Question: How much has the market changed in the last six months?
Answer: Sometimes I write columns for myself as the audience, this is one of them…I hope some of you find it as interesting as I do!
Four months ago, you couldn’t watch/read the news without hearing about the collapsing real estate market but by late January, it was obvious that low supply would prevent that from happening. Demand even prevailed through February rate spikes because 2023 was the first year that new listing volume in February was lower than January.
Market Whiplash from Q4 ’22 to Q1 ‘23
It’s normal for the market to slow in Q4 and pick back up in Q1, but the change in market conditions from Q4 2022 to Q1 2023 was the most significant on record.
To get a sense of just how much of a shift we experienced between Q4 and Q1, I compared the key performance metrics of Net Sold (sold price less seller credits) to Original Asking Price percentage and the percentage of homes going under contract within ten days. I also compared all property types, condos, and detached/townhouse/duplex. Here are the highlights:
Buyers lost about 6.3% of negotiation leverage on non-condos since Q4. I think that percentage accurately represents how much the market value of most non-condo properties has changed in just a few months.
The performance data for non-condos is surprisingly similar for Q1 ’23 and in Q1 ’22, despite 2022 being the hottest market we’ve ever experienced.
Market pace in Q4 was really slow, with less than 1/3 of non-condos going under contract within ten days. In Q1 that number has jumped to almost 71%.
The condo market in Q1 ’23 is notably more competitive than it was in Q1 ’22, despite last year’s favorable market conditions (low rates). It took buyers a while to put the pandemic-led resistance to condos behind them, but it’s now clear that condo demand has returned.
Looking ahead, it doesn’t seem like there’s any supply relief in sight, with new listing activity trending at 10-20+ year lows so even moderate demand will create upwards pressure on prices and a fast-paced market. However, you can expect demand to ease up as summer approaches and you can always count softer demand in Q4.
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.
If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to Eli@EliResidential.com. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at (703) 539-2529.
Video summaries of some articles can be found on YouTube on the Eli Residential channel. Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH @properties, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.
Question: 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:
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.
Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.
Question: Do you think the Amazon HQ2 development pause will cause home prices to fall in Arlington?
Answer: News broke Friday morning that Amazon will pause a majority of their HQ2 development in Arlington (link) – three 22-story buildings and their centerpiece, the 350ft Helix building. So far, Amazon has built two office towers and hired roughly 8,000 of the planned 25,000+ workers projected for HQ2.
The announcement of Amazon HQ2 in November 2018 led to a speculative boom in condo prices, so will this news cause a similar drop in prices?
Amazon HQ2 Led to a Condo Price Boom
The Amazon-effect was massive when Amazon announced its intention to build its second headquarters in Arlington VA on November 13 2018. The condo market went from a multi-year annualized appreciation of less than 1% to an 11.7% increase in 2019, which was only slowed by COVID lockdowns in March 2020.
The non-condo market was appreciating nicely in the years leading up to the announcement and experienced a much smaller boost than the condo market.
Note: this data defines “condo” as multi-family/apartment-style condos, not townhouse-style condos (e.g. Fairlington)
Months of Supply (MoS), a measure of supply and demand where lower MoS means a more favorable market for sellers, fell off a cliff as soon as Amazon announced HQ2. I’ve always found this chart to be one of the best visual explanations of how immediate and extreme the Amazon-effect was on our market.
Prices Should Fall, If Real Estate Markets Were Efficient…
Given that prices increased speculatively in 2019 because of the announcement, not actual development and hiring, hypothetically, real estate prices should fall relative to the risk that Amazon cuts, materially reduces, or significantly delays their HQ2 plans.
This should probably look something like the JBG Smith (Amazon’s development partner) stock price, shown below, which dropped about 8% on Friday, after Amazon announced they were pausing HQ2, and has recovered about half of that price drop since, finishing Monday down just under 5% from Friday’s pre-announcement price.
