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.

Rent vs Buy: Data to Aid Your Decision

Question: How have rental prices and purchase prices changed in relation to each other over the last few years?

Answer: This is not going to be a column about whether you should rent or buy, there are plenty of those. Rather, I’m offering a data comparison of how rental and purchase prices and demand metrics in Arlington have changed in relation to each other since 2018.

We all know that both have gotten mind-numbingly expensive over the last few years, but there’s not really a third option (aside from crashing with Mom and Dad) so everybody is faced with the same decision of whether it’s a better decision/value proposition for them to rent or buy – hopefully this column helps with that decision.

Note: the rental data used below is limited to what is in the MLS, which is a limited data set of the Arlington rental market but it is more than enough data to allow us to capture an accurate reading of the rental market

Buy a Condo, Rent a House?

Since 2018, the average price of a single-family home has gone up by significantly more (+28.3%) than the average cost of renting a house (+20.7%) in Arlington (note: this does not take mortgage rates into consideration) whereas the average cost of renting a condo (+12.9%) has gone up much more than the average cost of buying a condo (+8%) during that time.

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Another way of looking at the price relationship between sale prices and rental rates is to look at the multiple of the average cost to buy compared to the average cost of a 12-month rental. Using the table below, we learn that condo prices are the cheapest they’ve been since 2018 relative to the cost of renting, which may very well be due to high mortgage rates pushing more demand towards renting and away from buying condos.

We can see a modest decrease this year in the cost of buying a house relative to renting, after five straight years of that multiple increasing. This is also likely due to mortgage rates shifting more demand than usual towards renting.

The other key takeaway from the table below is just how much more it costs to buy a single-family home relative to renting one in comparison to buying vs renting a condo.

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Renting Ain’t Easy

Unfortunately for those fed up with purchase prices, high mortgage rates, and low inventory for purchase, deciding to rent isn’t exactly an easy way out. Not only have rents increased significantly since 2021 — by 10.5% for single-family homes and 15.1% for condos (yes, it’s higher than the increase since 2018 because rents fell in 2020 and 2021) – but the rental market has gotten much more competitive in that time with properties renting more than twice as fast as they did in 2019 and about six times faster than they did in 2018!

The demand metrics below show just how competitive the rental market has gotten over the last two years, because of higher prices and mortgage rates pushing more demand towards rentals. For reference, depending on the season and type of property, about 40-60% of homes for sale go under contract within seven days and usually sell for 99-101% of the original asking price.

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How to Use this Data to Decide on Buying vs Renting

The data in the first section suggests that the smart financial decision is to buy a condo and rent a house, right? No, not really. This data isn’t meant to answer your buy vs rent question, rather it can be a helpful input amongst the many other considerations that factor into which decision is right for you/your family.

For example, you may walk away from this column feeling that renting a house is a better financial decision, but the reality of renting a single-family may not actually work for you – it’s harder to find what you want from a rental, you give up a lot of control over the home’s maintenance and condition, you may not be able to live there as long as you’d like, etc.

Condos (and apartments) are a different story though, you have significantly more options from individually owned condos to commercially managed apartment buildings and there a fewer maintenance and condition issues that might negatively affect your day-to-day living and enjoyment of the property.

At the end of the day, the decision to rent or buy should include a wide range of factors and be based on your individual situation, not the opinion of one or two people in the business of making content or who financially benefit from your decision. I do think that a mistake many people make is that once they’ve owned a home, they never consider renting as an option again. I think that for every move you need/want to make, you should give serious consideration to both renting and buying, allowing yourself to revisit assumptions you’ve made, challenge your reasoning, and consider current market conditions.

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.

Hidden Pitfalls in Rental Agreements and Leases: Protecting Your Interests as a Renter or Landlord

Question: Do I have to use my Property Manager if I sell my house?

Answer: This is more of a PSA post than anything else. If you’re a landlord or tenant, it’s crucial to pay attention to the fine print in agreements, especially regarding a future property sale. It’s common for Property Managers or Agents to include language that gives them the right to list your property if you choose to sell it or gives them a right to a commission in the event it sells during the rental period, to the tenant or somebody else.

