Podcast with ARLnow: Market Conditions, Missing Middle, and More

Answer: Last week I joined ARLnow founder and leader, Scott Brodbeck, for a live podcast discussing a range of local real estate topics including market conditions, the struggle of buying, Missing Middle, and more! Scott and I hope to continue doing live podcasts when there is a good intersection of news and real estate. Look for us to go live on social media so that you can listen in or ask questions live on the podcast.

The full podcast transcript is copied below, if you’d like to search for specific words and look at where it’s discussed in the video:

Scott: [00:00:00] All right. So thank you for joining us today. We’re going to talk for about half an hour this afternoon about the state of the Arlington real estate market. This is the first time we’ve done anything like this live. So it’s a bit of an experiment. So bear with us if some of the technology does not go perfectly.

So Eli, you are noted by our readers from your Ask Eli column for just having mounds of data from which you pull insights. What is your take on the current state of the real estate market in Arlington, where we have 8 percent interest rates, and it seems like a weird place. Help us out. What’s going on?

Eli: Yeah, so it is a weird place. And where we’re at now is oftentimes, not just this year, but in other years, you get some scary feelings about what’s next. Things start to slow down and it’s generally a fairly significant slowdown from earlier in the year. And so we are experiencing fairly normal seasonality right now.

The metrics are [00:01:00] aligned with what we usually experience this time of year. Demand is petering off. Inventory is slowing down. Properties are sitting on the market a bit longer. There’s more price reduction. So this happens this time every single year, and oftentimes people make the mistake of getting lulled to sleep and thinking that they can just let the holidays come and roll easily into

the next year and buy. But that’s what everybody plans to do and oftentimes we see demand in the market quickly turn by the second or third week of January. But what we’re seeing is a little bit extreme of a version of some of those data points. And it’s because both buyers and sellers are getting pulled away from the market because of primarily the high interest rates.

There’s a lot of both parties sitting on the sideline. And so the change in days on market that we’re experiencing now is more significant [00:02:00] than compared to earlier this year than what we would experience in a normal year. We do have a larger percentage of properties on the market that are reducing their price, but we’re talking about just percentages.

So right now in Arlington, I think something a little under 40 percent of homes have reduced the price that are sitting on the market. That’s normally like in the mid thirties. And so it’s similar, but a little bit more extreme version of that. We’ve got low inventory, but an extreme version of it, right?

We are down 20, 30 percent in the amount of inventory that would normally be coming to market this time of year, even though it’s normally still pretty slow. And all of that, even though demand is particularly slow because of high interest rates, there’s enough sellers sitting things out and sitting on the sideline and keeping supply low that it’s like this balancing effect on the supply demand. And prices are mostly staying level. There’s more deals [00:03:00] out there right now than you would expect in early part of the year, but we’re certainly not bottoming out, even though it might seem that way to some sellers who after three weeks don’t have an offer and their hair’s on fire a little bit, but that’s normal for this sort of this time of year.

Scott: So if you were to compare this market to let’s say 10 years ago, I don’t remember where the interest rates were 10 years ago, but it certainly wasn’t at two and I believe lower than eight, correct me if I’m wrong, 

Eli: –four fives ish. In the early part of the decade there. We had moved into a low interest rate environment due to the stimulus and everything from the great recession

and it was low rates. And so I think generally, if I recall, we were in the fours and fives. 

Scott: So is this at all comparable to that market where the interest rates were a little slightly higher than they were a few couple of years ago? I don’t know. I was not in the real estate market myself at that point.

Eli: You know, the most recent memory people have of major shifts in the real estate market [00:04:00] is the great recession, right? Is kind of 11, 12, right? And people have been looking for patterns that would suggest we are moving into a similar pattern as that, but it’s just a totally different situation. It’s a wildly different set of economics that we’re dealing with. It’s not comparable really at all. That shock was one brought on by collapsing mortgages, enormous supply, people unable to afford their homes, short sales and foreclosures, which were sending tons of inventory to the market while at the same time, demand was down because markets were collapsing in general, stock prices were down, people were losing their jobs. And that’s why prices dropped. And so the recovery phase was a winding down of all that inventory and a rebuilding of demand as people started to get more confident around 11, 12, 13. We don’t have [00:05:00] that kind of inventory, right?

And so prices are not falling. I think it, one, speaks to the kind of the stability and strength of the Arlington market and the local DC area market. That’s what a lot of the markets in the country are experiencing just because supply is so low. So it’s not allowing the week in demand and the interest rates to really push prices down.

And so there’s not really a lot of similarities to what we had happening 10 to 15 years ago. And this interest rate shock is significant if rates come down a little bit, like they did moving through the recession, which helped to stimulate some of the market. If we drop by a percentage or two, I think, hold on, right?

If the average rate comes down to five and a half, 6%, which I don’t think it will anytime soon, but if something happens that causes that to happen relatively quickly. I mean, hold on, there’s going to be a wave of buyers coming off the market. And are off the bench and much faster than sellers will come off the [00:06:00] bench and decide it’s time for them to move.

And things could get pretty interesting.

Scott: That would be exciting. Although there are a lot of people saying that these interest rates are going to remain higher for longer. So we’ll see what happens. We’ll do a quick reset here for anybody watching live. Uh, we’re talking with ARLnow real estate columnist, Eli Tucker. He’s been doing our real estate column for four years and you agreed, Eli, thankfully to do this little experiment with us where this is for a podcast, but it’s also going out live. We’re accepting questions. If anybody’s watching on Facebook right now, you’re welcome to type a question into the comments and we’ve never done this before. So, please forgive us if it’s not working exactly as we were intending. Eli, you talked about the demand is still there in the market and DC area potentially remaining strong. I wanted to ask you about two potential factors that might be playing into the market right now. You have 10, 000 plus employees.

We don’t know how many exactly moved here for the job versus we’re already [00:07:00] there. But you have a very large private employer that keeps hiring people down in the Pentagon city area. Do you see any evidence that is contributing to increased demand on the ground in Arlington? 

Eli: Yeah, I have found a handful of new Amazon employees who have moved into the area shopping around listings, open houses and things. So you are seeing some signs of that. I don’t think that it is enough that it has caused a real material effect On the demand in the Arlington market, because they’re not only buying in Arlington, right? They’re going to be looking across the DC metro area, Fairfax County, Alexandria. And so I’m not sure where we would find support to say that these new employees moving here are creating some sort of new demand, but I haven’t gotten that sense at all.

I think what we saw, the biggest impact that we will feel is that [00:08:00] initial spark that we got, particularly in the condo market when they announced at the end of 2018 and what that did to the condo market from late 2018 to early 2020 until COVID shutdowns sent condo market into a tailspin. That market appreciated up 8, 10 percent in that time, which is totally abnormal for the condo market.

And so I think it’ll be more incremental, what we see and feel. And I think it will be hard to truly measure, especially with all the other employment that’s happening around here, and all the people coming and going. Turning over of political offices and things like that. I think it’ll be hard to truly measure.

Scott: So another factor that’s potentially weighing into the real estate market, although on a small scale at this point, to be clear is Missing Middle. We’ve done numerous stories on the passing of the Missing Middle ordinance in Arlington. It essentially takes what were formerly area zone just for single family housing and [00:09:00] opened it up to buildings of up to six units a piece.

