inventory

12Jan2021

Analyzing the Pace of Housing Inventory and Demand

elieliresidentialcom Arlington, Buyer, Home Owner housing, housing market, inventory, listings, Market, New Listings 1 Comment

Question: When should I expect more homes to be put on the market for sale?

Answer: 2020 was an unusual year for housing inventory because we saw so little inventory come out during the spring, when the pace of new listings peaks, and an explosion of listings, especially condos, from late summer through the holidays. Here’s a link to a column I wrote that visualizes how unusual 2020 was for housing inventory in Arlington. Even though my analysis in this column and previous columns focuses on Arlington, similar patterns show up and can be applied across the DC Metro.

It is much more likely that the pace of new listings will follow a more traditional pattern this year, with the number of homes listed for sale increasing steadily from now to the spring, peaking for about mid-March to mid-May, and then dropping steadily through the rest of the year, with a brief post-Labor Day spike.

Weekly Pace of Listings, by Housing Type

I’ve always shared and seen monthly breakdowns of listing inventory, so I thought it would be interesting to break it down a bit further into a weekly chart and see if there’s a noticeable difference in the seasonal pace of new listings of single-family homes/townhouses and condos.

The following chart does just that and pulls data from the five years spanning 2015-2019 (I threw out 2020 because it’s an anomaly). The weekly percentages represent that week’s share of total annual listings. Note that the data for the first and last weeks of the year aren’t always full weeks because of how Excel calculates weeks.

As it turns out, the pace of listing inventory for single-family homes/townhouses and condos is nearly identical throughout the year, aside from a slightly higher pace for SFH/TH in the middle of the spring and a slightly lower pace for SFH/TH during the dog days of summer.

What can buyers looking for a home in 2021 take away from this chart? You can expect a significant increase in listings beginning around mid-February, buckle-up for the most options in April and May, plan your vacations in July and August, look-out for the post-Labor Day surge, and hopefully you’ve found your dream home by the holidays!

Weekly Pace of Listings, by Year

The pace of new listings remains pretty consistent year-after-year, as shown by the chart below. There were only a handful of weeks with unusually low listing activity, compared to previous years. I’m guessing there was major weather activity during those weeks that caused some homeowners to delay or accelerate their listings by a week or two to avoid the drag of bad weather.

The consistency you see in the five-year chart below is also reflected in longer (ten and fifteen year) charts, but those get a little too messy for display.

Weekly Pace of Listings and Contracts

The pace of listing inventory and contract activity is highly correlated. The “chicken or the egg” question is whether more/less listing activity drives more/less contract activity (demand) or does demand dictate listing activity or do buyers and sellers just have similar patterns of behavior and thus the pace of supply and demand naturally correlate?

I think that it’s mostly due to number three, a natural correlation of behavior patterns that cause the pace of supply and demand to move in tandem. This is also supported by data like the new-listing-to-new-pending ratios not being very seasonal.

Using the chart below, one could even make the argument that the best time to list a property for sale is the last 2-3 months of the year, when the pace of contract activity (demand) consistently exceeds new listings (competition). However, I’ve analyzed “success metrics” like days on market and sale-to-ask-price ratio based on the month a property is listed and overwhelmingly found that February-May/June produce the most favorable results for sellers.

I hope these charts were interesting and helpful to you! If you’d like to discuss buying or selling strategies, don’t hesitate to reach out to me at Eli@EliResidential.com.

22Dec202022Dec2020

Positive Signs in the Condo Market, Finally

elieliresidentialcom Arlington, Home Owner Condo, Condo market, condos, inventory 0 Comment

Question: Can you provide an update on how the condo market is doing?

Answer: Arlington’s condo market began shifting in favor of buyers this summer, after two years of a very strong seller’s market, when historical numbers of condos began hitting the market at the same time demand subsided. I’ve written about these changes four times since (falling values, visualizing high inventory, first signs of a trend, and first signs of a shift).

**November Might be a Turning Point**

For the first time since June, we’ve seen a reduction in the Months of Supply (MoS) of Arlington condos. Months of Supply is a great measure of supply and demand (lower MoS = stronger market with higher demand and less inventory).

While the reduction in MoS is slight, it’s a positive sign nonetheless that the market is either closer to finding its level again or may soon show signs of strengthening. However, one month, particularly a winter month, is not enough to establish any real change, we will need to see what the next 3-6 months bear.

Multiple Key Indicators Show Positive Signs

My hope for a settling or strengthening of the condo market is not solely based on one metric, there are other key metrics that suggest November may be the first month of a settling or strengthening condo market.

Absorption Rate (Figure 2), a measure of demand, increased ever-so-slightly in November, the first increase since May, albeit still down nearly 68% from the December 2019 Absorption Rate.

The number of condos for sale during November decreased for the first time since May (Figure 3), albeit slightly. The better news, however, is that the decrease in total condo inventory doesn’t seem to be caused by frustrated sellers pulling their condos off the market, rather due to promising contract activity (Figure 4), which was up 41% year-over-year in November.