Property Managers With Exclusive Right to Sell

Watch out for language granting property managers or agents exclusive rights to list your property if you decide to sell. This exclusivity restricts your options and flexibility, limiting your ability to explore alternative selling methods or use the agent of your choosing.

Required Commission Payments

Be aware of language stipulating a commission to property managers or agents if you sell your property to the tenant or another buyer during the rental period. Landlords might be obligated to pay a commission, even if they find an alternative buyer or wish to handle the sale independently. This financial burden can significantly impact both parties.

What If an Exclusivity or Commission Clause Exists?

Like most things in a contract, these clauses are negotiable. If you see something that you believe binds you to certain actions or payments in the event of a sale, ask about it and work to ensure you have the most flexibility if a sale does take place. You may not plan to sell when you sign the paperwork, but life happens and priorities change.

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

If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to Eli@EliResidential.com. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at (703) 539-2529.

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.

2022 Arlington Mid-Year Condo Review

Question: How did the Arlington condo market perform in the first half of 2022?

Answer: It has been quite a ride for the Arlington condo market over the past four years!

After a long stretch of relatively little appreciation from ~2013-2018, the condo market surged on the November 2018 news of Amazon HQ2 and then flatlined when COVID lockdowns began in the spring of 2020. Beginning in the summer of 2020, condo inventory flooded the market in record volume, causing the market to soften and prices to drop.

Conditions were improving by the summer of 2021 as demand picked up. By early 2022, competition return to the market with more multiple offers and escalations. The competition didn’t last long, as the entire housing market began to slow due to high interest rates and worsening economic conditions.

After much volatility in the condo market since late 2018, I think we are finally seeing signs of the market finding its natural balance — moderately favorable for sellers, while providing buyers with a range of options and the occasional opportunity for a discount.

Let’s look at the stats behind the first half of the 2022 Arlington condo market… 

Pace of New Inventory Evens Out

From 2013-2018, the Arlington condo market averaged ~500 and ~700 new listing in the first and second quarter, respectively. Those numbers dropped off a cliff in 2019 and 2020 because people chose to hold properties because of Amazon’s announcement (Q1 2019-Q1 2020) and then held in Q2 2020 because nobody knew what to do when COVID hit. Then the pace of inventory surged at a record-shattering pace from the summer of 2020 through the end of 2021.

Inventory levels finally came down to earth, closer to their 2013-2018 averages, with 576 and 651 new condo listings in the first and second quarters of 2022, respectively.

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Supply/Demand Levels Back to Normal-ish

With the easing of new inventory volume and demand coming back to level, Months of Supply (a measure that combines supply levels with the pace of demand) has returned to levels more in-line with pre-Amazon years and what I would consider to be the Arlington condo market’s natural balance.

Housing economists consider six months of supply to be a truly balanced market for buyers and sellers, but we rarely see a sub-market around here that gets close to six months. 1.5-2 months of supply is a favorable market for sellers, but it usually takes less than one month of supply for multiple offers and escalations to become a common occurrence. 

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Demand Metrics Tell Similar Story

The return to balance is showing up on the supply and demand sides of the equation, although demand seems to be marginally stronger that it was pre-Amazon announcement, which I’d attribute to how expensive townhouse/single-family properties have gotten lately, driving more demand towards less expensive condos.

What we can see from the chart below is that the speed of the market, measured by the percentage of properties going under contract within the first ten days, has improved over last year but has fallen well below 2019/2020 levels. The same goes for the percentage of properties selling for at or above the asking price.

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Good Half-Year for Two-Bedroom Condos

All pricing data points to the first half of 2022 being a great year for two-bedroom condos and an okay year for one-bedroom units. Here are some key pricing data points:

  • The median price of a two-bedroom condo increased 11.7% to $550,000 in the first half of 2022 compared to the first half of 2021
  • The median price of a one-bedroom increased 3% to $380,000
  • The average price of a two-bedroom increased 15.7% to $620,616 compared to 3% to $381,220 for a one-bedroom condo
  • On a $/SqFt basis, two-bedroom condos increased 7.4% to $517/SqFt compared to 2.8% to $497/SqFt for one-bedrooms

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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 Ask Eli, Live With Jean playlist.
Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH @properties, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.