We’re seeing a fair number of duplexes townhomes in terms of permits for that kind of construction. We’re also seeing some six plexes mixed in there, mostly around the Metro corridor. But we’re just at the beginning of this, cause it was only a couple of months ago that they opened up the permitting process and in terms of.

Missing Middle units getting built, I’m not exactly privy to how many are under construction, if any, but we’re in the very early stages of this. And even if there was a flood of applicants, the county in their approval of Missing Middle limited the number that can get approved in a given year. So this is a bit of a small scale thing. But nonetheless, I’m sure a lot of people are wondering. Is it having any impact, excuse me, on the real estate market here in Arlington? 

Eli: From a data standpoint, from a pricing standpoint, no. There’s absolutely no impact to the market at this point from Missing Middle The impact to the [00:10:00] market is all of the noise and the conversation around it. That’s where all the energy is coming from and the policy side of things.

And also, unfortunately for the handful of neighbors who are seeing Missing Middle approved applications or Missing Middle pending applications right next to them, where it’s going to directly affect their parking and their experience and privacy and things on a day to day basis. That impact is very real. But from a market standpoint, I think we are a long ways off from seeing it move the needle in any meaningful way.

I think they started accepting applications July one, if I’m not mistaken. And in the first month or so, there were quite a few applications coming in. But it’s really slowed down to a trickle since then. Maybe one new application a week, a lot of applications getting rejected and sent back for review [00:11:00] and a handful, I think maybe seven or eight total have been approved.

And from anybody that I’ve talked to and the numbers that I’ve run, I’ve looked at this from a number of different angles with a couple of developers and some architects, and it’s really hard to find situations where you can justify paying more for land for a teardown for Missing Middle at this stage than you would for single family.

And so I think most of the folks buying up or looking for Missing Middle, especially with the lawsuit out there that provides a big question mark as to what this all looks like and a lot of potential risk, I think that it’s very hard for somebody who’s paying attention to the market and understands the market to pay more for land than they would be able to profit and do well with a single family house.

And so I don’t think it’s moving the needle very much. And there’s just so many unknowns right now. For me as [00:12:00] a real estate agent, where it’s my job to value things, to understand what the appropriate acquisition price should be, what the likely out sale is going to be for a four unit or a six unit, that’s really hard right now because we don’t really know what these are going to look like. We don’t really know how the market is going to respond to different product categories and in locations that haven’t really had those types of products in them. So when you have that much unknown in what the outsale is going to be, you have to be particularly careful in what you’re acquiring them for.

So I think that we’re going to slowly learn about how the market is going to interact with missing middle, where it works, where it doesn’t work. There’s going to be some mistakes and successes. There’s going to be some great ideas and some bad ideas. And I believe this was intentional from the county that it will probably be three, four, five years before there’s enough examples and we’ve seen enough where more people are willing to put their money in confidently and actually [00:13:00] start to intentionally buy up Missing Middle and implement it. If there’s profit there. We may find out in three or four years that there’s very little room for missing middle to be profitable in a lot of areas and that’s possible.

So I think we’re a ways off from seeing an actual effect on the market. Some people I think would applaud that. I think a lot of people would also say you totally missed the point and we missed the boat here in the policy. 

Scott: You mentioned that it’s hard to get it to pencil out and people who know the market might be avoiding it.

What are you seeing in terms of who’s building it? Is it smaller builders that don’t do as much work in Arlington? Do you see any of the bigger builders dipping their toe in the water to see how it goes? What are you seeing from that standpoint in terms of who is building this out there? 

Eli: Like most one-off development in this area, it’s a combination of those things. There are some small folks names I don’t recognize, but there are also some bigger players getting involved. I don’t think [00:14:00] that they would have any problem with being mentioned in this, but Classic Cottages, they’re a huge player in the single family development game in Arlington. And as far as I can tell, they hold the most pending and approved permits of anybody. There’s not a whole lot out there. And I think they probably have four or five, maybe five or six in process or approved. And I spoke with them and one of the fears that people have is that these are going to turn into rentals.

And I certainly understand that concern. I don’t think that the numbers work out in a lot of cases for these to be rentals in a lot of the areas, but Classic Cottages has no intention to rent, right? This is for resale. They plan to build to a similar style and quality as their 2 million dollar single family homes, right?

It’ll be tuned to the price point, but they’re very conscious of their brand and their name, and they don’t want to spoil what they have in the rest of the market. I think that any builder who has a brand in Arlington, I think we will see some of the mid sized to bigger [00:15:00] players getting involved eventually.

I think that they’re going to be very careful to deliver a product that represents also the quality of their single family product. And so it is a combination. I also think that a lot of the applications in are just from homeowners. I’ve looked back at some of the public records and sales history, and it doesn’t look like there’s been, for many of these, a sale recently. To me, that indicates that a lot of these applications are from, you know, existing homeowners.

 They might’ve been renting the property out or they’re living there and they’re just curious that they’ve heard all of this money that can be made for Missing Middle. It costs nothing to put an application in. It’s fairly simple to do. You have to provide some plans and permits. That’s not very difficult. I am not convinced that a lot of those folks have truly run the profit and loss models that a builder would to bring it to market. And so, for a lot of those folks, I wonder, and I’ve wondered [00:16:00] publicly on some of my articles that I don’t know how many of these will actually make it to construction because when it comes down to starting to spend a million bucks plus on construction, that’s where really the rubber meets the road.

And you start to get into the land disturbance stuff with stormwater, which is really challenging in Arlington to get through those. And none of that has not been done yet to get to an approved Missing Middle permit. So I think that there’s also a lot of homeowners who are maybe going to get to the approved application and then try to find a builder or an investor who wants to buy a lot from them with an approved application.

And who knows at that time, if anybody’s going to agree that it’s profitable. I would guess that there is a percentage of properties that fall into that category as well. 

Scott: So a bit of a fraught question. Apologies if it touches on a sensitive area But I was wondering what do real estate agents in Arlington in general think of Missing Middle?

We’ve [00:17:00] cited in our reporting a newsletter from a real estate agent, natalie Roy, who seems to be very much opposed to it. And in fact, ran for county board essentially on a platform opposed to it. On the other hand, there are a lot of people assuming in comments, both through elected officials and in our comment section that developers and real estate agents must be all for it because you’re gaining more inventory.

So where, where does the truth lie? 

Eli: You know, Natalie, I think is doing amazing things reporting on Missing Middle and I commend her for that. I think she’s making some great arguments and really supporting a large percentage of the community. Her and I are actually overdue for some coffee to talk about Missing Middle. She disagrees with a number of my opinions on the topic. And Natalie, if you listen to this, we’re still on for coffee. I think a lot of it has to do with where the agents live. And I think for agents who live in Arlington and can be negatively affected by missing middle, they’re in a [00:18:00] single family neighborhood.

Like most people who live in single family neighborhoods and don’t want that disrupted, they’re strongly against it. I’ve talked to multiple agents who are in that situation, or most of their clients are in those positions and they don’t like it. This isn’t going to be a seismic shift in the amount of business that we can do.