Just for fun, I compared the difference in average condo prices if you replace the 2019 HQ2-driven “speculative” gains with the average annual appreciation of the Arlington condo market for the three years before and after (0.8%) and keep the actual 2020-2022 gains. In this hypothetical world where Amazon doesn’t choose Arlington for HQ2, condo prices would be 11.5% below their current levels.
…But Prices Will Probably Hold
In a hypothetical world where real estate prices react like the stock market, which is efficiently priced by sophisticated models and highly informed institutional investors, we might see condo values fall by an amount that captures what is already built and the impact of a multi-year delay, and discounts for the odds that Phase 2 of HQ2 never proceeds or proceeds only partially. This would probably amount to something like a 4-5% decline from current prices or a loss of roughly 30-40% of the “speculative premium” currently priced into the market from 2019.
But, unlike the stock market, the real estate market is relatively inefficient, at least on a small scale like the Arlington condo market. Prices are set by a handful of individuals – about 1,400 condo sales in Arlington over the past year compared to over a million shares of JBG Smith traded on most days – and those individual buyers and sellers have uniquely different priorities with different factors like emotion, motivating life circumstances, property condition, etc.
Real estate prices tend to be stickier than other markets with just a couple of past sales creating a strong resistance point for buyers and sellers so it’s unlikely we will see a noticeable drop this year in prices because of Amazon’s pause on HQ2. I also suspect that there are a lot of people who will buy and sell without knowledge of the HQ2 pause, who assume that everything about HQ2 is on track; another example of the efficiency difference in pricing of stocks (highly informed) vs residential real estate (information gaps).
Prediction: No Price Drop, Just Lower Appreciation
My guess is that the HQ2 pause will lower long-term appreciation (which is historically pretty low) for Arlington condos until we find out Phase 2 (development and hiring) is back on track, but I do not think we’ll see a near/mid-term drop in prices undoing the sharp increase after HQ2 was announced. The exception to this is the 22202 zip code of Pentagon/Crystal City (aka National Landing), where HQ2 is based, which might see condo prices slide slightly in 2023 because of the news.
Your thoughts and predictions are welcome in the comments!
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.
If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to Eli@EliResidential.com. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at (703) 539-2529.
Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH @properties, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.
Question: I found data that shows housing prices in DC are back down to the 2018 levels but anecdotal evidence suggests they are not. Can you explain whether the data I found is accurate or something is off?
Answer: The median price ($545,500) for homes sold in January ’23 in Washington DC showed a 15.4% year-over-year drop and was the lowest median price for any month going back to January ’19.
Did DC Lose Four Years of Appreciation?
Given the economic and real estate climate since this summer, with endless headlines about market corrections, it would be easy to interpret the latest DC median price data as proof that the bottom is falling out of the real estate market. Unfortunately for our bear-market prognosticators, or those waiting for a market crash to buy property, the chart above is misleading and not representative of the actual market.
The drop in median price is due to an unusual data set and does not mean that real property values have fallen 15.4% year-over-year and/or lost four years of appreciation.
How The Data Steers Us Wrong
Real estate data can be tricky to use correctly (aka draw accurate conclusions) so if you want to make data-driven decisions, make sure you are leveraging the right data and working with somebody who understands the strengths and weaknesses of real estate data in your local market. Here’s why the January median Washington DC pricing data steers us wrong…
Timing: Pricing data lags by about 30-60 days, meaning the pricing data published in January is mostly made up of contract activity in November/December and is thus an indication of what happened in the market, not what is happening in the market. November and December are traditionally the slowest months of the year, with the least demand and lowest volume of homes being listed for sale. Sellers during this time of year also tend to be under more pressure to sell.
Combine that with the market deceleration in the 2nd half of the year due to rapidly rising interest rates and it made for an unusually slow real estate holiday season.
By the time the January pricing data was published in early February, market demand had already picked up significantly.
Sales Volume: Only 352 homes sold in DC in January compared to the 10-year monthly average of 718. Other than December ’22 (432 sales), no other month for the past 10+ years had registered under 450 sales and only five months registered less than 500 sales.
