COVID-19 Market Impact Update

Question: What impact is Coronavirus having on the real estate market?

Answer: COVID-19 has had a similar impact on new listings in Arlington as it has across Northern VA and the DC Metro with each market dealing with a ~30-35% year-over-year drop in April and May. However, demand in Arlington has tapered off from 2019 highs, while demand in Northern VA and the DC Metro is steadily increasing, despite everything we’ve gone through with Coronavirus.

The tapering of Arlington demand, which is still very strong relative to historical numbers, is bringing the Arlington market more in-line with supply/demand readings of the Northern VA and DC Metro markets. The below chart shows Months of Supply (a good supply/demand ratio) for each market. Months of Supply calculates how long it would take for the existing housing inventory to sell out, if no additional inventory was supplied.

Prices Up Regionally

Year-over-year prices for May sales and year-to-date sales are up significantly across the region. Across all of the counties/regions listed below, Arlington’s year-over-year growth is the lowest, which is almost certainly due to the significant appreciation in Arlington last year, after the Amazon announcement.

Keep in mind that sales data lags actual market activity because it usually takes 30-45 days for a property to close, so May sales are more reflective of March and April activity than what we’re currently seeing. This is particularly interesting because March and April were the peak of Coronavirus concerns/lockdowns. Barring any major shifts in the DC-area economy, I expect year-over-year prices to show even more growth as we get further into the year and sales reflect an even stronger buyer market.

Arlington New Listings Down

We’re used to seeing new listing supply peak from March-June, after November-February lows, with April and May almost always exceeding March’s supply. Unfortunately for many home buyers, new inventory tumbled in April and continued dropping further in May.

The May 2020 drop in new inventory represents a 32.1% decline compared to May 2019, which is particularly concerning when you consider that new inventory in May 2019 was already down 21.3% from May 2018, giving us a 47% decline in new inventory from May 2018 to May 2020.

The decline in new inventory was distributed pretty evenly across property type (single-family vs condo) and price point.

Arlington Demand Down

Absorption is a good indicator of demand, providing the rate of homes going under contract relative to total supply. Demand, and therefore absorption rate, are usually highest from February/March through May/June and have been sky-high since spring 2019, with an absorption rate of 1.0 or more in eight months since March 2019.

While the absorption rate in April and May 2020 remained high relative to pre-Amazon years, there was a year-over-year decline of 37.6% and 25.5%, respectively, indicating a tapering of Arlington demand compared to last year. However, with so few listings coming to market, there’s still high levels of competition for desirable properties that are reasonably priced.

This doesn’t mean that the bottom is dropping out in Arlington. Part of the difference in year-over-year data is due to how sharply Arlington demand rose in 2019 (post-Amazon announcement), but we’re also seeing a lot of buyers being priced out of Arlington and pushing their searches further into Northern VA.

Northern VA New Listings Down, Demand Up

Northern VA has experienced a similar drop in new listings (33.8% and 33.4% YoY decline in April and May, respectively), but is actually seeing an increase in year-over-year demand with a 32.2% increase in absorption rate in May 2020 compared to May 2019 and absorption rates exceeding 1.0 in three of the last four months.

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

April Real Estate Market Review

Question: How did the April real estate market compare to what you would have expected if we weren’t going through the COVID-19 pandemic?

Answer:

Expectations vs Reality

The 2018 Amazon HQ2 announcement sent demand up and supply down, creating a frenetic real estate market across Arlington and Northern VA in 2019 (2019 Review One and Two). The party continued into 2020, with rapid price growth and intense competition amongst buyers, setting the stage for the market to establish new highs. It also seemed that the volume of new listings would finally go up, after YoY increases in December and January, the first YoY gains since October 2018.

All of those expectations were put on hold when the Coronavirus outbreak shut down the economy two months ago. For the first 4-5 weeks, the market froze up, with buyers and sellers unsure if we were on the verge of a market collapse and how to safely navigate critical real estate activities. Over the last few weeks, demand seems to be coming back and there are signs that sellers are more confident in listing their homes, which should lead to more supply.

April 2020 Market Report

April was our first full month living with Stay-At-Home orders, so let’s take a look at how last month compared to April 2018/2019 and February 2020 (last full month of normalcy).

Extremely Low Supply

Low supply was part of every Arlington real estate conversation in 2018. Then Amazon came and supply got so bad that the County Board launched Housing Arlington, but 2019 felt like the trough. Then COVID-19 hit and April 2020 produced 18% fewer homes for sale than April 2019.

The condo market has been hit the hardest by low supply with an unfathomable 55% decline in condo listings in April 2020 compared to April 2018.