Right? You’re talking about maybe if it really becomes effective, a couple dozen, a few dozen new units per year. Maybe. And mostly condo type units and stuff. And so it’s not going to be a game changer for our industry by any means, the way that the code is put together. So I would disagree that the agent community overall is supporting it just because it’s more business for us. Personally, as somebody who spends a lot of time in the housing industry, both as an Arlington resident and has a single family house with a couple of lots around me that I look at and I say, “ooh, that lot behind me could be Missing Middle. There’s a couple [00:19:00] opportunities here in my neighborhood.” I don’t like that as a resident, but I understand it. And I think that there’s progress that can and should be made on how to do this the right way. So I support it from understanding that there are gaps in our housing market that would be nice to fill.

I don’t think that the policy and the code that we have in here is going to do a good job of filling that. But hopefully this is the start of a longer term conversation to bring some new inventory and some new product to market that actually does fill some of those gaps. But without dragging the conversation all too long– No, I don’t think that the agent community is salivating it over all of this new business that’s going to come from it.

I just don’t think it lines up in that way. 

Scott: So it sounds like your answer to this is going to be yes. But just out of curiosity, is the middle actually missing? Is there a dearth of townhomes and duplexes and those kind of smaller scale [00:20:00] housing units that are somewhere between like a condo, one bedroom condo and a high rise and a single family home on its own lot?

Eli: Yeah, there is. So three and four bedroom properties exist, but a lot of those are old properties built in the forties to sixties when a lot of single family in Arlington was built and there’s not a whole lot you can do with it. We don’t have, in my opinion, enough townhouse and duplex product, and we’re certainly not missing one and two bedroom condo multifamily type housing.

That’s a ton of our housing, both rental and for purchase. And so I think when I talk about the policy, not really, in my opinion, working for what we actually the gaps that we need to work. I think the policy is going to ultimately lead to more one and two bedroom condo style development and that’s not what we need.

That’s not really what anybody is looking for. And I strongly [00:21:00] disagree with the way that the policy was structured that allows that to be the overwhelming profit driver for developers and really one of the only good paths forward. What we’re missing are the kind of 2,000 to 2,800 square foot, three to four bedroom, two and a half, three full bath that product where a young family or established family can move there, live there comfortably. It has the conveniences and the features in the floor plans that families right now are looking for. That I believe is where the gap is. And I think that it would be fantastic to find some ways to deliver that. I also think that for much of Arlington, when we talk about real neighborhoods, the suburbs where people don’t want these four to six plexes, they’re just out of place.

Those products, I do think are appropriate in some of those neighborhoods in a lot of cases, right? I don’t really have a problem with a duplex or even a well done [00:22:00] triplex or something, or we’re on a large lot for townhouses, which is not allowed now going in some areas, I think that’s the type of product that there is a gap for, but it’s not the product that is really being incentivized and the code really allows the developer community to create. 

Scott: So somewhat related question, and going back to our real estate market conversation among people my age, and I just turned 40. A lot of people my age who I’m friends with in Arlington, they are in the same boat. They bought a house at some point within the past few years when interest rates were low, or they bought a house earlier and they refinanced.

And now they’re sitting there with a low interest rate. Sitting pretty. But they bought what they expected to be a starter home. And there is just no world in which it makes any economic sense for them to trade up and go from a 3 percent interest rate or something around [00:23:00] that to an 8 percent interest rate.

Enviable position if you’re currently in the market and you’re going to be starting with that 8 percent interest rate. But nonetheless, I talked to so many people are in the same exact boat and they’re thinking, do I renovate? Do I do additions? A lot of them are taking that option, but what does that do to the market?

When you have people who bought assuming that they would be trading up at some point and now are like, I guess I stay here. 

Eli: It’s so frustrating. I have eight to ten clients that I have been working with lightly for the last kind of year and a half who are in this position and they can stay in the house they’re in. And it just is crazy to triple or quadruple their monthly payments. To make that upgrade. This is the problem across the board. It is freezing the market and it’s not providing the inventory because when those folks do end up buying now [00:24:00] a starter home a duplex or a large condo or small single family house comes to market and it allows the market to churn and move, which is good because it means more people are moving into the homes that they want to be in that they’re happy. You want that. Housing is such a key ingredient to the American life and happiness, and you want people to be able to matriculate through the housing system and what we also aren’t getting is the folks at the top of the housing system, the empty nesters and retirees selling those bigger homes that they have all this extra capacity and they’re in the same boat. It doesn’t make sense for them to sell because you know, they’re going to downsize and end up in something as expensive unless they decide to pay all cash, but everything’s frozen and I think it’s going to take a while to unfreeze it. I’ve seen studies that say we’re really not going to be able to [00:25:00] unfreeze the market until rates get to about 5%. Like that upper fours, low fives is when a lot of these folks who are sidelined, who don’t want to make that move will start to come back to the table. It’s really tough because you’ve got a lot of people who have worked very hard, who have great incomes, great savings and deserve to be able to move to the next stage of housing in their lives and with their families and they can’t and renovating isn’t pretty either. Those costs have skyrocketed and that’s not necessarily the right ROI long term for a lot of families. And so there’s, when you’re in these situations where there’s not a lot of great alternatives, it’s really hard, and there’s just a lot of frustration in the housing market. Not a lot of good answers. We’ve put ourselves in a really tough spot with people locked into super low rates and now in an environment where they might not come down to that five level anytime soon. I wish I had an answer. 

Scott: I can confirm [00:26:00] that it’s frustrating, even though I count my blessings that, you know, we bought in here in Arlington when we did where it just feels like we’re stuck, which is, it’s not the worst, but it’s also, you went into it with one expectation and now it’s a completely different reality and there’s no indication that it’s going to change anytime soon. So we’ll see. Eli, we’re at the end of our half hour that we said we were going to go here. Thank you again for being gracious with your time. I did want to throw in one bonus question at the end for those who might be interested in the behind the scenes here.

So you’ve been doing the Ask Eli column on ARLnow for a number of years. You can tell me the year it started, but what sort of reaction do you get? Do you ever get stomped in the street and Hey, you’re the real estate columnist guy. 

Eli: Yeah, what I get from a recognition standpoint is people will look at me and they, it’s a familiar face type thing, but like, it’s not easy to say, “Oh, you’re from the columns.”

So if I mention it, or I ask if they read [00:27:00] ARLnow or if I’m at an open house and I mentioned it, they go, “Oh, yes.” But it’s rare that somebody will actually stop me and say, “Oh, you do the column” because it’s a really hard thing to place out in the wild, but I’ve loved it. It has taught me so much about real estate and the Arlington market and all the time and the data.

I really enjoy it. And I know the data that I get into doesn’t really appeal to everybody, but it’s really helped me grow as a professional a lot. And I appreciate very much having the platform, the opportunity to do all that. And it’s really been a wonderful experience. Eight years in, and I hope to be having these conversations and another eight years.

Scott: I appreciate you being willing to be the guinea pig for our first discussion like this. It’s much appreciated. You always bring such insight to conversations like this when you have them with myself or other people you’ve talked to who I know and in the column itself. [00:28:00] So thanks for that, Eli. Appreciate you being here.

Appreciate you taking the time and maybe we’ll do this again soon. Sounds good to me. 

Eli: All right, Scott. I appreciate 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 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.

Selling on-market/MLS returns much more than off-market

Question: Are there any studies or data comparing the results of on-market vs off-market sales?

Answer: I hope everybody had a great Labor Day Weekend! Last week, we reviewed what the MLS/Bright MLS is which is a good lead into the recent study completed by Bright MLS that looks at the performance of properties sold on-market (via Bright MLS) vs off-market (not listed for sale in the MLS). For those so inclined, the study provides a detailed explanation of their methodology that led to the data reported in this article.

