Condo

Rent vs Buy: Data to Aid Your Decision

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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.

Mid-Year Condo Market Review (Arlington)

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Mid-Year Condo Market Review (Arlington)

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

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

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

Average Prices Down Slightly

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

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

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

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

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

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

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

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

Best Arlington Condos for DC July 4th Fireworks

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Best Arlington Condos for DC July 4th Fireworks

One of my favorite things about the Arlington condo market is the remarkable views that some of the buildings have of DC and the National Mall! Some of the best July 4th fireworks in the country take place on the National Mall and what better place to view them than from your very own Arlington condo!  

Today, Jean Ropp, Arlington real estate agent with Eli Residential Group, toured 4 Arlington condo buildings to check out their views of the DC Skyline:

  1. Prospect House, 1200 N. Nash Street, was built in 1966 and is located just steps from the Iwo Jima Memorial. The building is best known for its views of the Washington Monument and DC skyline.
  2. The Pierce, 1781 N. Pierce Street, completed in 2021, it is Arlington’s newest building for sale. This high-end, luxury building has an average sale price of ~$1.8M and $1,000 per square foot. Part of the price tag come from the impressive views of DC from many of the units, the rooftop terrace and the rooftop pool.
  3. The Odyssey, 2001 15th Street N., built in 2006, is located in the Courthouse neighborhood. This building’s great reputation and excellent amenities make it an Arlington favorite. The views from the rooftop pool and top floor gym are exquisite.
  4. The Waterview, 1111 19th Street N., built in Rosslyn in 2008, is unique because floors 1-15 are a hotel and floors 16-31 are condo residences. The Waterview has its name for a reason! The views of the Potomac River and Washington DC are unmatched.

There are other buildings in Arlington that offer superb views not mentioned here including 2000 Clarendon and Clarendon 1021.

Let us know in the comments below which of these buildings you’d like to watch the DC July 4th Fireworks from! If you’d like to tour any of these buildings, you can contact Jean at Jean@EliResidential.com.

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

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

Video summaries of some articles can be found on YouTube on the Eli Residential channel.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.

Condo Fees, They’re So Underappreciated

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Condo Fees, They’re So Underappreciated

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

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

What Do Condo Fees Pay For?

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

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

Predictable Expenses

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

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

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

Home Maintenance Cost > Condo Fees

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

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

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

Lower Utility, Insurance Bills

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

Amenities

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

Life is Easier

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

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

But What About Evil Condo Boards?

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

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

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

Conclusion

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

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

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

Video summaries of some articles can be found on YouTube on the Eli Residential channel.

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

Impressive Sales at Rosslyn’s New Luxury Condo, Pierce

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Impressive Sales at Rosslyn’s New Luxury Condo, Pierce

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

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

Building Overview

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

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

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

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

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

Pre-Sales/Pre-Pandemic

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

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

COVID Lockdown, Sales Lockdown

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

Vaccines Led to More Activity

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

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

Return to “Normal” Life Kept Sales Strong

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

Current Status, Closing Out

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

Featured Available Units

Some of the units that highlight the remaining 15 include:

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

Figure 1: D5 floor plan

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

Figure 2: D2 floor plan

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

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Figure 3: C4 floor plan

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

What I’ve Learned from Pierce

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

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

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

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

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

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

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

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

Video summaries of some articles can be found on YouTube on the Eli Residential channel.

Eli Tucker is a licensed Realtor in Virginia, Washington DC, and Maryland with RLAH Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.

2022 Arlington Condo Review

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2022 Arlington Condo Review

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

Answer: Last week, I detailed the 2022 Arlington Single-Family market performance so this week we’ll do a deep dive into Arlington’s 2022 condo market performance.

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.

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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.
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“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.

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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.
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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.

Arlington Condo Market Performance Metrics

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Arlington Condo Market Performance Metrics

Question: How has Arlington’s condo market reacted to higher interest rates?

Answer: In last week’s column, I looked at performance metrics for detached homes in Arlington, shared my thoughts on local pricing behavior, and discussed news about the national vs local real estate market. This week we will look at the underlying performance metrics in Arlington’s robust condo market.