Looking Ahead, Eyes on March-May

Over the next few months, I’ll be looking closely at whether these trends (stronger demand, falling inventory) continue, find a level, or revert back to what we’ve seen since this summer. I’ll be particularly interested in what year-over-non-COVID-year numbers looks like and if we settle into normal spring activity for inventory and demand.

For example, while the charts above are positive indicators for the condo market, Figure 5 shows just how much inventory (new listings) is still coming onto the market, with November generating nearly 79% more condo listings in 2020 than in 2019, but only a 41% increase in contract activity.

I think that March-May 2021 are going to be very interesting months, statistically speaking, and will be excellent indicators of what the market might look like for the next few years, until the next major market event (e.g. Great Recession, Amazon HQ2, COVID). I think/hope that by then, we will also have a better understanding of how the Federal Government and private companies will address teleworking beyond COVID and thus whether commute time will be prioritized differently by buyers.

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

15Dec202015Dec2020

Deep Dive into Arlington’s Townhouse Market

elieliresidentialcom Arlington, Buyer, Home Owner inventory, Market, Real Estate, town home, Town house, townhome, Townhouse 0 Comment

Question: I need more living space and single-family homes are out of my budget, so I’ve been searching for townhouses in Arlington, but finding that the options are limited. Can you provide some guidance on what the townhouse market in Arlington looks like?

Answer: I spend a lot of time digging into the condo and single-family home markets, but not much time on the townhouse/duplex market. Why? Because townhouses and duplexes make up such a small part of our housing inventory. According to this Missing Middle Study, townhouses and duplexes make up just 5.9% of Arlington’s housing inventory (3.7% are townhouses).

Fortunately (for some), we’ve recently had an unusual surge in new townhouse developments hit the market including:

Arlington Heights: 27 townhouses developed by NV Homes, walking distance to the East Falls Church Metro, ranging in price from about $1.1M-$1.4M
Trenton Square: 19 townhouses developed by Madison Homes, near the intersection of Rt 50 (north side) and Glebe and a short distance to Ballston, starting at around $1M
Morrison Hill: 17 townhouses developed by Beazer Homes, near the intersection of Columbia Pike and George Mason (across from the new Harris Teeter), ranging in price from about $800k-$900k+
Towns of 24^th: 8 townhouses developed by Evergreene Homes, in the Nauck neighborhood near the intersection of 395 and Glebe, starting in the mid-$800s
Park Nelson: 3 townhouses developed by District Line Development, in the Nauck neighborhood, ranging from $900k to $935k.
Townes at South Glebe: 16 townhouses across two sites developed by Christopher Companies, off of S Glebe between Columbia Pike and Shirlington, with prices starting in the upper $800s

Explanation of Data

For the data below, I looked at sales of townhouse and duplex properties over the last five years (except the last chart). I decided to separate these properties into ownership type: Condominium and Fee Simple.

Condominium ownership is generally used in multi-family buildings (apartment-style), but was popular in many of South Arlington’s townhouse communities in the mid 1900s. In condominium ownership, the HOA is generally responsible for what’s outside the walls of the home (roof, fencing, some plumbing, etc) and HOA fees are therefore (significantly) higher.

Fee Simple ownership means that you own the entire structure and the land your home sits on. The HOA fees are usually much lower because there’s less common ownership.

Over the last five years, we’ve had a nearly 50/50 split between condo and fee simple townhouse/duplex sales.

5-Year Townhouse Market Performance

Unsurprisingly, the townhouse/duplex market has followed the same general trends as the rest of the housing market, with a strong 2018, followed by a white hot 2019 and 2020, where the average townhouse/duplex sold for more than the asking price and 60% or more of homes listed sold within the first week.

Here are a few highlights from the data below:

There are a few ways of looking at appreciation here, but overall, the data suggests the townhouse/duplex market has appreciated ~20% in the last five years, with most of that coming in the last two years
The apparent drop in market value, by average sold price, of Fee Simple in 2019 is a misrepresentation of the market and due to the difference in the distribution of sales (more inexpensive/fewer expensive listings), the $/sqft tells a more accurate story for 2018-2019 Fee Simple pricing
The ~10% appreciation of the Condominium townhouse/duplex market (smaller, older, and less expensive than the Fee Simple market) in 2020 is likely due to buyer demand shifting away from similarly priced apartment-style condos in buildings towards private entry townhouse/duplex living with easier access to outdoor space (COVID related)
While quite different in size, price, age, and HOA fees, the Condominium and Fee Simple styles of townhouse/duplex ownership generally move in close parallel