Selling On-Market = Listing in MLS

When people talk about selling or buying homes on or off the market, they are generally referring to whether or not that home was listed in an MLS. Our regional MLS is called Bright MLS and is the second largest in the country including most or all of VA, DC, MD, DE, WV, PA, and NJ

Almost 95% of DC Metro Homes Sold on Market

The vast majority of homes are sold on-market, especially in the DC Metro, which has the largest percentage of on-market sales of anywhere in the Bright footprint with 90% of homes selling on-market in 2022 and 93.5% in 2023 Q1, up from 85% in 2019.

Selling On-Market = Much Better Price for Sellers

The study went to great lengths to analyze the results of comparable properties (something they failed to do in their initial study in 2021) to provide an accurate measure of the difference selling through Bright MLS makes for sellers. The chart below shows how much more a comparable home sells for when sold via Bright MLS vs off-market/MLS.

The on-market premium has increased significantly over the last three years when the market has been running red-hot. Homeowners in the DC Metro earned 18% more on comparable homes sold on-market in 2023 Q1 and 15% more in 2022.

When the market heats up like it has the last few years, you often hear homeowners talk about how easy it is to sell a home off-market because there’s so much demand. Sure that is true, but the question is not whether or not you can sell the home off-market (of course you can), the question is whether or not that nets you the best result (it rarely does).

Why Sell Off-Market?

There are a number of scenarios where an off-market sales with limited exposure is justified – privacy (athletes/celebrities), security (high value personal possessions), interest from a family member, friend, or neighbor – and there are examples of off-market sales producing results that match or sometimes exceed what one might get via the MLS, but for the vast majority of homeowners, an on-market sale will produce significantly better results because of the tremendous increase in exposure to potential buyers.

Those considering an off-market sale should do so with a clear understanding of the disadvantages and measure those against your own reasons for considering an off-market approach.

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 Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.

What is the MLS and Bright MLS?

Question: I often hear people reference the MLS or Bright when referring to properties for sale. Can you explain what these are?

Answer: If you’re buying or selling a home anywhere in the US, you may hear the term “MLS” and if you’re buying in the Mid-Atlantic “Bright” used a lot. The simplest way I describe it to people is that the MLS, short for Multiple Listing Service, is the real estate industry’s database(s) of record for property sales. There are hundreds of regional and local MLS’s across the country that act as the aggregator of properties for sale/rent.

Bright (MLS) is the name of our regional MLS and, with just over 110,000 participating agents, it is the second largest MLS in the country behind the California Regional MLS. Prior to 2017 it was called MRIS (Metropolitan Regional Information Systems), but in 2017 it was rebranded to Bright after a merger with 8 other regional MLS’s mostly from PA, NJ, and DE.

The map below shows the current Bright MLS footprint, meaning brokerages/agents in all of these areas input their listings into the same platform. It covers 40,000 square miles and 20M people.

Our Reach Map

What is the MLS (Multiple Listing Service)?
The MLS is a real estate information exchange platform and database created by cooperating residential real estate brokerages to improve the efficiency of their real estate market.  As a privately created and managed organization, each MLS is primarily funded through the dues of the brokerages and agents within the market it serves. There are hundreds of MLS’s across the country and each operates under its own direction and rules & regulations.

The information you find on consumer-facing websites like Zillow comes from various MLS’s and each MLS has the right to negotiate its own relationship (syndication agreements) with these sites and determine what information is made available.

Without the MLS concept, we would have an extremely fragmented industry that would make it difficult for buyers to ensure they are seeing most/all of what is for sale within their sub-market and it would be much more difficult for sellers to get top dollar because they would not have access to the entire buyer market.

What is Bright MLS?
Bright is the MLS that serves the mid-atlantic region including all of, or most major markets in, Virginia, Washington DC, Maryland, Pennsylvania, New Jersey, West Virginia, and Delaware.
The Executive Committee and Board of Directors is made up of representatives from the region’s major brokerages and directs the business of Bright, which has developed into a full-blown software, services, and technology company. Bright has adopted a strict set of rules & regulations to provide data uniformity and ensure fair play such as restrictions on marketing properties for sale that are not entered into the MLS, as discussed in this article.

MLS is a Net Benefit to Consumers and Agents
Your interaction with Bright MLS is likely to come from listings that your real estate agent sends you directly from the system, but you are also indirectly interacting with Bright whenever you search a 3rd party real estate site like Zillow because their data is pulled from Bright (and other MLS systems across the country).

While at time frustrating for brokerages, agents, and consumers (personally, I think there’s so much more they can do with data and their consumer-facing tech), the MLS structure is a tremendous net benefit for the industry and consumers by combining home sale data into one database with a common set of requirements and rules of engagement. This allows the entire industry to function more efficiently than it did prior to the MLS concept, which has led to lower commission fees.

The biggest example for consumers (and I’d also argue to Realtors) is that since Zillow and other consumer-facing sites began aggregating listing information for public use, real estate agents are no longer the “gate-keepers” of listing information and consumers have direct access to practically everything that is on the market (entered in an MLS) in nearly real-time.
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.

Will New Homes Prices in Arlington Drop Due to Toll Brothers Project?

Question: What impact will the new Toll Brothers community have on the Arlington housing market?

Answer: If you have enjoyed my real estate columns over the years, I would greatly appreciate your vote for Arlington Magazine’s Best Of Arlington, Real Estate Agent (in the Home section) and encourage you to support all of your favorite Arlington businesses with a meaningful vote!

Toll Brothers will open sales of 40 new single-family homes at The Grove at Dominion Hills very soon (projected by this fall) starting in the $1.9Ms (really $2M) and I suspect most of the homes will have a final price tag of $2.1M-$2.3M.

All 40 homes will not be available at once, rather they’ll be released in phases based on the pace of sales, but the addition of these homes to the market will have a significant impact on the supply of new construction homes in Arlington and I expect will put downward pressure on the price of new builds under ~$2.6M.

The Grove Will Be a Big Percentage of New Construction Supply

Arlington has averaged just over 95 new homes sold per year since 2018 (per MLS, which includes most but not all new homes sold) so even if it takes two years for Toll Brothers to release all 40 home sites, those homes will represent a significant percent increase in the supply of new homes in Arlington.

If you look at the sales of comparably priced homes ($2M-$2.4M), The Grove will bring an increase of 60-70% more new builds to market over the next 18-24 months (assuming that’s the timeframe they release all 40 home sites within).

Most new homes in Arlington are located in the 22207 zip code, with 52% of new home sales (275 of 524) since 2018. The Grove is in the 22205 zip code and while it’s just 1.5 miles from 22207 and 22205 also commands premium pricing and shares many of the same characteristics as the 22207 zip code, there’s no data to support whether or not the 22205 market is prepared to absorb 40 new homes at this price point. Of the 73 new homes sold in 22205 since 2018, just seven have closed at or above $2.1M – one more is under contract and three are for sale.