Underlying Arlington Market Performance Data for Condos

Here’s how I approached the data used in this week’s analysis:

  • Low-, mid-, and high-rise condos only
  • Resale data only, no new construction
  • All data is presented by the month a home was listed in so we can measure how home sales performed based on the month they came to market
  • Net Sold = Sold Price less Seller Credits
  • I used data from 2017, 2019, 2021, and 2022 because I think it offers a helpful snapshot of recent Arlington markets to compare 2022 to. 2017 was our last “normal” market because Amazon HQ2 was announced Nov 2018 and that kicked off a condo craze. 2019 was the first full year with the Amazon bump, but pre-COVID market, and 2021 was a full year of the COVID-driven shift in condo demand.

I either did not use or must caution your interpretation of this year’s August-November data because it is incomplete for purposes of this analysis. There are 13, 26, 39, and 42 condos actively for sale that were listed in August, September, October, and November, respectively, which will influence the performance metrics for those months when they do contract/close and most likely will result in worse performance metrics than those months currently show.

There are only 10 condos still for sale listed January-July that will likely pull down the performance metrics for those months once they contract/close, but not enough for me to be concerned about the resulting data being presented in this analysis.

Business as Usual for Condos

While the detached market was on fire in 2021 and early 2022, the condo market performed mostly along the lines of historical metrics, except for one month, February 2022, when average sold prices climbed slightly above the original asking price. As a result, high interest rates have led to a more modest reversal in pricing behavior over the last six months, compared to the detached market.

The only time in the last 15 years that we’ve seen a real acceleration in condo prices was during 2019 (and pre-COVID 2020) as a result of Amazon’s HQ2 announcement.

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Pace of the Condo Market Slightly Below Normal

We had a few months during the peak of the 2022 market where the pace of sales came close to the craziness we experienced in 2019, after Amazon announced HQ2, but average days on market has returned to its normal seasonal trends. As more data rolls in for closings in August-December, I expect the average days on market for the last 3-4 months of 2022 to exceed historical averages, but not by much.

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One of my favorite performance metrics is the percentage of homes that sell within 10/30 days. I think it beats average and median days on market for a true understanding of the pace of a market.

As opposed to average days on market, these charts indicate that high interest rates have slowed the pace of the condo market beyond the usual seasonal slowdown, with a notably slow October where just 38% of condos listed sold within 30 days. Expect to see these metrics fall even further as more condos listed after July contract and close.

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Looking Forward

Condo pricing tends to be pretty stable and movements up or down are relatively small, with the exception of major events like Amazon HQ2 (rapid appreciation) and COVID (rapid, temporary depreciation), so expect a return to stable and predictable pricing in our condo market where we’re used to seeing 0-2% appreciation year-over-year.

The effect of high interest rates will likely be felt most in the slow pace of the market. The pace will almost certainly increase in Q1 2023, which means we can expect about 1/3 of condos to sell within the first 10 days and about 2/3 to sell within the first 30 days during the spring selling season. 

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.

Find Savings in Your Condo/HOA Budget

reallivingathomeblog Arlington, Investor , , , , 0 Comment
Find Savings in Your Condo/HOA Budget

Question: We are finalizing our 2023 condo budget. Do you have any advice for ways to save money?

Answer: As a former Condo Board Treasurer, I feel the pain that this time of year brings, so I’m happy to offer some advice that helped me finding savings while I oversaw the budget and has helped other Associations do the same…review your Master Insurance Policy. I know, it’s not the most exciting answer, but your insurance policy is likely a top three expense on every year and if you haven’t reviewed it lately, there’s a good chance you can cut the cost by 5% or more and probably improve your coverage at the same time.

I’m not an expert in insurance so, I asked Andrew Schlaffer, President of ACO Insurance to provide some details on what Boards should look for when they do a review of their Master Policy. If you’d like to discuss a review with Andrew directly, you can reach him at 703.595.9760 or andrew@acoinsgrp.com. Take it away Andrew…

Hardening Markets, Increasing Premiums, Decreases in Coverage

The condominium insurance marketplace is facing challenges that will impact homeowners in 2022 and beyond. Water damage claims are still among the loss leaders impacting Unit Owners, along with fire damage and wind/hail claims. The DMV is home to many aging condo buildings that continue to struggle with mitigating water damage losses and their impact on insurance premiums.