The unusually low sales volume means that the median price data can be skewed by unusual balances of less (or more) expensive homes in a given month, which is why most January pricing data comes in much lower than other months and why January ’23 was such an extreme version of that scenario.
There were just 46 single-family homes in the January data. As you can see from the chart below that shows the number of sales by price points, the distribution of sale prices skewed significantly lower in the January data with a big drop in the number of $1M+ homes sold but a more consistent number of homes under $600k sold. This leads to a much lower median price, but doesn’t mean home values are dropping, just that fewer expensive homes were sold.
Average Price: The chart of monthly average prices tells a different story about price trends, showing a clear upward trend since 2019/2020. However, as you can see, using average price presents its own set of data challenges because of how much variability there is on a month-to-month basis based on the type/balance of sales included in the data for any given month.
Buyers Still Won During Q4
I’ve shown a bunch of reasons why the low median price for January sales wasn’t an accurate representation of the market (home values not down 15.4% year-over-year or to 2018-2019 levels), but I should still point out that it was objectively a more favorable time for buyers to negotiate better deals, just not to the tune of double-digit price drops.
The average home that sold in December ’22 and January ’23 sold for 4.2% less than the original asking price, which is pretty good when you consider the average home in the spring of ’22 was selling for nearly 1% over ask. In my opinion, this is the best measure of how much home values actually dropped from spring ’22 to November/December ’22, which is likely about 5%.
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.
If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to Eli@EliResidential.com. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at (703) 539-2529.
Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH @properties, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.
Like the rest of the housing market, the condo market started the year off strong due to low interest rates and a return to more normal condo buying habits, after the flight from condos seen during the ’20-’21 pandemic years. Despite the interest-rate driven slowdown in the second half of the year, the aggregate performance of the condo market in 2022 was flat to slightly up, depending on how you look at the data.
The Condo Market Has Returned to Normal…
What is a normal condo market in Arlington? It’s hard to remember what a normal condo market looks like because we haven’t seen one since ~2017/2018. The market went red hot at the end of 2018 after the Amazon HQ2 announcement until being frozen by COVID in early 2020 and then from summer ’20 through 2021we saw a flood of condo inventory hitting the market as people left for more space, which kept prices from increasing like the single-family and townhouse market.
So what is normal? Normal is about 1-2% annual appreciation and an average over 30-45 days on market. When you strip out the gains related to more expensive new construction condos being sold and just look at resales of existing condos, you’ll see that the long-term norm for Arlington apartment-style condos is a modest 1-2% annual appreciation.
…Except Inventory Levels
However, there are some signs that we might see stronger appreciation in 2023/2024 due the supply of condos for sale trailing well behind the 10yr average. The chart below highlights just how extreme the transitions were into the post-Amazon HQ2 announcement market (Nov ’18) and then into the COVID market. With a very weak pipeline of new condo deliveries in Arlington, supply will come from an already limited inventory of existing condos for sale and should create some upward pressure on pricing.
Data Highlights and Analysis
The following data is for apartment-style/multi-family condos (aka buildings only, exlcuding townhouse-style condos like you see in Fairlington) and does not include age-restricted condos (The Jefferson) or Coops (Riverplace). All prices are based on net sold price (purchase price less any seller-paid closing cost credits):
The average price of an Arlington condo increased by 2.6% to $502,000 and the median price increased 1.7% to $427,000. If you remove new construction sales from the data, the average price increased by only .6% to an average price of $463,000.
The average 1BR condo increased .1% with new construction included and .7% without new construction included. The average 2BR increased 5.4% with new construction as opposed to just 1.3% without new construction (2000 Clarendon had a lot of 2BR units).
Since 2018 (five years), condos have appreciated by just 10-20%, depending on the sub-market you’re looking at and data you’re using, and almost all of that growth came in the ~12-14 months between the Amazon HQ2 announcement and COVID lockdowns. That appreciation drops by almost half when you remove new construction from the data. Single-family homes have appreciated about 2-3x+ faster over the last five years.
