have a significant influence on the performance metrics for those months when they do contract/close and most likely will result in worse performance metrics than those months currently show.
Note there are 2 homes for sale listed in each month May-July and 7 for sale from August that will likely pull down the performance metrics for those months once they contract/close, but not enough for me to be concerned about the resulting data being presented for those months
Net Sold Price to Original Ask down 9.3% in 6 Months
The average net sold to original ask dropped from a March peak of 105.9% to 96.6% in August. I suspect that once September-November listings close and we can start filling in those fields, we’ll see that number fall further but maybe not significantly because asking prices have started to react to weaker market conditions and many sellers are coming off their expectations for spring 2022 prices.
Of note, this performance metric is coming more in-line with 2017 metrics. I’ll be interested to see if performance metrics stabilize around 2017 numbers, pre-Amazon HQ2, or if they worsen. My guess is that they’ll worsen slightly compared to 2017 through the end of the year and come more into balance in 2023 (pending interest rate movements).
Average Days on Market 4.8x Higher in August than February ‘22
Unsurprisingly, the average days on market has skyrocketed relative to earlier this year from 9 days in February to 43 days in August. August ’22 is still lower than August ’17, but the August average will increase once the 7 properties still for sale from August contract/close.
Homes Selling Within 10/30 Days Go from Record High to Low
One of my favorite performance metrics is the percentage of homes that sell within 10/30 days. I think it beats average and median days on market for a true understanding of the pace of a market. As opposed to average days on market, these charts indicate that our market pace is slower than 2017, on a seasonal basis.
We’ve gone from 82% of homes listed in March selling within 10 days to just 27% in October. Similarly, at least 90% of homes listed February-April sold within 30 days compared to 45% and 44% selling within 30 days in August and October, respectively. That is a massive change in market pace within 4 months!
Looking Ahead
I expect the performance metrics of August-October to worsen as more of those listings contract/close and November-December to come in below 2017 numbers. It’ll be a bit difficult to truly understand the aggregate effect on pricing because Arlington is a relatively small housing market, but I’ll do my best to come up with some accurate measures once we’re far enough into 2023 and enough 2022 listings have sold. Ultimately, the tale of local home values will be told in how long it takes interest rates to settle back down into the expected 4.5-5.5% range (don’t hold out for sub-4% rates again).
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. Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH @properties, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.
Question: I’ve read a lot of bad news about the real estate market, how is that playing out in Arlington?
Answer: Bad news sells…keep that in mind as you get your daily/weekly dose of headlines that the housing market is collapsing under the weight of high interest rates and overinflated prices. With that said, I’m not about to deliver a rosy picture of the Arlington real estate market, but it’s important to keep in mind that most of what you’ll see in the news will be cherry-picked statistics and stories around the country/region that are likely more extreme than what our market will experience overall.
Arlington remains one of the most stable, reliable real estate markets in the country. We are absolutely feeling the effects of a dramatic tide shift in demand, but just as our market didn’t see meteoric price increases like other markets from Loudoun County to Tampa to Boise during Summer 2020 to Spring 2022, we most likely won’t experience as extreme of a pullback while interest rates remain high.
Usually, you’d scroll down and see a lot of charts and data from me in an article like this, but I don’t think we have enough of the right data yet to tell an accurate story of property values in Arlington. So this week is more of a stream of conscious of my thoughts on property values, with a few data points sprinkled in. I welcome any and all theories, agreements, and disagreements in the comments section!
Have Prices Gone Down?
The short answer is “yes,” prices have come down from their 2022 peak. By how much? That is a very difficult question to answer and there’s no reliable way for us to know at this point. So let’s talk about how I think we should we talking about prices based on what we do and do not know at this stage:
What we do know:
The prices we saw in the first half of this year are out of reach, in most cases
In the last seven days, 52 properties in Arlington (12.5% of homes for sale) have cut their asking price, which is a pace consistent with previous seven-day windows. Odds are this pace increases as we get closer to, and into, the holidays.