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And New Homes Are Already in a Softer Sub-Market

Adding that kind of supply to any market is bound to put downward pressure on prices, but I have no doubt that the market would happily gobble up dozens of 2,500-4,000 SqFt homes in the $1M-$1.5M+ range. However when you get into the 5,000+ SqFt market (I imagine most of the 40 homes will finish with 4,500-5,000+ SqFt) and in the $2M-$2.5M range, you enter into that is already pretty well balance between buyers and sellers, softer than the rest of the housing market, without the inventory from The Grove.

The first chart, courtesy of Altos Research, shows the percentage of homes with a price reduction in the “upper” price range of the Arlington single-family home market, which The Grove community will fall within. Notice the upward trend of price reductions this year highlighted by ~30% of homes reducing price this spring compared to previous spring markets with just 20-25% of homes with a price reduction.

I have seen this play out anecdotally as well with more new builds reducing the asking price or accepting larger discounts from ask than in years past. I would expect this trend to continue as the market adjusts to the Toll Brothers inventory rolling in later this year and in 2024-25

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The Months of Supply (MoS) chart below, a good measure of supply and demand where higher MoS suggests a market more favorable for buyers, shows us that the market for homes with 5,000+ SqFt is very much in balance between buyers and sellers, with about six Months of Supply. Most housing economists say that six MoS is a balanced market, below six favors sellers, and above six favors buyers. For comparison, the overall Arlington market measured 1.4 MoS in Q2 2023.

So this chart tells us that unless demand picks up sharply for large homes, the extra supply added by Toll Brothers will likely push this sub-market (~5,000+ SqFt) into a buyer’s market.

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Local/Smaller Builders Will Bear the Burden

Most likely, none of this will matter to Toll Brothers and it will be a problem for their competition (everybody else building in Arlington) to bear. Toll Brothers can afford to wait for premium buyers longer than smaller builders can, Toll Brothers has an exceptionally efficient and proficient sales machine including full-time sales staff, model homes, and a nationally recognized brand, and Toll Brothers can offer incentives smaller builders can’t compete with, most notably through the Toll Brothers mortgage company.

If I was a builder in Arlington, I would be careful over the next couple of years on projects in the $2M-$2.5M range with tight margins.

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.

Mid-Year Condo Market Review (Arlington)

Question: How was the market for condos in Arlington during the first half of the year?

Answers: The condo market loves stability, often it’s a bit too stable for most condo owners (low appreciation), so after a wild ride from 2019-2021, we can finally say with a high level of confidence that the Arlington condo market has found its level in the wake of Amazon HQ2 (rapid appreciation) and COVID (supply surge and depreciation).

The data below is based on the sales of apartment-style condos in Arlington during the first six of of the past five years. Note: I filtered out new construction data because it throws off the readings on actual market trends and gives a distorted view of pricing in 2021 (mostly due to 2000 Clarendon sales).

Average Prices Down Slightly

I’m generally not a big fan of using $/SqFt because it can throw off so many false readings, but in this case, I think $/SqFt is a more reliable way of reading the year-to-year price trends of the market than average sale price, but both readings indicate pretty similar market conditions over the past five years.

  • The average price for a 1BR decreased by .6% to just over $375,600 and the average $/sqft decreased by 2.5%
  • The average price for a 2BR decreased by 1% and the average $/sqft decreased by 3%
  • Overall, prices have changed very little since the Amazon HQ2 bump in 2019, with just 1.6% appreciation for 1BR in the last five years and 6.9% for 2BR on an average price basis, and a 2.7% increase for 1BR and 3.8% increase for 2BR on a $/SqFt basis
  • On average, condos are selling for just under their original asking price
  • Keeping up with the market-wide trend of low supply, sales volume in the first half of 2023 came in just higher than 2020, when the market froze for Q2. 2023 sales are down well below the first half numbers over the rest of the decade.
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  • Just over 50% of condos are selling within the first ten days on market
  • Just over 50% of condos are selling for at or above their original asking price
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Poised for Future Price Growth

I expect the second half of the year to be like the first half, but with normal seasonal trends in play, meaning properties will take a bit longer to sell and buyers will be able to negotiate more off the asking price, but expect prices to hold steady for the most part.

However, if rates start coming down by next year, the condo market is poised for strong appreciation (in the condo world, that would be 3-5%). If you look at the first chart below, you’ll see that we are operating with some of the lowest inventory levels we’ve seen in the past decade (bested only by the 16 months of Amazon HQ2 craze), any pop in demand will cause prices to jump with such low inventory levels. The second chart shows Months of Supply is remaining low as well, at about five weeks. Months of Supply measures supply and demand, with lower values indicating a more favorable market for sellers.

These charts suggest a market with a lot of upward pressure on prices, being held back only by the high interest rates.

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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 Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.

Condo Fees, They’re So Underappreciated

Question: Why would anybody waste hundreds of dollars each month on condo fees?

Answer: Most people associate paying condo fees with throwing money down the drain, but the truth is that most people aren’t looking at condo fees the right way; they even offer some advantages over a single-family home or townhouse.

What Do Condo Fees Pay For?

For those who haven’t spent much time studying condo budgets, some of the main expenses in a condo budget include:

  • Reserves: a building’s savings account for large major repair or replacement of things like the roof, façade, elevators, etc
  • Property Management/Staff: contracts for a property manager, front desk, janitorial services, and engineer
  • Maintenance and Utilities: general upkeep of the building including lawn service, basic repairs, power washing, window cleaning, snow removal, and utilities like water, sewer, and trash (some buildings also include gas, electric, and/or tv and internet)
  • Master Insurance: this policy usually protects everything except your personal items and improvements within each unit

Predictable Expenses

One of the most beneficial, yet underappreciated, advantages of condo fees is that they give homeowners a very predictable, flat expense structure. Taking care of a single-family home might mean months or years with very low maintenance expenses and then a run of tens of thousands of dollars in expenses (e.g. a storm damages your deck and deck and your basement floods).

In a condo, your biggest financial exposure is usually HVAC and appliances, all of which are under $10,000 and have somewhat predictable expirations. Many of the other normal home maintenance and replacement costs tend to fall under the purview of the Association.

For younger buyers with less savings and retired homeowners on a fixed income, the benefits of stable, predictable condo expenses makes financial planning/management easier and also require less of an emergency savings fund so more cash can be deployed into investments or to enjoy.

Home Maintenance Cost > Condo Fees

When you own a condo, you’re only responsible for what’s inside the walls of your home (appliances, water heater, flooring, walls, plumbing fixtures, etc) and, if you have one, an outdoor HVAC compressor. Of course with a single-family home or townhouse, you are responsible for a lot more without anybody to share those costs with.

Over the last 12 months, the average condo fee in Arlington was $583/mon (~$7k/year) representing about 1.4% of the average condo market value. Estimates for annual (single-family) home maintenance range from about 1-2% (Wells Fargo) to 1-4% (State Farm) of your home’s value in annual maintenance expenses.

Many homeowners will spend more in the long-run maintaining a single-family home than they will on condo fees, plus condo fees include more than just maintenance and repair.

Lower Utility, Insurance Bills

Condo living will help you save money on other expenses including utilities and homeowners insurance. It’s usually much easier to keep your unit comfortably heated and cooled because you benefit from the ambient temperatures from the units and hallway around you. And because of the existing Master Insurance policy for the building, your own homeowners insurance policy tends to be less expensive than a comparable policy for a single-family home or townhouse.