Most of the 5yr price appreciation of the 2BR and North Arlington market segments is due to higher priced new construction buildings that have come online during that time and not actual price growth. When removing new construction, the 5yr growth for a 2BR drops from 20.1% to 10.5% and for North Arlington from 18.1% to 9.9%.
Over the past five years about 2% of condo sales have been studios (no legal bedroom), 39% 1BR, 51% 2BR, 8% 3BR, and ~.5% have been 4+BR.
“Standard” Condos in Rosslyn-Ballston Corridor Haven’t Budged
A lot of similar condo inventory was built in the early 2000s along the Rosslyn-Ballston corridor so it gives us a unique opportunity to look at a large, relatively similar data set. The chart below looks at net sold prices of 650-800 SqFt 1BR and 900-1200 SqFt 2BR condos that were built between 2000 and 2010 along the R-B corridor. This sub-market makes up about 11% of total condo sales in Arlington over the past five year.
Since the Amazon HQ2 driven appreciation from 2018-2019, the value of these condos has barely moved and in the case of the 2BRs, the average net price has actually fallen slightly each year since 2019. I expect appreciation to look better over the next five years, barring any jarring market forces like COVID.
Condo Market by Zip Code
The Rosslyn market, carried by luxury buildings like Turnberry, Waterview, Wooster and Mercer Lofts, Gaslight Square, and the newly built Pierce, is the most expensive zip code for condos by a significant margin.
For those looking to snag a piece of real estate near Amazon HQ2, condos in the 22202 zip code are still reasonably priced but come at a cost of the highest monthly condo fee per square foot in Arlington.
22207, one of the most expensive zip codes for single-family homes, is the second lowest $/SqFt of any zip code for condo purchases. This will probably be a deterrent for developers of Missing Middle who are considering building 5-6 unit multi-family buildings vs townhouse-style duplex/triplex properties.
If you’d like data pulled for a sub-market you live in or are considering buying into, don’t hesitate to reach out!
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.
If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to Eli@EliResidential.com. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at (703) 539-2529.
Video summaries of some articles can be found on YouTube on the Eli Residential channel. Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH @properties, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.
Question: How did the Arlington single-family housing market perform in 2022?
Answer: The 2022 housing market came in like a lion and left like a lamb. The way things were reported in the news, one may be led to believe the 2nd half of the year was a disaster, with home values crashing because of higher interest rates, falling stock portfolios, the Ukrainian war, and buyer fatigue.
The truth, at least locally, is that the aggregate of the first half/second half, yin and yang housing market was still marked by strong price growth across all single-family sub-markets (I’ll analyze the condo market next week).
Strong, Stable Growth Continues for Arlington Single-Family Homes (SFH)
Like a blue-chip stock, the Arlington housing market is reliably strong and stable. We didn’t experience the double-digit annual appreciation of other national housing markets from ’20-’22 but we also benefitted by excellent growth prior to the pandemic buying craze (Amazon HQ2 and overall strong local market conditions). You can also count on the likelihood of stable growth to continue even if other markets struggle as they transition out of their reliance on pandemic-buying and ultra-low interest rates.
The average and median price of a SFH in Arlington increase 4.4% and 7%, respectively
Over the last five years, the average and median price of a SFH in Arlington increased by 25.3% and 29.1%, respectively
The average buyer paid 1.9% over asking to purchase a home in 2022
Homes that sold within ten days of being listed sold for an average 5% over asking and 57% of homes sold in 2022 were sold within ten days
Low supply was a big driver in keeping prices elevated despite difficult second half market conditions. There were 30% fewer SFHs sold in 2022 than in 2021.
22205, 22201 Zip Codes Lead Growth
If we drill down into performance by zip code (note: 22206 and 22209 don’t have enough SFH sales to be included), we find some really good insights:
22204 is the only remaining zip code with an average price below $1M. It was only 2017 that the entire County’s average price was below $1M.