For additional context, new listings in April are usually 25-40% higher than in February, but this year they were only 10% higher and actually lower in the condo market.

Sharp Decline in Demand

Given the on-going competition and mostly stable housing prices, it may come as a surprise to those actively searching for a home that demand has dropped off significantly.

The rate of properties going under contract compared to the new supply dropped to pre-Amazon levels and the number of homes selling within one week of being on market dropped significantly. Condo demand suffered the most which I think is due to a combination of health concern about being in common areas and because it’s easy to delay a condo purchase with an extra 6-12 months of renting a comparable apartment.

While many homes are still getting great offers, sometimes multiples, I do see more homes sitting on the market that probably wouldn’t have in a non-COVID market. Homes with large buyer pools had so much demand before the virus that they can afford to lose a chunk of the buyer market and still generate strong interest. Homes with a more niche buyer market have had their smaller buyer pool evaporate in many cases and should prepare for a longer sales timeline.

Prices Seem Stable

The Coronavirus’ impact on pricing is still to be determined because it’ll take a while to build up enough data points to draw a reliable conclusion. Based on my experiences and those of my colleagues, it seems that there has been little or no impact on prices for most properties (with the exception of niche home, mentioned above), which can be attributed to relatively parallel declines in supply and demand.

Looking Forward

As society adjusts to new norms and the science community continues to bring us promising news on treatments and a vaccine, I think that we’re likely to see more confident buyers and sellers over the next couple of months, which will translate into higher demand and more supply. The impact on competition and prices will depend on which moves faster, but I expect demand growth to outpace supply, at least in the next 4-6 weeks.

The big unknown is if/when there will be another seismic jolt to our health and job security that will send sellers and buyers out of the market. It seems this fall is the most likely window for a second shockwave, but this summer is shaping up to be a strong real estate market locally.

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.

Past Seven Days (Arlington) 
Seven Days Prior (Arlington)
Impact of Coronavirus on the Real Estate Market, Pt 6

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

Answer: In this week’s review of how the COVID-19 pandemic is impacting real estate, we’ll take a look at how Arlingtonians think Coronavirus will change their personal finances, how the Arlington market performed over the last seven days, and how the virus is changing the mortgage industry.

Arlingtonians Still Confident

Thank you to everybody who participated in the poll last week, we collected some really valuable information about how Arlingtonians think the virus will impact their personal finances.

Out of 1,055 respondents, 50% feel that their personal finances will either not be negatively impacted or that the impact won’t last more than six months. Over 70% of respondents don’t expect the negative effects to last more than 12 months.

These results reflect a strong local consumer (buyer) confidence and would suggest that local buyers still have enough confidence in their finances/income to make a long-term investment, like buying a home. When you consider the recent McKinsey study (below) on the most vulnerable jobs, you can see why Arlingtonians, many of whom make over $70k/year, remain confident in the face of a global economic crisis. Income/job security is likely the most important consideration for people determining what the negative impact of COVID-19 will be on their personal finances.

Arlington Market Update

New inventory tanked over the past week and we saw the largest week-to-week drop in the number of properties that went under contract. It’s hard to say for sure whether the decline in contract activity is demand-based on a result of less inventory, but it’s likely a combination of the two.

With very little new inventory coming to market and the Coming Soon pipeline drying up, total inventory is dropping quickly, which should keep home values relatively protected, despite declining demand.

Past Seven Days (Arlington)
Seven Days Prior (Arlington)

Showing activity is down significantly compared to a normal spring market, but it seems to be stabilizing at an average of 4-5 scheduled showings per week on properties listed in Arlington. I think that significant increases/decreases in showing activity will be a leading indicator of how the market feels about the risk of Coronavirus to public health and the local economy.

Major Changes To Mortgages

The mortgage industry has experienced rapid and impactful changes over the last month that will surely change demand for months or years to come. I checked in with Jake Ryon of First Home Mortgage (JRyon@firsthome.com) on the top three ways Coronavirus is impacting the mortgage business.

Elimination of Products/Tightening of Requirements

Mortgage products are designed around a bank’s ability to accurately predict a borrower’s ability to repay their loan, so as economic uncertainty rises, a bank’s ability to forecast borrower risk decreases and banks become more risk averse.

As a result many loan products not backed by the Federal Government are being eliminated including loans like sub-20% down payment jumbo loans without Mortgage Insurance (a popular mortgage product locally), Non-Qualified Mortgages (borrowers with lower credit scores or high debt-to-income ratios), and mortgages for investment properties. I’ve also heard that Second Trust loans, a popular product that allows you to purchase your next home without making it contingent on the sale of your current home, may be up next for elimination.

In cases where products aren’t being eliminated, some products have tighter borrowing standards like higher reserves or credit scores.