Many buildings have amenities that can either save you money (e.g. a gym that saves you from paying a separate gym membership fee or grilling area to save you on a grill and propane) or enhance your living (e.g. pool, rooftop terrace, 24hr front desk security).

Life is Easier

One of the main reasons retirees sell the home they’ve lived and invested in for decades to move into a condo is to relieve themselves of the time and hassle of maintenance and repairs. While you can debate whether you’ll pay more on maintenance in a condo vs single-family home, there’s no denying that you’ll spend a lot less TIME on maintenance in a condo, and your time is certainly worth a lot. Even if you are not doing any of the maintenance work yourself in a single-family, you will spend time contacting, meeting with, and managing contractors and vendors who do the work.

This goes for landlords/investors too – the effort of maintaining an investment property that is a condo is much lower than one that is a single-family home.

But What About Evil Condo Boards?

Another concern I hear about condos is that the evil condo boards/management will increase fees or levy special assessments (one-time fee levied against all owners, on top of their condo fee) on a whim just to screw owners over for thousands of dollars. This simply is not accurate.

First and foremost, the Board members are also owners and pay the same fee increases and special assessments as the rest of the owners so they should have a shared interest interest in keeping costs down. Second, most Boards try to limit fee increases to 2-3% annually to keep pace with inflation (yes, fee increases have been higher the last two years while we deal with high US inflation). Finally, special assessments are generally a measure of last resort and uncommon.

If you are concerned about fee increases and/or special assessments, I strongly encourage you to attend Board meetings, participate on the Financial or Building Committees, or become a Board member to personally oversee your investment.


Just because this column is pro-condo does not mean it is anti-single-family home/townhouse, but somebody has to stand-up to for the oft-bullied condo fee! I do hope this message reaches buyers and investors who are a good fit for condos, but hesitant to consider them because of a misunderstanding about condo fees.

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.

Impressive Sales at Rosslyn’s New Luxury Condo, Pierce

Question: How are sales going at Pierce condos in Rosslyn?

Answer: The Pierce condos are one of three new buildings in Rosslyn’s luxury Highlands development (the other two buildings are rental apartments) with prices that rival the most expensive buildings in the DC Metro and far outpace other Arlington buildings on a price-per-square-foot basis, which I detailed in this 2019 column.

Building Overview

Penzance (developer) and The Mayhood Company (sales) began pre-selling the 104 units just before the pandemic hit. Sales in the building have captured the attention of many Arlingtonians and the real estate community because of the building’s prominent position in the Rosslyn skyline, record setting price-per-square-foot, and shifts in condo demand for a couple years following COVID lockdowns.

The Mayhood Company, who also handled sales at Turnberry Tower, Rosslyn’s other luxury condo building, played an active role in designing Pierce condos and conceived it as “Turnberry Gen 2” with the application of lessons learned from their time selling those units. 

Prices ranged from roughly $950,000-$4,000,000+ with the average unit going for about $1,750,000 for approximately 1,700 SqFt of living space. Currently, units in the building range in price from ~$1,800,000-$2,600,000 and in size from ~2,000-2,400 SqFt. The bulk of the building has sold for $1.5M-$2.4M.

Pierce was completed and ready for move-ins by the fall of 2021.

I caught up with the Mayhood sales team to get a sense of how sales have gone through the lockdowns, during the post-lockdown flight from condos, and the return to more normal buying habits over the past 12-18 months. 


Sales jumped out to a great start prior to the pandemic, with about 10 contracts right out of the gate. As expected, many of these sales were to buyers targeting premium views – the building has quite a few upper-level units with unobstructed (and nearly impossible to be obstructed in the future) views of DC and the Potomac. The other non-view sales were units on lower floors with the lowest price-per-square-foot.

Many of these early buyers were downsizing from larger single-family homes, which is/was expected to be the most common buyer profile for the building.

COVID Lockdown, Sales Lockdown

The sales office shut down due to COVID lockdowns in March 2020 and sales were frozen until August 2020, when they began taking calls and doing virtual sales. There was zero activity from mid-March until August/September, but they still finished 2020 with 15 total contracts.

Vaccines Led to More Activity

The building had about one contract per month from August 2020 through May 2021, but once vaccines become more broadly available and life started opening back up around June 2021, activity picked up significantly, resulting in 8 contracts in June 2021 and about 3-4 contracts per month through the end of 2021.  Also, by June of 2021, the construction had progressed to allow prospective buyers to take hard hat tours and see the finishes and views in person, as opposed to renderings, which is always going to boost interest and sales. There were 28 contracts written in 2021

From late summer 2020 through early summer 2021, the buyer profile shifted from those downsizing from larger single-family homes to buyers who were already living in condos/apartments and looking to upgrade. That shifted back to the “norm” of more downsizers by summer 2021, when vaccination rates were up.

Return to “Normal” Life Kept Sales Strong

2022 was a return to “normal” operations for most people and Pierce sales were excellent, with a consistent pace of 2-3 sales per month, totaling 30 contracts on the year, evenly split between the first and second half of the year. The overall condo market in Arlington also started experiencing a return to more normal buying behavior; low interest rates early in the year helped too.

Current Status, Closing Out

The project is transitioning into the close-out phase which means more is on the table for negotiations for buyers and as a result another 16 units have contracted so far this year, leaving just 15, or about 14% of the building, left to sell. The advertised price on the remaining units ranges from about $1.8M to just over $2.6M. Unit 2601, the largest penthouse unit, is also being resold after being one of the first contracts in 2020.

Featured Available Units

Some of the units that highlight the remaining 15 include:

  • Unit 1203: A D5 floor plan with 2BR+Den/2.5BA over 2,400 SqFt and a 175sqft of balcony across two balconies

Figure 1: D5 floor plan

  • Units 1302 and 2002: Both D2 floor plans with 2,000+ SqFt. Unit 1302 is the least expensive unit available (by a lot) and unit 2002 is the largest unit available with a view (Potomac River, Georgetown, National Cathedral)

Figure 2: D2 floor plan

  • Unit 2502: If you want the best view without the extra space unit 2502 (C4, 1700 SqFt), is the highest floor of any unsold unit and has two balconies with excellent northern views the Potomac River, Georgetown, the National Cathedral and on a clear day you can see Sugarloaf Mountain in Maryland (30+ miles away)

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Figure 3: C4 floor plan

  • Resales: It’s normal to see a handful of units resold in the first few years so it’s good to monitor on and off market channels for floorplans, views, or price points that are no longer available (like the penthouse unit 2601)

What I’ve Learned from Pierce

When I first analyzed this project, I was suspicious that there would be enough $1,000/SqFt buyers in Arlington. At the time (2019), there had been less than 10 sales in Arlington that exceeded $1,000/SqFt.

Fast forward to today and about 40% of sales (35+ units) in the building have exceeded $1,000/SqFt and the top five highest $/SqFt have ranged from $1,350-$1,530/SqFt! Incredible numbers when you compare it to not just to Arlington sales, but all regional sales.

The strength and pace of Pierce sales speaks volumes about Arlington’s ability to support the luxury market and the distance Rosslyn has come in the last 5-10 years (shoutout Mary-Claire Burick and the entire Rosslyn BID team!) to attract buyers with the financial means to live in DC and Bethesda’s premier neighborhoods and buildings. It’s also a testament to Penzance and Mayhood for recognizing how much demand there is from downsizing buyers for 2BR+den/3BR condos (much of Turnberry is 2BR) with large outdoor space and excellent amenities.