22201 extended its lead as the most expensive zip code to purchase a SFH, costing an average of over $100k more than the next most expensive zip code, 22213, and finishing the year with an average price of nearly $1.6M
22201 and 22205 experienced the most appreciation, with YoY increases of 9.3% and 8.2%, respecively. The next highest zip code, 22203, grew by 4.9%.
22205 was the most competitive/frustrating for buyers, with the average home selling for 4% over ask
Over the last five years, the 22202 zip code (area surrounding HQ2) has, unsurprisingly, benefited from the highest appreciation at 33.8% growth since 2018 due to the Amazon HQ2 boost followed by the pandemic buying craze
New Construction: Bigger Homes, Bigger Prices
New builds have outpaced the appreciation of the rest of Arlington over the past two years, gaining 21% since 2020. New homes are also bigger than they’ve ever been with the average home claiming over 5,100 SqFt of finished living space, nearly six bedrooms, and more than five full bathrooms. Buyers are now paying almost $400,000 per bedrooms to own a new home.
You may notice the sharp drop-off in the number of new homes sold in 2022. This drop does not align with County data for new construction starts/completions and I think is more representative of the number of homeowners building outside of what’s being offered on the market – demolishing a home they already live in, acquiring their own lot and hiring a builder, or securing a lot/build with a preferred builder prior to it being marketed for sale.
Price and Bedroom/Bathroom Distribution (for my Missing Middle friends!)
The biggest change in price distribution in Arlington has been at the ends of the spectrum, with the percentage of homes seller for under $800k dropping from 35% in 2018 to 11% in 2022. On the other end of the spectrum, the percentage of homes selling for $2M+ has increased from 3% in 2018 to 11% in 2022.
Most sales in Arlington fell between $800k and $1.2M. The median household income in Arlington is about $128,000 which at current interest rates, limited personal debt, and a 20% down payment qualifies for a roughly $900k purchase. If rates drop to 5%, the median income qualifies for roughly $1M.
Nearly 2/3 of SFHs sold in 2022 had three or four bedrooms, most of which had at least two full bathrooms, and the price of those homes averaged $940,500 and $1,155,000, respectively.
If we add townhomes and duplexes to this data, we’ll see an even higher concentration in the 3-4BR range and lower average prices, so we see here that the term “Missing Middle” is a bit of a misnomer…it’s not missing and the average costs generally align with median household income, but the supply simply of “middle” housing isn’t as high as County leadership and MM proponents would like it to be. I also expect that most Missing Middle housing built would be more expensive than the current average prices for 3-4BR homes, certainly when comparing existing “middle” housing and new Missing Middle housing in the same location.
*Note: this table displays the most common BR/BA combinations, but does not show all sales
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.
If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to Eli@EliResidential.com. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at (703) 539-2529.
Video summaries of some articles can be found on YouTube on the Eli Residential channel. Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH @properties, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.
Question: How close are the County’s tax assessments to actual market values?
Answer: Earlier this month, Arlington announced that the next round of annual tax reassessments would increase the total residential assessment by 4.5% (this is overall, changes to individual home/land values will vary significantly). This change is meant to align with the increase in market values of Arlington homes, but assessed values remain well below actual market values for most homes. In fact, 81% of homes sold in 2022 sold for more than their most recent tax assessment value.
Homes in Arlington that sold in 2021 sold for an average of 8.7% (median 8.4%) above their most recent tax assessment.
Homeowners in the 22205 zip code benefit the most by underassessments, for a second year in a row, with an average difference between 2022 sold prices and their assessments of 14.8%, or over $194,000. Owners of single-family homes and townhouses (12.9% average difference) benefit more from underassessments than condo owners (4.1% average difference).
If County assessments were representative of actual market values, the average Arlington homeowner would pay over $900 more per year in property taxes, so don’t forget to send the Department of Real Estate Assessments a thank you card!
The following chart details the difference between how much a home in Arlington sold for in 2022 compared to its most recent County-assessed value:
If you believe that the County’s assessment of your home’s value is too high, you have the right to appeal the assessed value; the deadline is March 1.