Price reductions and sale prices are not being discounted anywhere close to enough to offset the difference in monthly payments between earlier this year and now
The market always slows in the summer and continues to taper off through the end of the year (with the exception of September/early October), we’re just experiencing a more dramatic version of seasonality because of the sharp interest rate increases that have paralleled the traditional seasonal slowdown and because of where we’re coming from – insane demand for nearly two years.
Supply coming to market is down, contract activity is down, and showing activity is down all about 20-30% year-over-year
What we don’t know:
What is the appropriate baseline to judge price change from? Is it the relatively short window of peak pricing from roughly February-May 2022? If you want headline news, sure, but if you want a more accurate/helpful perspective on market conditions, you probably want to use a wider data set that goes back to Q2/3 2021.
We don’t have anywhere near enough data points after the market inflection this summer to assess market price changes in Arlington (or even Northern VA or the DC Metro, in my opinion) and because sold price data lags so much behind shifts in market condition, we won’t truly know what the pricing effects were on Q3/Q4 markets until at least February 2023 because many homes struggling to sell now won’t show up in sold data until then.
There’s no precedent for how buyers as a whole will respond to such extreme interest rate increases (see chart below I saw last week on MortgageNewsDaily.com that highlights the historical significance of recent rate increases), so it makes pricing challenging for sellers (and buyers, for that matter). Days on market has increased 2-3x or more for most sub-markets and the number of showings are down by about 30-35% year-over-year so it can also be very difficult for sellers to infer whether their time on market is price induced or not. A lot of current pricing is based on seller motivation and their hope/fears of market conditions 3-6 months from now.
The Big Unknown (hint: interest rates)
The most significant “what we don’t know” is what will happen with interest rates in the coming months/year. And please save me the “interest rates are still low relative to the last 30 years” non-sense. The fact is that buyers, homeowners, and prices have adjusted for sub-5% rates over the last 15 years and a long-term reversion back to the 6-8%+ range will be painful.
Per MortgageNewsDaily.com, the average 30yr fixed rate is ~7-7.3%, depending on the data source (see chart below). What we don’t know is how long we’ll have unusually high interest rates and that is ultimately what will drive changes in property values in Arlington, regionally, and nationally (I know, stating the obvious here).
Barring a change in Fed policy (e.g. reducing expected Fed Rate increases or bringing liquidity to the mortgage market), it seems unlikely rates will drop much or at all in Q4. High rates compounded with the normal seasonal slowdown means that there will be plenty of discounted sales from motivated sellers who don’t want to hold out until 2023, but when we eventually aggregate all the sales data from Q3/4, I’m not sure it will amount to an eye-popping drop in prices across the entire Arlington market (maybe 5-10%, depending on your baseline data).
I think the problems (aka a double digit drop in home values over a longer 6-12 month period) will show up in Q1/2 2023 if interest rates are still 7% or more through Q1 2023. I think that is when we’d start to see property values in and around Arlington drop as a whole, by uncomfortable amounts (maybe below 2021 prices).
On the flip side, if rates come down by late Q4/early Q1 and we start seeing 6% or lower averages on the 30yr fixed, that would coincide with our normal ramp-up period into the spring and the market could very quickly turn around. I would bet that if we see the average 30yr fixed rate get to the mid 5% range or less in Q1, we will see a rapid return to competition as buyers who have been sidelined due to high rates in the 2nd half of 2022 return to the market and meet the normal churn of new buyers introduced to the market in the new year.
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. Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH @properties, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.
Question: We are planning to put our home on the market this spring and seeking advice on home improvement projects to maximize our sale. What guidance do you have on home improvement projects with the best resale value?
Answer: The decisions you make about money you do or do not spend improving your home prior to a sale can influence your bottom line more than most other decisions you make during the sale process. They’re also the decisions you’re most in control of, so take your time and plan carefully.