The sales team has noticed that after dealing with COVID, buyers seemed to value direct elevator access to their unit more than before. About 50% of the units in the building have direct elevator access in and out of the unit. The large private balconies on many units have also become more important to buyers, something I’ve noticed elsewhere in the condo market as well.

Another interesting shift in the buyer profile is more interest coming from Washington DC (and Maryland, to a lesser extent). If you’ve ever tried dating somebody who lives in DC, you know how hard it is to get Washingtonians to cross the “Potomac Ocean” and the same goes for housing, so it has been a pleasant surprise to see the building drawing so much attention from DC.

If you’re in the market for a luxury place to call home with excellent floor plans and incredible building and nearby community amenities, the close-out phase at Pierce is a great time to buy. Feel free to email me at Eli@EliResidential.com or call at (703) 539-2529 to discuss your options.

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 Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.

Investment Property to Save and Pay for College (vs 529 Account)

Question: Is it more effective to save for my kids’ college through a rental property investment or a more typical college savings plan like a 529?

Answer: I often hear from parents who purchase a small investment property around the birth of their child as the primary savings vehicle for college. Some people swear by it. I did it when my son was born (and will report back with results in 13 years!).

I reached out to my financial advisor, Erik Fischer CFP, RICP of Taylor Financial (erik@taylorfinancial.com, (727) 417-3400), about the topic and he offered a very detailed, thoughtful comparative breakdown of using a real estate investment as a college savings tool vs a more traditional 529. Erik is an excellent resource if you have additional questions about this topic or other financial savings topics.

With frequency, this question arises from parents who gravitate towards real estate investing.  And, there is not a definitive answer. Ok – column over.  Just kidding.  While it’s true that there is not a definitive answer, depending on your situation the answer may be definitive for you.

Identifying the parameters:

  • First, establish a target – how much wealth do you want to save to pay for college?
  • Then, consider the following key areas when comparing the two investment vehicles
    • Savings strategy –how will you fund your savings vehicle
    • Flexibility
    • Level of involvement
    • Associated risks
    • Expected growth rate
    • Tax implications

Establish your target: 

The good news here is that your target will likely be the same regardless of which approach you choose.  So here is an easy-to-follow framework of how to establish your target.

  1. Identify the amount you would like to have accumulated for each child when they reach college.  You can research the “Cost of Attendance” (*important* this is your all-in cost, not just tuition) at http://www.collegeboard.org. 
  2. Use the current cost of attendance for a school and inflate that amount to future dollars using an inflation rate of 5%.  Inflate this number out until your child is likely to graduate college.
    1. Why 5%?  This is somewhat arbitrary, but over the last 20 years college costs have been doubling or more the long-term average inflation rate of 2-3%.  I encourage you to use a number somewhere from 5-8%.
  3. Take the last 4 years of inflation adjusted costs and add them up.  These numbers represent a ballpark of what you could expect to pay for this child.  Is it perfect? Of course not, but it will give you a greater level of visibility into what you will need.

Establish your target (example):

Let’s say your child was just born, plans are to attend college in 18 years, graduate in 4 years.  At UVA, in-state cost of attendance for families making over $110,000 per year is $29,877 (tuition represents roughly half of this number).  If you adjust for inflation and add up 4 years of all-in cost, you arrive at an aggregate number that includes the annual timeline of cashflows.  See table below:

These calculations will vary whether you plan for in-state vs out-of-state, public or private, and how much of the cost you are willing to fund.  Regardless, the framework will remain the same or very similar to arrive at some accumulation target.

You have your target, now what’s the best way to get there: 

Let’s compare a 529 based approach to a rental property-based approach.  Of course, these are not the only two ways to save for college, but we’re focusing on these two today.

Let’s first look at the rental property approach: the high-level idea is buying a rental property when a child is born and selling it to fund college when the child is college-ready.

Because of the increased complexity of rental real estate (which is not inherently good or bad, it just is), let’s identify some of the important considerations first:

  • Down payment will be required
  • Management / execution risk
    • cash flow planning
    • property management
    • tenant management
    • increased tax planning
    • increased insurance planning
    • financing considerations (if you will require a mortgage)
    • a plan to sell the property (to fund college)

So, you may have picked up here another hint at what the answer might be for you depending on your situation.  That is, if you do not have the cash on hand to make a reasonable down payment for the type of property you desire, the rental property might be off table for you, at which point you might lean on an annual savings approach of a 529.

Rental property example:

Rental strategies come in all shapes and sizes, but let’s say that we have $50,000 available to fund this strategy and we use that to purchase a property with the following facts:

  • 20% down payment, leaving $10,000 left over as a sinking fund to close the deal and maintain the property.
  • Purchase price $200,000
  • Mortgage rate of 6%
  • Cash flow neutral over the course of the 10 years (perhaps negative in the first few years, and positive in the last few years due to rent inflation and fixed mortgage), with annual profits years 11-18 of $5,000 that you let accumulate in a bank account that generates some interest
  • Property appreciates at 3% annually
  • Sell the property in your child’s senior year of high school and pay off the remaining mortgage.
  • Keep the rest in cash to pay for school, or in a high yields savings or CD ladder to time payments over 4 years.  The point is, you’ll have all your cash going into freshman year and you’ll keep it invested safely while they are in college.

Here is the formula with accompanying visuals below:  determine growth of underlying asset, then sell after 18 years, subtract 5.5% of sale price (commissions, closing costs, etc.), eliminate the debt, add back in the cash from your rental property bank account.  Once you have done all this, you are left with unencumbered cash that you can use to pay for college (pay it all to a college…lovely, right?)

$340,487 x 94.5% = $321,760

$321,760 of take-home transaction, minus the outstanding debt of $94,493 = $227,267

Plus $45,000 in cash that has accumulated in your rental property bank account = $272,267*

*The final available balance will likely be lower due to a capital gains tax, but the tax charge is highly variable based on factors like future tax code, final cost basis, tax management during property ownership, and other personal financial considerations at the time of sale.

We are now very close to our target.  Also, it’s very important to identify the many factors that can be quantified with deeper analysis, but by nature are less tangible.  Let’s list them:

  1. Advantages
    1. Tax advantages along the way with depreciation, deductible expenses, and favorable tax rates (capital gains rates) on sale
    2. Opportunity to develop skills and expertise in real estate
    3. Flexibility that you are not required to use the asset for college if you are able to pay for or end up choosing to pay for college in some other way – this is a big one.
    4. Potential for upside return
    5. Potential to be integrated with planning for your own retirement
  2. Disadvantages
    1. Level of management extremely cumbersome compared to a 529
    2. Execution / management risk can significantly impact total returns.
    3. Increased liability 
    4. Market risk
    5. Typically, you will need a significant amount of cash upfront to make the down payment

Carefully examine these attributes, because one or some of them might be deal-makers or deal-breakers for you.

Now, let’s compare the rental property strategy to the typical/default college savings account, a 529. This is simple, add an initial lump sum, or deposit annually.

