Question: I have read articles about the 22202 zip code suggesting everything from extreme appreciation to homes now selling for pre-Amazon prices. Can you shed some light on what’s actually happening in that market?
Answer: After months of articles about extreme appreciation in 22202, the Amazon HQ2 zip code making up neighborhoods like Crystal City, Pentagon City, Aurora Highlands/Hills, and Arlington Ridge, there was an article published last week by the Washington Business Journal claiming that prices are now below pre-Amazon HQ2 announcement levels. The supporting data was that median sold price in November 2019 was 12% lower than November 2018 prices.
This is yet another example of lazy reporting on Amazon’s impact on local real estate with the sole intention of generating clicks. First of all, if you use the average sold price instead of median, there was a 2.3% increase in prices from November ’18 to November ’19, not a 12% decrease. Second, with a drop in total sales from 30 in 2018 to just 12 in 2019, with prices ranging from $255,000 to $1,145,000, there’s just not enough data to draw any sort of reliable conclusion on market performance by comparing the two months.
To generate reliable real estate trends, you either need a lot of data points (sales) or drill into smaller data sets. With that said, let’s dive into some real analysis on how Amazon HQ2 has impacted residential real estate for its new neighbors in 22202.
The 22202 market offers a diverse supply of housing. This year, condos have sold from as little as $195,000 for a 500sqft studio to $1,250,000 for a 2,900sqft 3BR/3BA penthouse. The least expensive detached home sold for $630,000 to be torn down and the most expensive a 6BR/4.5BA for $1,600,000.
Homes in the area tend to be pretty old with most detached homes being built prior to the 1960s and only one condo building has delivered since 1990.
Of the 135 homes to sell so far in 2019, 76 were in condo buildings, 47 were detached homes, and 11 were townhouses.
Inventory levels in the 22202 condo market took a huge hit, dropping 40% from 130 sales in 2018 to just 76 in 2019 (with two more scheduled to close in 2019). The decline is attributed to owners choosing not to sell (holding out for more appreciation), certainly not lack of demand.
As a whole, the average sold price in the 22202 condo market increase 22.8% ($402k to $492k) and median price increased 18.6% ($379k to $450k) for properties that went under contract after Amazon’s November 13 HQ2 announcement.
However, don’t think individual property values appreciated ~20%. The entire market is skewed higher because of a big drop-off in less expensive studios (60% decline) and 1BRs (33% decline).
Let’s take a deeper look at how property values actually changed by looking at similar sales within comparable buildings. I’ve grouped all buildings along Arlington Ridge and Army Navy Drive, along Crystal Drive, and both Eclipse buildings so that we have larger sample sizes to compare pricing activity from within comparable buildings. I limited this data set to one- and two-bedroom units.
The percentages for each building group represent the change from properties sold in 2018 and 2019 that went under contract pre-Amazon announcement vs post-Amazon announcement (Nov 13 2018).
|Building Group||Avg $/Sqft||Avg Sold Price||Avg Days on Market||Avg Sqft||Avg Condo Fee||# Sold|
|Arlington Ridge – Army Navy||+7.9%||3.8%||-36.4%||-3.1%||1.3%||-9.5%|
There’s a ton of interesting information packed into this table, here are some of my key takeaways:
- The two groups with enough sales to offer reliable data, AR-AN and Eclipse, suggest actual appreciation of around 8% based on $/sqft. I think $/sqft is a better measuring stick than sold price in this case.
- Across all condo buildings, the average price of 1BR condos increased 9.8% and 2BR condos increased 12.1%
- Not shown in this table, but calculated elsewhere, is that the standard deviation of the average sold price increased by 49% and 72% in one-and-two-bedroom condos, respectively. This highlights the variability of pricing in the area and why it’s important to drill down into the data instead of just looking at overall average and median price trends.
- In my personal market assessment, by comparing individual sales of similar units, I believe actual property value appreciation in the 22202 condo market is 8-12% depending on factors like property condition, condo fees, bedroom count, and age of building.
- Sales activity increased significantly along Crystal Drive and decreased only slightly along AR-AN, as long-time owners saw an opportunity to sell condos that were previously difficult to unload due to building age and high condo fees. The 80% drop in days on market along Crystal Drive is incredible.
- I’ve said for years that I thought the Eclipse buildings (3600 and 3650 S Glebe) offer some of the best long-term value in Arlington/Alexandria, and I still believe that to be true even after Amazon price increases. It would be great if I listened to my own advice and bought an investment property there…
I’ll provide a similar analysis of the detached single-family home market in Part 2, but the next two Tuesdays are Christmas Eve and New Years Eve, so I may wait until January to publish it. If you have any questions about my analysis or you’re considering selling a condo in 22202 and would like some more specific analysis done of your property, feel free to email me at Eli@EliResidential.com.