Should Your Condo Building Have a Rental Cap?

Question: Do you think it is a good idea for our condo board to consider setting a cap on the number of units that can be rented at a given time?

Answer: One of the most common debates within condo buildings is whether an Association should limit the number of condo units that can be rented concurrently. There are some benefits of limiting the number of owners who can rent out their unit(s), but I think it’s the wrong decision for most buildings because it can hurt property values and is unnecessary, in most cases.

For the sake of clarity, when I refer to rental/investor units in a building, I am referring to individual unit owners renting their unit(s) out to tenants instead of occupying it themselves (they are considered investors).

Lending Misinformation

There is a lot of misinformation out there about how the number of rental units in a building effect the warrantability of a building (ability of future buyers to secure a mortgage). Here are the limits you need to be aware of:

  • Fannie/Freddie Loans: Conventional loans backed by Fannie Mae/Freddie Mac do not have any rental limits for primary and secondary home loans. They limited the number of rentals in a building to 50% for investor loans only.
  • VA (Veterans) Loans: No rental limits. The VA does not like seeing rental caps and may not approve a building for VA loans if they do have rental limits in place.
  • FHA Loans: FHA loans are restricted in buildings with more than 50% of units rented. FHA loans represent a small percentage of the loans written in this area.
  • Jumbo/Private Loans: High balance loans (over $970,800 loan amount), not insured by Fannie/Freddie, have a wide range of guidelines. Some have rental restrictions and others don’t, but in general jumbo/private loans tend to have more conservative lending guidelines and a higher chance of restricting a loan due to the number of units being rented. However, many banks will make exceptions, especially with higher (30%+) down payments and there are many alternative lending options in the jumbo/private arena a buyer can choose from.

Pro: Better Quality of Living

Owner-occupants generally invest more in their home, take better care of common areas, and take more pride in developing a strong social community. In small associations or those intent on maintaining a certain standard of living, quality of living may prevail over property value.

Cons: Buyer Turn-Off, Forced Sales

Many buyers want to keep their options open to renting a unit out after they are done using it as their primary residence and are turned off by the idea of a rental cap and plenty will not buy in a building if there is a cap, even if it’s unlikely to be reached. By turning otherwise motivated and qualified buyers away, you’re bound to hurt the market value of units in your building.

If a rental cap is reached and enforced, it can hurt market values even more because homeowners are forced to sell if they move out and a forced sale may result in a homeowner agreeing to take a worse deal when they would have otherwise chosen to rent the unit until they can sell into a strong market.

Track Rental Activity in Your Building

Even if you do not have a rental cap, it’s still important to track which units are being rented out. At a minimum, your Board/Management should receive a copy of each lease and keep a basic spreadsheet to be able to report on which units are being rented. In my experience, I have found that most buildings in Arlington settle into a rental percentage of 20-35%. For some buildings, like those in the heart of Clarendon, I see higher rental percentages, sometimes exceeding 50%.

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

If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to Eli@EliResidential.com. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at (703) 539-2529.

Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.
Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH @properties, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.

Are You Considering Operating a DC-area Airbnb

Question: What are the local laws governing short-term rentals in the DC area?

Answer: I hope you had a great Fourth of July holiday weekend! Some of you may have stayed at an Airbnb this weekend and come back with grand plans of buying your own investment property to rent out.

If you’re considering purchasing an investment property for short-term rentals (STR), like Airbnb, one of the most important things to research early on are the local laws governing them. With all the tourism to the DC area, a short-term rental property can be quite lucrative, but most local governments in this region have laws in place to prevent properties from being used exclusively for short-term rentals and thus limit your expected returns.

It’s also important to know that short-term rental restrictions from Homeowner, Condo, or Cooperative Associations take precedent over any local laws and it is extremely rare to find an Association that allows for any rental period less than 6 or 12 months.

Short-term rentals are defined as properties rented out for less than 30 consecutive nights to the same renter.