As water damage claims continue to rise and property damage costs increase, many insurance carriers are beginning to make changes to their coverage offerings that may increase your risk exposure. A few examples of these coverage changes include Increased deductibles, per unit water damage deductibles, removing coverage for Sewer or Drain Backup and Wind-Driven Rain. 

In general, condominium property rate increases in the DMV have been significant and unpredictable. Much of the pricing impact can depend heavily upon carrier underwriting discretion which highlights the importance of your insurance professional specializing in this space. It has not been unheard of for Master Insurance policies to receive between a 7% to 15% property rate increase in 2022. For struggling communities, these rates are much higher. 

The umbrella/excess liability carrier marketplace has also faced tremendous disruptions. There are several factors driving these rate increases including but not limited to: COVID-19 impacts, years of underpricing, reinsurance rate increases, and the rise of nuclear verdicts (claims over $10MM). Additionally, there have been several specialty real estate programs who no longer offer umbrella/excess liability options for the habitational industry which has put a lot of strain on remaining carrier markets to fulfill the increase in demand. Many communities can expect umbrella/excess liability rates to increase between 10% to 25% this year. 

Pillars Of Insurance Reviews

Condo insurance reviews require a holistic approach, so it’s important to break the cost into a few distinct categories: insurance premium, deductible expense, and out-of-pocket costs. To effectively accomplish long-term savings, all three of these categories need to be considered and addressed with a qualified insurance professional.

Adjust Coverage Responsibly To Save On Premium

Premium is certainly a factor to consider during the insurance selection process; however, available insurance products differ significantly. Coverages and services should be very carefully analyzed and compared. While omitting various coverages will save premium dollars, it might also result in substantially increased costs to the Association for out-of-pocket expenses related to uncovered claims. It is critical to work with a professional who understands local insurance needs and can adjust your insurance program in a way that maximizes premium savings while maintaining adequate insurance coverage. Some coverages may be required by statute and/or Association documents, so cutting required coverage exposes the Board to unwanted risk.

Deductibles Based On Loss History

Associations with strong financials often choose to increase their property deductibles which can provide immediate savings of 2-5%. Deductibles range from $2,500 to $25,000+. When considering deductibles, it is important for the Association to review their loss history and the loss history of comparable buildings in an effort to obtain an accurate estimate for deductible expenses.

Rate Shopping

The most common strategy employed by Associations seeking lower insurance costs is to shop their carrier. An Association can accomplish this in several ways but generally their appointed broker can offer alternative carriers in an effort to obtain the most competitive rates possible. Make sure your broker has access to all of the competitive markets in order to maximize the likelihood of finding savings.

Secondly, and more importantly, if savings is found, your broker should verify that all required coverages are included to secure the Association’s long-term financial security and lender approval. Additional savings can be realized by a thorough coverage analysis to verify the Association is not being over-insured by paying for coverage it won’t use.

To insure cost savings and long-term health of your property, make sure your insurance broker specializes in Condominium or Homeowners Associations. To maximize your savings, the Association, insurance broker, and insurance carrier need to work in harmony to identify and reduce threats to the financial health of the community.

Help Reducing Claims

One of the best ways to keep insurance costs down is to avoid claims altogether.  Some examples of how insurance brokers can help reduce claims and the impact claims have on your future premium costs include coverage reviews/benchmarking, claims management services, site inspections, building upgrade recommendations, life safety planning, vendor contract reviews, discrimination/harassment training, and hiring/firing best practices. 

Thank You

Andrew, thank you very much for providing your insight. I know from experience how much of an impact an insurance review can have on a condo budget, but also how important the right coverage can be when there’s an unexpected claim.

One thing Boards often overlook when they’re solely focused on price is the quality and speed of service when a claim in filed. For example, if a pipe bursts and floods the gym and lobby, a Board should be confident that the work orders will be executed quickly so the building can be back on its feet without delay or headache. Unfortunately, most Boards don’t think about this until they’re dealing with it, and it’s too late.

I encourage any Board/Treasurer to reach out to Andrew to review their policy. His contact info is:

Andrew Schlaffer, President

ACO Insurance

www.acoinsgrp.com

Direct: 703.595.9760

Email: andrew@acoinsgrp.com

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

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

Video summaries of some articles can be found on YouTube on the 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.