529 – Annual Deposits equaling $500 per month for 18 years

529 – Lump Sum with the same $50,000 that was used for the rental property

The tables above represent the hard numbers that move you much closer to your ideal target. Helpful.  Now, there are also many factors that can be quantified with deeper analysis, but by nature are less tangible.  Let’s identify them:

  1. Advantages
    1. Tax-free growth, and tax-free distributions if used for qualifying educational expenses.
      1. This is the big one, it’s the main differentiator of the 529 from any other account type.
    2. Automatic – set it and forget it
    3. Can be transferred to other qualifying relatives if needed for their education
    4. Potential for stock-market returns
    5. Based on the new Secure Act 2.0 law, part of the plan may be eligible to convert to a Roth IRA for the beneficiary if certain criteria are met
  2. Disadvantages
    1. Tax benefits are lost if not used for qualifying educational expenses
    2. 10% penalty on earnings if not used for qualifying educational expenses
    3. Market risk
    4. Lack of flexibility to use the money for any other reason, due to a & b above
    5. Lack of liquidity, use and control for any reason other than college
    6. Cannot be integrated with planning for your own retirement

Carefully examine these attributes, because one or some of them might be deal-makers or deal-breakers for your own situation.

Comparing the two: 

How do we put this all together?  From a wealth accumulation perspective, in these examples, the rental property strategy wins, and it beats the lump sum deposit into a 529 by a significant amount.

However, this is only one example.  If we ran 100 examples for each, we would get 100 different results for each. Yes?  You could get a 10% return in the 529, or a 6% return. Your rental property could cash flow negatively in all years, or positive in all years.  You could get a great deal, or a bad deal.  You could refinance if interest rates lower and capture significant savings.  You could have an extended vacancy. Maybe the asset only grows by 2% instead of 3%.  There will be a ton of variability.

Distill the factors that will influence the results for you:

  • Rental strategy
    • Purchase price of the home
    • The plan to sell the home
    • Ability to manage the cash flow of a property, maintain it, and sell it properly / advantageously
    • Ability to execute proper tax planning along the way
    • Ability to manage tenants
  • 529
    • If you deposit a lump sum, at what point in the market cycle did you get started – during a bull market?  During a bear market?  Unfortunately, this is somewhat out of your control, but it makes a big difference in final results
    • Investment selection – did you create an appropriate portfolio within the account
    • Behavioral finance – did you try to time the market, chase a rate of return, or avoid a market drawdown?  As you can tell by the wording, none of those tend to be in your financial interests.

What’s the bottom-line(s):  

  • Don’t just focus on the surface-level math, but dig deep into the variables that impact your personal strategy (including non-financial)
  • While real estate in this example, and many others, may produce a higher college savings balance, it comes with a lot more work and requires a large lump sum payment up-front
  • Research and seek out the expertise you need to execute both options efficiently

Thank you very much for your detailed analysis, Erik. I have benefitted from Erik’s financial guidance for many years and would encourage anybody with questions about college savings or other financial planning decisions to reach out to him at erik@taylorfinancial.com.

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.

Construction Underway on 40 New Toll Brother Homes

Question: Do you have any information on when the Toll Brothers community in Dominion Hills will be for sale?

Answer: Construction is underway on Toll Brothers upcoming 9.5 acre community, The Grove at Dominion Hills, a massive (by Arlington/inside-the-beltway standards) development of 40 brand new detached homes that will start around $2M, formerly the site of the historically significant Febrey-Lothrop property.

As of Monday, March 13 they were fully framed and under-roof on their model and one of their “quick-move-in” homes, with a third in foundation, and a fourth getting ready for foundation; all along the existing N Madison St.

What I Know/Expect

Toll Brothers is as tight-lipped as it comes about new developments until their official public releases, but here’s what I know/expect:

  • The community will include 40 new single-family homes
  • Lot sizes will clock in around 60ft wide and about 8,000 SqFt (just over 1/6th of an acre), which is about 5% smaller than the average Arlington lot and about 10% bigger than the median Arlington lot (as we know from this column on Arlington lot sizes)
  • I expect home sizes to range from about 3,500-5,500 total finished square feet depending on lot dimensions and options
  • I expect most or all homes to include a two-car garage with either basement and main level entry depending on lot topography
  • Toll Brothers will offer a combination of “quick move-in” homes with pre-selected options/finishes and semi-custom homes that allow buyers to choose from a pre-determined selection of elevations (exterior design), floor plans, options, and finishes
Site Plan from the Dominion Hills Civic Association website

Details and Sales Opening Expected 2023

Toll Brothers is careful to not release pricing, floor plans, or most details about a project until their chosen public release date which is currently projected to occur in late summer 2023. Details will get released for the first time on their website with a community webpage. Sales are currently projected to start at the end of 2023, but that timing could easily move up or back depending on market conditions and work progress.

Toll Brothers determine their sales process based on market conditions and you can expect a multi-phased release, with prices increasing with each release (standard practice for new communities). Toll Brothers often use a combination of option incentives and preferred lender incentives to drive demand, which smaller builders do not offer.

In my experience, they usually implement an appointment system on a first-come, first serve/meet basis. Those who register online for an appointment first, can schedule the first appointments with a sales rep and have the chance to lock in lots early so interested buyers should go into those meetings prepared to put down a deposit.

Recently, and controversially, Toll Brothers implemented a blind auction system for lots at Arden, their luxury community in Great Falls. They set a starting price for a lot and had buyers submit forms stating how much they were willing to pay for the lot and what they wanted to build on it then chose the winner (presumably based on the highest lot bid).

If you’re an interested buyer, take advantage of the time between the public information release and the sales opening to learn as much about the community as possible, figure out what lots you prefer (note that the best lots usually come with a steep lot premium), compare your options with Toll Brothers to other new build opportunities, and be ready to make a decision with a lot-hold deposit at your first appointment.

What Will the Homes Looks Like?

In my opinion, Toll Brothers has some of the best-looking homes (exterior and interior) and smartest floor plans of any of the national/regional builders. I often reference their plans, options, and designs for inspiration on local new build projects.

Each of their communities gets a unique set of elevations (exterior design), plans, options, and selections to fit the local community, price point, lot dimensions, etc so we won’t know what we’re getting at The Grove at Dominion Hills until they release the community website, but I did my best to give interested buyers an idea…

The following image is posted in a Dominion Hills Civic Association article about the community, and I assume it was provided to them by Toll Brothers during a community meeting. The Randolph model looks to be a clear match to one of the two homes currently framed and under-roof that I took photos of above.

Local communities that may have a similar design aesthetic to The Grove:

While the above communities may have a similar design aesthetic, they are all being built on sites with much larger lot sizes so you’ll get wider homes with different floor plans. I searched nationally for other Toll Brothers sites that have smaller, more narrow lots like we’ll see at The Grove to try to find some examples of what the floor plans might look like:

How Will The Grove Impact the Market?

There’s no way to overstate the scale of this development in Arlington and the surrounding communities given how unusual it is to even see a development of 2-3 detached in Arlington, let alone 40. For reference, there have been 79 new construction homes sold (per MLS) for $1.9M-$2.5M in Arlington since Jan 2021 (26+ months). I will provide more in-depth analysis on this once more information is released by Toll Brothers later this year.

If you are interested in buying a home in The Grove or other new construction homes in the area, you can reach me at Eli@EliResidential.com or on my cell at (703) 539-2529.

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 Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.

Did DC Real Estate Prices Just Crash?

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.

Chart, bar chart, histogram

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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. 

Chart, histogram

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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.

Chart, line chart

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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.


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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%.


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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.