I compiled a list of the local STR laws in the greater DC area and summarized them below with links to the government websites where the information is detailed:

  • Arlington County: Allowed in units used by the owner as his/her primary residence (the owner occupies the unit at least 185 days of the year). Cannot use detached accessory dwellings for short-term rentals.
  • Washington DC: Unlimited rentals if the property is owner-occupied during the rental (rental is for partial use of the home), limited to 90 nights of rentals per calendar year for properties that are not owner-occupied during the rental (renter has full access to the entire property). DC also requires an assortment of licenses, certifications, and fees.
  • City of Alexandria: Unlimited rentals during a calendar year and no restrictions on owner occupancy. Properties can be owned and used solely for short-term rentals. City of Alexandria charges an additional 8.5% Transient Lodging Tax for properties that sleep 4+.
  • City of Falls Church: I could not find any official guidance from the City of Falls Church on short-term rentals and am led to believe there are not currently any restrictions or additional taxes
  • Fairfax County: Limited to 60 nights of rental bookings per calendar year, with no reference to owner occupied vs unoccupied. Detached accessory dwellings cannot be used as STRs. No more than six adults can stay in a single property. Additional Transient Tax charges apply.
  • Loudoun County: It seems that Loudoun County is still drafting their short-term rental policies, with the last official write-up I found referencing a February 2022 public hearing and draft amendment. The County’s zoning currently does not allow short-term rentals, but a hold has been put on enforcement until a policy can be finalized.
  • Montgomery County: Limited to 120 nights of rentals if the home is not occupied by the owner during the rental and unlimited rentals if the home is owner-occupied during the rental. No more than six adults can stay in a single property.
  • Prince Georges County: Limited to 90 rental nights per calendar year if the property is not owner-occupied during the rental and limited to 180 rental nights per calendar year if the property is owner-occupied during the rental.

Owning and operating a short-term rental can be very lucrative, but it’s important to understand that residents and local governments are still in the early stages of defining how their communities want to support or restrict STRs. Before making a significant investment in a property for STR income, get fully informed on current laws/taxes, research the mood of residents and politicians on STRs, and incorporate the risk of law/tax changes into your investment decision.

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

If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to Eli@EliResidential.com. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at (703) 539-2529.

Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.
Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate | @properties, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.

Arlington Rental Market Update – Single-Family, Townhouse, and Apartment

Question: Have rental prices in Arlington followed a similar trend as the ownership market?

Answer: The rental market for apartments was hit hard during the pandemic with rental rates dropping roughly 15%-20% in Arlington and the DC Metro, but rents quickly climbed back up last year and seem to be stabilizing.

As you would expect, the pandemic had the opposite effect on the detached and townhouse rental markets, sending those prices up, but at a lower rate than the appreciation we’ve seen in the cost to buy.

Below, I’ve compiled rental data from the MLS in Arlington over the last five years. Note that very few commercial apartment buildings list in the MLS so this data is limited to non-commercially owned rentals (for apartments, that is mostly individually owned condos).

Further, it’s difficult to say what percentage of non-commercially owned properties go through the MLS for rent but I would guess that it’s less than half of rented apartments, but likely a majority if detached and townhouse properties. Despite the limited data set, we still have more than enough information available through the MLS to generate outputs that represent the true rental market.

Here are some highlights from the data table:

  • The total number of rentals that came to market in 2021 increased sharply over previous years with 48.8% more apartment rentals and 24.9% more detached/townhouse rentals, compared to the averages over the previous four years.
  • The increase in rent for 3-4 bedroom and 5+ bedroom single-family homes from 2019-2021 was 6% and 12.7%, respectively
  • In 2021, the average tenant for a single-family or townhouse paid at or over the asking price
  • Rental prices for 3-4 bedroom townhouses is nearly identical to those of 3-4 bedroom detached homes
  •  The average rent for a one-bedroom and two-bedroom condo is down from 2019 highs by 5.7% and 3.2%, respectively

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

Best and Worst Months to List a Rental

Question: What time of the year is most and least favorable for putting a property on the market for rent?

Answer: The rental market follows similar seasonal trends as the resale market in that spring tends to be the best time to list a property and the market is slowest during the winter months. For this market analysis, I looked at all rentals in Arlington from 2015-2019 (I kept 2020 out because it’s an anomaly) to determine how the month a property is listed for rent impacts a landlord’s negotiation leverage and the days on market. I split the data into apartment-style properties and detached/townhouse properties to see if there was much variability, but the trends are similar for all property types.