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.
If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to Eli@EliResidential.com. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at (703) 539-2529.
Video summaries of some articles can be found on YouTube on the Eli Residential channel. Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH @properties, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.
Question: A friend of mine just lost an offer on a house and there were 7 other offers, is the market competitive again?
Answer: If you’re letting news outlets, national real estate pundits, and Twitter guide your real estate strategy in the DC Metro/Northern VA, you’re likely getting a very different perspective on the real estate market than what we’re seeing locally. Despite 6-8+ months of headwinds, the market did a 180 in the first few weeks of January, compared to the weeks prior (this is a common trend).
Multiple offers, escalations, and limited contingencies have returned to many parts of the market, so this week’s column is chart-heavy to show that the “crash” in the 2nd half of the year was all relative to the breakneck pace of the market in 2021 to mid 2022 and how natural supply/demand economics are keeping the market competitive and prices up, despite how much higher the monthly payments are.
Second Half 2022 was Relatively Bad, Historically Normal
Overall, across the DC Metro region, total sales transactions finished the year 3% above the 10-year average. Things seemed a lot worse than they were because of the massive number of sales we experienced in 2021 and 2020.
While prices in most sub-markets did drop from the first to second half of ’22, real estate in the DC Metro still appreciated in 2022 above the 10-year average. Even condos, which struggled through the heart of the pandemic, appreciated nicely in 2022.
In Northern VA, there’s a clear jump in average prices in Q1/Q2 2022, followed by a very normal drop in average prices for Q3/Q4 (this has more to do with more expensive homes being sold in the spring, not a seasonal drop in home values), but the Q3/Q4 average prices fit nicely within the normal trend line and do not suggest any sort of crash, just a jarring difference from what we experienced in the first half of the year.
Average sale price to original asking price ratios, one of the best demand metrics, fell sharply through December, from all-time highs in the spring. While the speed of the drop shocked the market, it dropped to normal Q4 levels so the “crashing market” feeling was only relative to the extreme demand in early 2022, but not so when compared to historical norms.
A similar pattern can be seen in the second chart for median days on market. In fact, the 2nd half of 2022 was still a faster pace market than the 10-year average.
Showing activity during the past week, as measured by Bright MLS, is 73.7% lower than it was in 2022, but 5.5% higher than it was during the same week in 2019.
Interest Rates Are Lower, Relatively Speaking
The relative effect of interest rates plays a huge role in demand. For most of 2022, buyers felt like they were losing every week as rates climbed steadily from January through October. Conversely, rates have fallen since November and stimulating demand.
**It’s worth noting that there are Jumbo loan products currently available at rates ~.5% less than what the second chart shows.**
Just look at the difference between the mortgage rate trends from January ’22-October ’22…
…compared to the mortgage rate trends since November ’22…
Not Much Demand Needed to Make the Market Competitive
With supply this low, it doesn’t take historic demand to generate competition. Q4 2022 was by far the lowest quarter for new listing supply in over a decade and total active listings still trail well behind the 10-year average heading into a new year.
We’re currently see many more homes go under contract than what is being supplied to the market. For example, over the past seven days in Arlington, 48 properties went under contract compared to only 31 new listings.
The pace of new listings will continue to increase through the spring, peaking from roughly mid-March through May, so it will be interesting to see whether demand will keep pace with increased supply or whether supply will outpace demand and reduce the amount of competition that currently exists.
For now, the low inventory and current demand levels are enough to create competition in many sub-markets for good properties priced appropriately and thus putting upward pressure on prices at a time when many expected prices to fall or remain stable.
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.
If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to Eli@EliResidential.com. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at (703) 539-2529.
Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH @properties, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.
Question: On social media, I have seen a new loan program advertised called the All in One mortgage. Whom might this program benefit and are there any pitfalls to look out for?
Answer: With mortgage rates so high, we’re seeing new products or new angles on old products (like the 2-1 Buydown) and lots mixed information about why rates are high or where rates are likely heading in 2023 and beyond. So in keeping up with my promise to provide relevant, transparent information on the mortgage market, let’s talk about another buzzy product being discussed lately, the All-in-One Mortgage.