Most Remodeling Projects Lose $$$ on Resale
Remodeling.com publishes an annual report showing the resale return of specific remodeling jobs, based on region of the country, and the 2022 report was published earlier this month. Unfortunately, I can’t share the DC-area report because of copyright issues, but it’s worth visiting the link yourself (they require some basic info).
The findings of their report show that the majority of projects (e.g. bathrooms/kitchen remodel, new roof/windows/siding), done individually, return just 50-80% of the cost. I have seen another study by Zillow that shows similar projections.
There are, of course, always exceptions to this guidance. For example, if most of your home has been updated except for one room/bathroom, you will probably get a much better return making modest improvements to the lagging space to bring it up to par with the rest of the home. Another example is improving something that is in exceptionally bad condition such as replacing old, rotting single-pane windows that don’t function and have air leaks; you’ll probably earn yourself close to or above 100% return on this work rather than the ~65% determined by the Remodeling.com study.
So when considering larger scale home improvement projects – kitchen reno, new roof, porch addition – it’s rarely a good idea to do this work strictly for resale purposes, but only if you’re going to realize personal value from it.
Should You Ever Spend on Listing Prep?
The study mentioned above is in reference to more expensive home improvement projects and does not include the most common (and profitable) work done for listing prep like painting, power washing, cleaning, landscaping, and flooring.
Prior to most sales, every homeowner should make a list of possible repairs and improvements and gather pricing for all worthy projects. If you plan to hire a real estate agent for your sale, I highly recommend doing this with your agent, who should have a good understanding of profitable vs unprofitable projects for your market/property type and have a team of contractors available to support the work. They should have a deep enough knowledge of buyer preferences, your sub-market, and project cost to prepare a set of listing prep recommendations based on your home and budget, rather than a generalized one-size-fits-all plan.
After you prepare a full list of potential improvements, you can bucket them in tiers and analyze each tier for cost, project timeline, and impact on the expected resale value to determine which improvements make the most sense. These tiers generally fall into three categories:
Clean-out, Clean-up: This focuses on the low cost, high return items to make a home more presentable such painting, deep cleaning, repairs, light landscaping, etc
Bring up to par: Investing in one/some more expensive projects to bring them up to par with the rest of the home. For example, improving a dated bathroom if the rest of the home is updated so that the one bathroom doesn’t drag down the value of the other improvements.
Remodel/Homeowner Flip: Similar to what an investor might do to a dated home in an expensive neighborhood, a homeowner might choose to make a major investment into updates and benefit from a significant profit
Consider All Costs
The cost of doing improvements goes beyond the cost of the labor and materials. Don’t forget to consider things like:
Your time managing the work (note, a real estate agent will generally handle project management)
If you’ll live in the home during work, the inconvenience of having work done while you’re there
If you’ll move out before starting work, the carrying cost while work is being done
Risk of something going wrong during the work (applies more to larger projects)
Contingency budget for unexpected work that may come up during the project(s)
Always Seek 100%+ ROI
There’s no doubt that remodeling your kitchen will generate a higher sale price, but it’s rarely advisable to invest money into improvements if you won’t return more than 100% on the investment. Herein lies the challenge and strategy in planning your improvements. Understanding the profile of your likely buyers and what they value, plus other factors like market conditions and property type, is crucial to making investments that generate profit, not just a higher price.
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. Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH @properties, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.
I would love to hear more from you in comments or by email (Eli@EliResidential.com) about your opinions on the availability of good real estate content – national or local market information, investing, best practices/how-to, etc. Whether it’s content you’d like to see here in my column or content you wish you could access from other sources, I’d love to hear!
Question #1: Are you informed on the real estate market?
A1: Yes, I seek out information and data regularly A2: Somewhat, the news I follow includes enough to keep me informed A3: Not really, I occasionally hear/read the headlines A4: No, I don’t get any exposure to real estate news or information
Question #2: Are you happy with the real estate information/news you receive?
A1: Yes, I get exposure to the type and amount of real estate information I want A2: No, I get real estate information but it’s not what I want A3: No, it’s hard to find real estate information
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.
Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH | @properties, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.