Best Months to List: March – July

Worst Months to List: September – December

The data I looked at to determine the best and worse months are the percentage of the final rental price to the original asking price (indication of how much leverage landlords have), the average days on market, and the percentage of properties rented within two weeks of being listed for rent. These data points provide some of the best indications of how successful you will be renting a property at different times of the year.

While there are clearly certain months of the year that are better/worse to rent, I think it’s also important to note that the gap between the best and worst month(s) is not massive, but it’s enough that landlords should work to put themselves on a spring/early summer leasing cycle and avoid signing leases that expire in the late fall/winter.

If you are a tenant, you can expect the most properties coming to market from May – July and a dramatic reduction in options from October – December.

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

COVID Impact on Arlington’s Rental Market

Question: How has COVID impacted Arlington’s rental market?

Answer: Recent articles have shed light onto just how much COVID has hurt the apartment rental market in the DC Metro, including this article on rents dropping by 14% in Arlington and this article on rents in DC’s Class-A high-rise buildings dropping ~18%.

I have certainly experienced the difficult rental market in the last 10 months with clients who have struggled to find new tenants for their condos for months, even after significant price reductions. In some buildings, there are double-digit numbers of condos being offered for rent, with little interest.

I have also spoken to many condo owners who are turning to selling units after months of vacancy trying to rent them out, which is one of the reasons for last year’s explosion in condos listed for sale.

I took a look at last year’s rental market for apartments, townhouses, and single-family homes and compared it the previous four years to see how each sub-market performed. There’s a summary of key findings below and a detailed data table to follow.

Note that this only includes properties in Arlington that were rented through Bright MLS. Most commercial rental buildings do not use the MLS and not every homeowner with an investment property rents through the MLS, but the number of properties rented through the MLS is enough to make this statistically reliable data.

Key Findings

  • Condo rentals dropped in price for studios (-10.2%), one-bedrooms (-4%), and two-bedrooms (-1%). If you remove January and February (pre-COVID) listings, the price drops increase further. I suspect 2021 will see an even larger drop in rental prices because many owners are still trying to find a tenant.
  • The average time to rent a unit increased by 50% to two months and tenants negotiated significantly further below the asking price than ever before.
  • Two-bedroom units struggled, but not nearly as much as studios and one-bedrooms units, likely because the 2nd bedroom provides a much-needed home office.
  • COVID had the opposite effect on single-family and townhouse rentals with prices increasing to all-time highs, homes renting faster than ever before, and owners securing prices closer to their asking price than ever before.
  • Rentals of small two-and-three-bedroom houses and large four-bedroom townhouses were in the most demand, with average days on market just 3.5 weeks and some of the highest rental price to asking price ratios of any property type.
  • I expect single-family and townhouse rentals to have an even better 2021 (from the perspective of the homeowner) as people continue trying to get more space, avoid common living, and find buying those homes to be cost-prohibitive and/or too difficult (competitive).
Year ListedAvg RentAvg $/sqftAvg Rent $ to Ask $Avg Days on Market# Listed
One Bedroom
Two Bedrooms
Two Bedrooms
Three Bedrooms
Four Bedrooms
Five Bedrooms
Two Bedrooms
Three Bedrooms
Four Bedrooms

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

Question: What is the role of Business Improvement Districts in Arlington?

Answer: The Business Improvement Districts (BID) of RosslynBallston and Crystal Citydeserve much of the credit for turning these neighborhoods from convenient places to work to lively, family-friendly places to live.

Funded primarily by businesses located in the neighborhoods they represent, BIDs are an important bridge between residents, businesses and local government. Homeowners located in or near any of these BIDs can thank their leadership teams for increasing the value of their homes.


As a long-time Rosslyn resident, I have watched as Mary-Claire Burick and her team at the Rosslyn BID have transformed Rosslyn over the last five years.

I reached out to her for an interview to answer some questions about the role of BIDs in the community and how residents can take advantage of their influence on local government and business investment. Thank you Mary-Claire!

What is the role of a BID, and what role does the Rosslyn BID play in the community?

Business Improvement Districts are nimble organizations that wear a lot of different hats. In Rosslyn, we work on urban planning, transportation and business and community engagement, just to name a few.