It’s a fairly simple product, but cutting through the marketing of it to know if it’s the right product for you isn’t easy.
The rest of this article is a guest column generously written anonymously by a lender at a local bank that offers this product, but wishes to remain anonymous so they could provide an honest review. So enjoy a brutally honest review of a mortgage product that isn’t as great as the marketing makes it seem…
The creators of the AiO claim in their marketing that this loan will pay off a homeowner’s mortgage faster than a traditional mortgage, but we have found this not to be the case and that the AiO may be more expensive than a traditional mortgage, on an apples-to-apples basis.
The goal of this article is to provide a quick overview of this product, as well as discuss which situations the AiO may or may not be a good financial instrument for the purchase or refinance of a home.
Mortgage, Home Equity Line, and Checking Account “All in One” The All in One (AiO) mortgage combines a mortgage, a home equity line of credit and a checking account, all in one financial instrument. The AiO allows you to purchase a home just like any other mortgage, where you would apply for a pre-approval, shop for a home, and once a home is under contract, the AiO would fund the majority of the home’s purchase price.
In addition, you can deposit your pay into this account, and pay all your bills from this account, just like any other checking or savings account. The account has an ATM card and allows automatic bill pay. Finally, the AiO acts like a Home Equity Line of Credit (HELOC), allowing you to access your home’s equity should you have such life events as paying for a child’s wedding or building an addition to your home.
Whether this product is a good fit for you depends on your goals and priorities, so the following summarizes how the AiO fits with certain personal and financial goals.
AiO Recalculates Interest Daily, Not Monthly
A traditional mortgage charges interest on the outstanding balance as of the date of the last mortgage payment, and you pay interest on this balance for each day of the month until the next mortgage payment. In contrast, the AiO mortgage calculates interest daily, so if you deposit your paycheck in the account, this immediately reduces the balance on which interest is calculated.
Said differently, if you make an additional payment to principal mid-month, the AiO would calculate interest on the lower balance for the remainder of the month, whereas a traditional mortgage would not. The creators of the AiO mortgage share that this feature saves interest, which it does.
However, the AiO mortgage has a higher starting interest rate than a traditional 30-year fixed mortgage and the AiO does not have a permanently fixed rate of interest, so the interest rate on this product may be higher or lower in the future, as it is market-driven.
Hence, any interest savings due to the AiO paying interest daily can be lost due to the higher initial interest rate and / or increases in the program’s interest rate down the road. This does not mean that the AiO would not save on interest; however, there are many instances when the amount of interest you pay may be higher despite the advantages of daily interest recalculations, so be sure to discuss interest rate risk with your financial advisor.
Early Mortgage Pay-Off, True or False?
The creators of the AiO mortgage claim that the AiO will pay off your mortgage far faster than a traditional mortgage. To evaluate this claim, we’ve employed the assistance of a technical financial expert, who has both 20 years of experience in the mortgage industry and, before joining the mortgage industry, a finance role for a Fortune 300 company. As this individual’s company also offers the AiO product, the individual wished to remain unnamed.
The findings were that, on an apples-to-apples basis, the AiO mortgage did not result in the mortgage being paid off materially faster than a traditional mortgage. We used the simulator on an AiO mortgage web site, and summarized the results below.
For our analysis, we assumed a purchase of a $1.0M home, a 25% down payment, making the loan principal $750,000. We assumed a 6.5% interest rate on the 30-year fixed loan, the homeowner’s household has $15,000/month after tax income and that household had $4,200 remaining of their take home pay after payment of the mortgage and all other monthly expenses.
