Single-Family Demand Shifting From City to Suburb

Question: Have you seen a shift in single-family home preferences away from DC/Arlington further out into Northern VA?

Answer: Last week, I wrote about a clear shift in Arlington’s (and DC’s) condo market as historically high volumes of inventory have come to market and demand has tapered off. I received some follow-up questions about how the single-family market compares so this week we’ll take a look at some of the trends in single-family detached (SFD) homes in DC, Arlington, Fairfax County, and Loudon County.

Across all markets, demand and competition for SFD homes is high, but there is a clear shift in preferences for SFD housing further away from the city that we’ve never seen before. Both Fairfax County and Loudon County have reached all-time highs in absorption and all-time low months of supply.

Suburban Absorption Rate Sky-Rockets

The absorption rate, a strong metric for demand, has almost always been higher in DC and Arlington than in Fairfax and Loudon Counties. An absorption rate of 1.0 equal one home under contract for every home listed for sale and great than 1.0 means homes are going off the market faster than they’re being put in the market.

The first chart shows a dramatic increase in the absorption rate in Fairfax and Loudon Counties since June, far outpacing the DC and Arlington markets. Loudon County, the furthest/least densely populated of the four markets was on fire in August, with an already high absorption rate increasing nearly 50% over July.

Check out the difference between the Arlington County and Loudon County 10-year Absorption Rate in the second and third charts below.

Listing Volume Up Seasonally

One of the trends that stood out in last week’s condo analysis is the historically high volume of listings that came to market in July and August, ranking among the highest of any month in the last 10+ years. While the volume of SFD listings is up in July and August compared to past summer months, volume is still well below peak spring listing volume.

The year-over-year change in SFD listing volume in Arlington for July and August is pretty extreme (see second chart below) simply because of how low volume was in 2019 due to the Amazon HQ2 announcement, but the numbers still fall well below a normal spring market.

Historically Low Months of Supply in Suburbs

Months of Supply, a great supply/demand metric, is something I watch closely to predict price movement. The lower the Months of Supply, the more upwards pressure there is on prices.

Months of Supply for SFD homes in Fairfax and Loudon Counties has blown through 10+ year historical lows (first and second charts) and shows no sign of slowing down (prices likely rising rapidly), while Months of Supply has tapered off and even increased slightly in Arlington (third chart), a sign that prices might be stabilizing. Months of Supply in Arlington is still way too low to create a buyer’s market where prices might start dropping.

I hope you’ve found this analysis interesting and/or helpful. If you’d like to discuss buying or selling strategies, don’t hesitate to reach out to me at Eli@EliResidential.com.

Why Can’t I Find A House!?

Question: I’m prepared to make a strong offer in Arlington’s hyper-competitive market, but I can’t even find a house to make an offer on! Why is every home on the market either old and too small or new and too big??

Answer: While debates about Missing Middle and tear-downs continue, I thought it would be helpful to look at why Arlington is such a difficult place for most families to find good housing options. Most of Arlington’s single-family housing problems stem from when the majority of homes were built – before 1960 and within the last decade. Only 17.8 % of single-family homes sold since 2016 were built between 1960 and 2009!

Too Old, Too New

According to Arlington’s 2019 Profile, there were 28,500 single family detached homes in the County and according to public records, ~80% of those homes were built prior to 1960 or since 2010. Why is that a problem?

Many homes built prior to 1960 are functionally obsolete for most families (“the reduction of an object’s usefulness or desirability because of an outdated design feature that cannot be easily changed”) and homes built since 2010 have an average price of nearly $1.8M over the last 18 months.

Most homes built in Arlington in the 1940s and 1950s (with the original footprint) are plagued by 2-3 small bedrooms with small reach-in closets sharing one small bathroom, small enclosed kitchens, and small basements with low ceilings. They also lack the openness desired by most families in today’s market. Unfortunately, there’s very little one can do to bring these older homes up to today’s standards without extensive/expensive remodeling and/or expansion.

The economics of building a new home in the last decade doesn’t support the construction of a more modest homes (3,000-4,500sqft) so most new homes are built with 5,000-6,000+ square feet and are priced well above most budgets.

Just Right

It wasn’t until the 1980s and 1990s that Arlington homes were consistently built with designs more suited to today’s buyer including things like attached garages, master suites, and combination kitchen/dining spaces. While these 1980s-1990s designs may not be perfect, it makes for more reasonable compromises at prices many more Arlington families can afford.

Unfortunately, over the last four years, there have been fewer single-family homes for sale that were built during the 1980s and 1990s (4.3% combined) than any other decade until the 1910s.

Housing Changes Over Time

I put together some charts to highlight how home sizes have changed through each decade as well as how the average cost of a home changes by the decade it was built. These charts are based on Arlington single-family detached sales since 2016.

Note: Older homes that have been remodeled/expanded and sold are included in this data so the average size, bedroom, and bathroom count for older homes is higher than what you would expect from the original designs. Most pre-1960 homes were built with three bedrooms, one bathroom, and under 2,000sqft.

Note: Total finished square footage includes any finished basement space.

Here’s the data table for each of the charts:

Decade Built# SoldAvg PriceAvg BRsAvg Full BAsAvg Finished Sqft
<1930355$945,3453.62.42,302
1930s562$899,8673.52.42,315
1940s987$827,1973.52.32,121
1950s961$870,4533.72.52,413
1960s232$915,8184.22.92,760
1970s104$944,5764.02.82,919
1980s86$1,006,0184.23.03,193
1990s96$1,184,4094.63.23,641
2000s229$1,430,9054.94.04,697
2010s584$1,638,6965.24.65,004
Total4,196$1,022,3724.02.92,965
Using This Information

For those of you currently searching for a home or planning to start your home search, hopefully this information can be used to help you understand how likely/unlikely it will be to find the type of home you’re looking for and be more prepared to act decisively when the right home hits the market.

For those of you who own a home that falls within the middle-ground many buyers are seeking, you should have an even more favorable position within an already favorable market for sellers.

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