I suspect that changes to jumbo loan programs and a potential elimination of Second Trust loans will have a material impact on the DC Metro’s ~$1M-$1.5M market.

If you’re currently searching for a home, you should regularly check-in with your Loan Officer, especially before making an offer, to confirm that the loan product you plan to use still exists and the requirements haven’t changed.

Interest Rate Volatility

Interest rates hit all-time lows in the beginning of March, but a week later spiked in response to an overwhelming rush of refinances. The first half of March was one of the most volatile periods for mortgage rates ever, including the most volatile day ever. Since the Fed stepped in with liquidity, rates have stabilized, but are still relatively volatile.

Rate volatility is generally bad for demand because buyers take comfort in certainty. Here’s a chart showing rate movement over the last six months to highlight how crazy the last six weeks have been:

Increased Loan Forbearance

Loan forbearance (temporary pause on mortgage payments) is skyrocketing in the US, and will likely be another exponential chart to watch over the next few weeks/months. Borrowers pay a Servicer (lender) and the Servicer pays investors, who are guaranteed to receive their payments from Servicers even if borrowers stop paying. This has led to a massive liquidity crunch for many lenders and put their businesses in jeopardy of failing, despite efforts by the Government to relieve the pressure.

https://ci5.googleusercontent.com/proxy/MibKUDdVZ2qrv2k_GJPswXrC-P3vbvz-A_LZLUpCKDDaA0YonxXQX0jLflPyBmyetHNa2IhYnfVtGIP4SeOwEg_4h_Ti7UPfLayIMuGS7A=s0-d-e1-ft#https://mba-erm.informz.net/mba-erm/data/images/04102020.jpg

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.

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

Impact of Coronavirus on the Real Estate Market, Part 5

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

Answer: I hope this column finds everybody in good health. If you need to replenish your cooking oils and haven’t tried The Olive Oil Boom before, I highly recommend it. It’s a local shop in Courthouse that my wife and I love. My personal favorite is the Harissa olive oil.

If you have some local favorites that you’d like to help stay in business during tough times, please give them a shout-out in the comments section and note a personal favorite product/dish!

Financial Confidence Poll

Buyer confidence drives real estate demand, so I’d like to do a reader poll this week to measure the confidence of Arlingtonians. Thanks for participating!

Question: How long do you expect the effects of the Coronavirus pandemic to negatively impact your personal finances?

Arlington/Regional Market Update

Regionally and locally we’re seeing the pipeline of new inventory dry up and sellers lose confidence. The two charts below reflect market activity in Arlington over the past seven days (left) and seven days prior to that (right). While the total Coming Soon and New Active for each seven-day period is almost identical, the Coming Soon pipeline was cut in half. You’ll also note huge increases in the number of price reductions and properties pulled off market (Temp Off, Withdrawn, Canceled, and Expired).

Demand is dropping, but homeowners are experiencing it in different ways. For example, the markets that were hyper-competitive prior to the COVID-19 crisis, such as the $600k-$900k single-family starter home market that was seeing double digit offers, are still getting strong offers, and in some cases, multiple offers. For those homes, even a 60-70% decline in demand means a few offers instead of 10+.

I inquired on five homes this weekend for two separate clients. Each was a move-in-ready detached single-family home in Arlington, Falls Church, or Alexandria priced from $695k-$875k. All five had at least one strong offer, four were expecting multiples, one had two pre-inspections scheduled and one got seven offers.

However, the number of price drops and listings being pulled from the market shows that many homeowners are experiencing something different. If your home was likely to get one strong offer before the Coronavirus lockdown, a significant drop in demand can easily mean no offers and a longer wait for the right buyer to materialize.

To gauge the odds of a successful sale (quick sale, at/near asking price), homeowners should be conscious of the profile of the buyer(s) most likely to purchase their home and try to understand how their motivation and financial security has been impacted by COVID-19. For example, dual-income families are likely feeling more financial security than single-income buyers. Buyers with kids are often more motivated because they likely have fewer alternatives than somebody buying a 1-2-bedroom condo who can more easily find a comparable rental apartment until the economy is back in order. Further, families with kids are generally buying with a longer ownership horizon and thus able to outlast whatever economic recession/depression is brought on by the virus.

Past Sever Days (Arlington)

Seven Days Prior (Arlington)

Are Prices Dropping?

Although some homes are still selling for their pre-COVID prices (which shouldn’t be happening, in my opinion, given the amount of uncertainty/risk in the market), I suspect that most homeowners are settling for a few percent less than what they would have pre-Coronavirus. You can also argue that they’re taking an even greater loss than what they would have gotten in the peak spring market (right now) had Coronavirus never been a factor.