The AiO website automatically assumes the following:
All of the $4,200 remaining after paying expenses is used to reduce the loan’s principal
The AiO web site compares the above to a 30-year fixed mortgage with assumptions above, but does not assume any additional payments are made to principal
The AiO web site concludes that your mortgage would be paid down in 132 months (11.0 years), but the rapid payoff of the AiO mortgage is primarily a result of the assumption that extra payments are made in the AiO scenario and not the traditional
If the same extra principal payment of $4,200 per month was applied to a traditional mortgage, the 30-year fixed mortgage would be paid off in under ten years and have a lower amount of interest paid, as the AiO would have a longer pay down period and higher interest rate.
Alternatively, if we assume that neither the AiO or the 30-year fixed mortgage pay the extra $4,200 toward principal each month, the AiO would be paid down seven months faster than the 30 year fixed (353 months vs. 360 months); however, due to the higher interest rate for the AiO, the 30 year fixed is forecasted to pay – by the AiO’s own calculator – over $490,000 less in interest than the AiO mortgage.
Ability to Borrow not Unique to AiOs
If one has an AiO mortgage, the amount of principal paid down is, at any time in the future, available to be taken back out in cash. For example, ten years after you purchase your home, if you have a medical emergency, you can use the equity in your home to obtain cash almost as fast as one could take cash from a savings account.
The AiO is not the only mortgage product to offer this flexibility. Traditional mortgages (e.g. 30-year fixed loan) offer HELOCS that allow easy access to cash tied to your equity, once the line of credit is approved.
In both cases, you will be charged a market interest rate on funds borrowed against your home’s equity.
We do want to share a word of caution that the largest risk to any form of a HELOC is that one may spend money on goods and services that would not have been purchased if funds from the HELOC were not easily available.
A Worthwhile Option for Investment Properties
The AiO mortgage is the only product I know that will allow one to have a HELOC secured against one’s investment /rental property, as most HELOCs are for primary residences or (sometimes) second homes. In addition, the AiO allows one to borrow up to 70% of the value of the home, with a limit of $1.0M. Any current mortgages must be closed with the balance rolled into the AiO, and cash back is limited to $250,000.
While an investment property HELOC is not an advertised use for this product, in our opinion, this is one of the best uses of the AiO mortgage.
If you’d like to discuss buying, selling, investing, or renting, don’t hesitate to reach out to me at Eli@EliResidential.com.
If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to Eli@EliResidential.com. To read any of my older posts, visit the blog section of my website at EliResidential.com. Call me directly at (703) 539-2529.
Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.
Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH @properties, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.
Question: We’re moving to Arlington from out of state and have always had at least an acre of land. We’d like at least ½ acre in Arlington, but can’t find much. How big are most lots in Arlington?
Answer: I talk a lot about making sure the home you want exists before setting your hopes and dreams on finding it. Understanding what lot sizes you can expect to find in Arlington is a great example of that, so this week I’ll share data on lot sizes from homes sales going back to 2019.
The data is based on total square footage of a lot, including the land the home sites on. Most people think about lots in terms of acres, so here’s a quick conversion key:
Square Feet
Acres
5,445
1/8
10,890
1/4
21,780
1/2
32,670
3/4
43,560
1
Arlington Lot Size Highlights (sales since 2019):
Average lot = 8,479 SqFt
Median lot = 7,277 SqFt
Lot with ¼ acre or more is in the top 83% largest lots
1.4% with ½ acre or more
Just six of 4,355 were 1+ acre, none were 2+ acres
More homes sold on 1/10th acre or less than ½ acre or more
The chart below shows the percentage of homes sold in Arlington within five different ranges. 69% of homes sit on lots with 5,000-9,999 SqFt.
Drilling down even further, we see that 1,672 of 4,355 lots (38%) were between 6,000 and 7,999 SqFt
Lot sizes are not evenly distributed across the County. The smallest lots are found in South Arlington and along the Rosslyn-Ballston corridor with larger lots found further norther. The large lot sizes are one reason why 22207 has so much tear down-new build activity.
Below you can see a distribution of lot sizes by zip code, first as a percentage of sales in each zip code and then by number of sales in each zip code.
If any readers would like to see pricing data for certain lot sizes, I’m happy to pull that for you, just send me an email.
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.
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.