Pay Closer Attention to Your Condo Homeowners Insurance (HO-6)

reallivingathomeblog Arlington, Home Owner , , 0 Comment
Pay Closer Attention to Your Condo Homeowners Insurance (HO-6)

Question: What is the difference between my individual condo insurance and the Association’s master insurance policy and do I need my own insurance?

Answer: Every condo association has its own (expensive) Master Insurance policy to cover the common elements and limited common elements, but there are substantial gaps between the association’s policy and what you’re personally liable for without an individual HO-6 policy. Most people shop for the cheapest, fastest individual insurance policy and apply just enough coverage to meet the lender’s requirements, but that may put you at financial risk.

To explain common gaps between master policies and HO-6 (individual condo) policies, I’d like to re-introduce Andrew Schlaffer, Owner and President of ACO Insurance Group. Andrew is an expert in Master Insurance policies and has helped multiple local condo association’s reduce their cost and improve their coverage since writing a column on the topic last year. If you’d like to contact Andrew directly to review your association’s master policy, you can reach him at (703) 595-9760 or andrew@acoinsgrp.com.

Take it away Andrew…

Master Insurance vs Individual Insurance Policy

Nearly all master insurance policies in this area are written on a Single Entity basis which means coverage extends to general and limited common elements but also extends within individual units to fixtures, appliances, walls, floor coverings, and cabinetry, but only for like kind and quality to that conveyed by the developer to the original owner.

Items not covered by the master insurance policy and are generally not the association’s responsibility include:

  • Personal Property (clothes, electronics, furniture, money, artwork, jewelry)
  • Betterments and Improvements (demonstrable upgrades completed after the initial conveyance)
  • Additional Living Expenses (the cost to live at a temporary location, storage fees, loss of rents)
  • Personal Liability (provides protection for bodily injury or property damage claims arising from your unit)
  • Loss Assessment (triggered only if there is a covered cause of loss and the master insurance policy limits are exhausted; this assessment would apply collectively to all unit owners)
  • Medical Payments (no fault coverage available for injured guests within your unit)

Condo owners should purchase an individual condo insurance policy (HO-6), which is also required by lenders. This policy can provide coverage for the items listed above.

Review Your Dwelling Coverage

Dwelling Coverage should be included in every HO-6 policy to avoid significant out-of-pocket expenses. Many condo associations can hold you responsible for expenses that fall under the master policy deductible that are caused by the owner’s act, neglect, misuse, or carelessness. Due to the rise in water damage losses, many insurance carriers are increasing their deductibles, which in turn spurs the need for homeowners to adjust their dwelling insurance limit.

In a recent instance, a condo suffering from significant water damage losses was required by its insurance carrier to increase the master insurance policy deductible from $10,000 to $25,000. In this community, each homeowner should have at least $25,000 of dwelling coverage to indemnify them for the deductible expense in the event a claim arises from their unit. If coverage is not available, the homeowner would either pay this expense personally or the association can put a lien on their unit.

Dwelling coverage should also include a homeowner’s betterments and improvements (improvements made above what the builder originally delivered), including those completed by prior owners. Most lenders will require at least 20% of the unit’s market value insured under this coverage as well. 

What Information to Share with Your Insurance Provider

You should always review the condo association’s governing documents and understand the applicable statutory requirements (i.e. Virginia Condominium Act) and lender requirements to verify their individual responsibilities, including maintenance/repair and insurance. Along with sharing the association documents, homeowners should also provide their personal insurance agent with the following:

  • What is the master policy deductible? ($5,000, $10,000, $25,000)
  • What approach is used for the condominium insurance coverage? (Single Entity)

My Recommendation for HO-6/Other Individual Policies

Thank you, Andrew, hopefully this helps at least a handful of readers better protect themselves.

I find that most buyers go straight for the path of least resistance and cheapest premiums for their insurance coverage. Adding coverage to your existing auto policy in 5-10 minutes probably means that nobody reviewed your association’s Master Insurance policy and thus you’re at risk of coverage gaps. Personally, I’d rather pay a bit more to know that my policies have been designed with some personal attention and reviewed annually for gaps. Andrew and his team can handle this for you as well.

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.

2022 Arlington Mid-Year Condo Review

reallivingathomeblog Arlington, Home Owner, Rental , , , , , 0 Comment
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.