I think that for most of the DC Metro, that’s the appropriate discount at this time, considering what we do and do not know about the future of the national/regional economy.

The price drop that most people are worried about or looking forward to, depending on which side of the transaction you’re on, is a double-digit drop like we saw during the Great Recession 12 years ago. There are myriad inputs that factor into real estate prices, but the simplest is supply and demand. If you’ve been paying attention to real estate in Arlington or the DC Metro, you know that we’ve suffered from a historically low supply of homes for sale, driven by both a lack of new inventory and high demand.

Econ101 tells us that in order for there to be a significant price drop, demand will have to recede substantially more than supply. There’s no doubt that an on-going economic shutdown will significantly reduce demand, but if changes to lending practices over the last decade and financial support from the government allow people to keep their homes, inventory will likely plunge as well. So long as inventory and demand are dropping by somewhat similar amounts, we may not see the type of dramatic price drops we saw in 2008.

To highlight just how bad the supply is around here, I pulled charts showing the months of supply in Arlington, Northern VA, and the DC Metro over the last 10 years. Note that most economists agree that a market is fairly balanced for buyers and sellers when there’s ~6 months of supply.

I also added a chart showing the corresponding change in median sold price for Arlington during that same 10 year period.

https://cpp1.getsmartcharts.com/chart/mls/1/getreport.php?rid=60&ftid=2&fid=1000&gty=120&ltid=4&lid=51013&gid=2&cc=0000dd&sid=0&mid=0&tt=2&mode=4
Months of Supply for Arlington County
https://cpp1.getsmartcharts.com/chart/mls/1/getreport.php?rid=6&ftid=2&fid=1000&gty=120&ltid=4&lid=51013&gid=2&cc=0000dd&sid=0&mid=0&tt=2&mode=4
Median Sale for Arlington County
https://cpp1.getsmartcharts.com/chart/mls/1/getreport.php?rid=60&ftid=2&fid=1000&gty=120&ltid=2&lid=1006&gid=2&cc=0000dd&sid=0&mid=0&tt=2&mode=4
Months of Supply for Northern Virginia
https://cpp1.getsmartcharts.com/chart/mls/1/getreport.php?rid=60&ftid=2&fid=1000&gty=120&ltid=2&lid=1034&gid=2&cc=0000dd&sid=0&mid=0&tt=2&mode=4
Months of Supply for The DC Metro

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

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

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.

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.

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.

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’s Driving Arlington’s 2018 Condo Growth?

Question: Are there specific buildings or sub-markets in Arlington that were responsible for the jump in condo values in the first half of 2018?

Answer: The most interesting data point that came from last week’s mid-year real estate review was that, for the first time in years, condo prices appreciated significantly from the first half of 2017 (9.1% growth). I received a number of emails from readers asking if this growth occurred across the entire condo market or in specific locations or buildings so this week’s column takes a deeper dive into the 2018 mid-year data for condos in Arlington.

 

Growth and Demand Increase Across the Market

The good news for condo owners in Arlington is that appreciation and demand increased across all markets in the first half of 2018. In fact, 63 of the 79 measures for appreciation and demand improved (if you’re a homeowner/seller). To test the market, I looked at average price and three demand indicators (days on market, purchase price to asking price ratio, and number of sales) broken out by zip code, building age, and price range. The data compares pricing and demand trends in the first half of each year for all condos sold in Arlington. Cells highlighted in green indicate improvement (for homeowners/sellers) in that category for 2018.

 

All Eight Zip Codes Appreciated

Demand indicators supported the price growth, with most zip codes seeing a faster pace of sale and buyers negotiate less off original asking prices. For those tracking new construction in Arlington, only 11 of the 98 sales in 22209 were in Key & Nash and it’s important to note that builders do not enter all of their sales into the MLS, so a large percentage of those sales are missing from the data. Note that 22205 is not included because of the lack of volume.

 

 

Older Properties Surged

Many older buildings in Northern VA are struggling to recover from their peak pricing from 2005-2007, which has left many owners in a difficult financial position. The strong appreciation seen in condos built before the 1970s will be a much-needed relief for many and proves that Arlingtonians and investors are seeing value in older, less expensive condos compared to their newer, amenity-rich neighbors built in the last 20 years. Check out the huge drop in average days on market for condos built in the 1950s or earlier!

 

 

Higher Demand at Every Price Point

Demand picked up the most for less expensive condos, but every price range saw at least two demand indicators increase in the first half of 2018.

 

 

If you own a condo in Arlington and would like to take advantage of the recent appreciation of your property, feel free to email me at Eli@EliResidential.com to schedule some time to talk about your options.