But I think one of the most important roles that we play is that of a convener who brings together the perspectives of various stakeholders in our neighborhood –including residents, businesses and county officials — to advance initiatives that will help our community continue to thrive.

We are in constant conversation with folks on the street, in our restaurants and in our business community to better understand not only what they love about Rosslyn but also what they want to see improved.

How does the Rosslyn BID engage with residents and visitors? 

As I mentioned, community engagement is one of our top priorities.

Probably our most visible presence on a daily basis is our Rosslyn Ambassadors Program. Our team is out on the street five days a week helping residents and visitors with directions and working to ensure our sidewalk and public areas are safe and clean. Be sure to say hello when you see them around the neighborhood in their purple shirts.

Our events are another important way that we connect and engage with area residents. In 2017, around 40,000 people attended more than 160 events that we hosted ranging from our popular Rosslyn Jazz Fest and Rosslyn Cinema series to lunchtime fitness sessions and pop-up concerts. Each one of these events represents a touch point for our team to engage with residents and employees in our region, and for interaction between these groups.

It’s that sense of community that these events help build that makes them so impactful.

What have been some of the BID’s most successful events?

Last year’s Rosslyn Jazz Fest was an incredible experience.

That event alone brought nearly 10,000 people to Gateway Park on one day, which was a record for us. The Rosslyn Cinema has long been a neighborhood favorite. Last summer, more than 20,000 people came out to catch their favorite movie. And it may surprise you, but Rosslyn is the largest pit stop for Bike to Work Day in all of D.C., Maryland and Virginia.

In 2018, we will continue to host these popular events, but are also introducing new activities and expanding others.

One example is the Rosslyn Farmers’ Market, which occurs weekly during the summer in Central Place Plaza. We’ve worked with FRESHFARM to introduce a new FRESHFARM Share program, similar to a community supported agriculture (CSA) program, to help bring more healthy food to Rosslyn residents and businesses.

I’d also like to point out that these events have a wider purpose and impact. They help bring thousands of visitors to Rosslyn who could one day be residents or tenants. And there’s an economic impact–restaurants and retail in Rosslyn usually see a boost in sales and exposure.

Some of the other local BIDs are Crystal City, Ballston and Georgetown. What are some of the most significant benefits of a community having a BID? Does a BID make sense for every community? 

From my perspective, there are a lot of benefits that a community can realize from having a BID. But simply having a BID alone isn’t enough. It’s important for all of the stakeholders to have a clear vision for what they want to accomplish, and to ensure a BID has the resources and buy-in to help realize that vision.

A BID with a distinct mission can be a leading driver of change for a community, serving as a liaison between government, businesses and residents. Residents, in particular, have a real opportunity to utilize BIDs to help create a viable, economically sustainable community that reflects their vision of the neighborhood.

How have new restaurants and retail spaces helped change Rosslyn? Are there any openings you are particularly excited about?

Restaurants and retail have been a critical part of Rosslyn’s transformation from a commercial area to a more vibrant, urban, mixed-use area. Between 2015 and 2017, 17 new restaurants opened in Rosslyn, adding to the more than 65 restaurants, cafés and markets within a ten-minute walk of the Rosslyn Metro. We’ve also seen more restaurants and bars staying open later, like Barley Mac, Quinn’s on the Corner and Continental.

This year, we’re looking forward to the continued evolution of Central Place, which is bringing multiple new restaurant offerings to the heart of Rosslyn. I think folks are going to be really excited to hear what they have in the pipeline.

We are also excited for the Central Place Observation Deck, opening this summer. This 12,000 square-foot-space will offer an unparalleled view of the Mall and the U.S. Capitol. Offering snacks and light fare, the Observation Deck will be the perfect place to bring out-of-town friends, a date or a colleague for an after work drink.

How can residents get involved with their local BID? 

Residents should utilize their local BIDs to advocate for what they would like to see in their community. Remember, a BID is there to serve the needs of a neighborhood’s residents as well as its businesses and visitors.

Residents can also get involved with their local BID by attending events, participating in community meetings and providing feedback on BID activities. Depending on an individual’s local BID, there may be opportunities to volunteer or be a community ambassador.