Year Sold / Ownership Type	Avg Sold Price	Avg $/sqft	Avg Sold to Org Ask $	% Sold <7 days	# Sold
2016	$587,687	$349	99.0%	39%	441
Condominium	$473,288	$333	98.8%	38%	260
Fee Simple	$752,016	$381	99.4%	42%	181
2017	$617,917	$345	99.1%	40%	558
Condominium	$486,161	$333	99.4%	43%	313
Fee Simple	$786,243	$367	98.8%	36%	245
2018	$632,371	$367	99.2%	45%	533
Condominium	$501,229	$358	99.3%	47%	292
Fee Simple	$791,265	$381	99.2%	44%	241
2019	$642,569	$413	101.0%	60%	481
Condominium	$502,037	$385	101.4%	63%	220
Fee Simple	$761,025	$436	100.7%	57%	261
2020	$703,644	$435	100.4%	62%	561
Condominium	$552,263	$416	100.8%	61%	267
Fee Simple	$841,123	$453	100.1%	63%	294

What to Expect from Townhouse/Duplex Inventory

Below is a chart showing what your average Condominium and Fee Simple townhouse/duplex has offered buyers over the last five years of sales. While Fee Simple homes are roughly 43% larger, with an extra bedroom/bathroom, and about 25 years newer (likely to have a more open floor plan, larger bathrooms, and larger closets) the average Fee Simple home in 2020 was about $290,000 more expensive.

Ownership Type	Avg Bedrooms	Avg Full Baths	Avg Half Baths	Avg Total Sqft	Avg Year Built	# Sold
Condominium	2.2	1.9	0.5	1,418	1959	1352
Fee Simple	3.0	2.5	1.0	2,025	1984	1222

Sales Since 2019, by Decade Built

I also thought it would be interesting to compare what inventory looks like based on the decade it was built. The following table details what you can expect to find in townhouse/duplex inventory by decade built, based on sales since 2019.

Below are a few highlights from the data:

There are three “generations” of townhouse/duplex inventory: 1930s-1950s, 1960s-1980s, and 1990s-current. In each “generation” the size of homes being built increased significantly.
The oldest, least expensive homes sell the fastest, with an incredible 71% of 1930s townhouses/duplexes selling within one week on market. On the flip side, the newest, most expensive inventory can take a little longer to sell, with less than 50% of these homes selling within one week. However, even at 40% and 47%, that is still a fast pace for any market.
Of the 1,012 townhouse/duplex homes sold since 2019, 279 (27.6%) had an attached garage. On average, a townhouse/duplex with a garage sold for just over $967,000 and 77% of these homes were built in the 1990s-2010s. 75% of homes with a garage had a two-car garage, representing only about 20% of total townhouse/duplex sales and requiring an average purchase price just over $1M.

Decade Built	Avg Sold Price	% Sold <7 days	Avg Total Sqft	Avg BR	Avg Full Bath	Avg Half Bath	# Sold
1930s	$451,593	71%	1,018	1.9	1.3	0.4	129
1940s	$535,779	61%	1,361	2.2	1.9	0.1	301
1950s	$441,071	54%	1,117	2.5	1.4	0.6	54
1960s	$685,417	60%	1,871	3.2	2.2	1.3	30
1970s	$697,341	63%	1,953	2.9	2.3	1.2	83
1980s	$690,408	67%	1,618	2.6	2.3	1.1	198
1990s	$966,944	67%	2,128	3.1	2.6	1.3	99
2000s	$1,057,057	47%	2,560	3.2	2.6	1.2	60
2010s	$979,365	40%	2,218	3.5	3.2	1.1	88

For those of you exploring the purchase or sale of a townhouse/duplex in Arlington, I hope this information was helpful! If you’d like to discuss buying or selling strategies, don’t hesitate to reach out to me at Eli@EliResidential.com.

08Dec202008Dec2020

Condo Values Fall as Inventory Builds

elieliresidentialcom Arlington, Buyer, Home Owner Condo, condos, inventory 1 Comment

Question: Have you seen a decrease in condo values with all of the inventory currently on the market?

Answer: Over the last few months, I’ve written about the shift in the condo market (links here and here and here), which began around July and can be attributed to a historical number of units listed for sale while demand simultaneously dropped due to COVID. Indicators such as Months of Supply, Absorption Rate, Days on Market, and Sold to Ask Price Ratios have shown a more favorable market for buyers for the last four months, but it takes longer to establish changes in pricing (need enough data).

It’s been my experience working in this market over the last few months that prices seem to be down about 2-5% in many sub-markets, compared to late 2019 and the first half of 2020 (after surging since 2018). However, I dug into the data a bit more to see how condos that went under contract after July 15 compare to the sales of condos that went under contract from Jan 1 – July 14 2020. I used July 15 because that is when I really start to see changes taking shape in the condo market.

One point I’d like to make prior to sharing the data findings is that the data is based on condos that have sold/closed and there are many condos still sitting on the market or under contract that won’t show up in this analysis. The market has also worsened (for sellers) each month since July, so properties that went under contract in July/August likely did better than those later on in the year. Therefore, it’s likely that as the units close that are currently struggling to sell, or just now coming to market, the data will get worse (larger decrease in values).

Data Summary

I chose to segment the market in a few different ways to get a sense of how different sub-markets are experiencing the condo shift. When comparing relatively small data sets (like we have here), the best conclusions can be drawn by analyzing market segments that have lot of similarities such as condos along the R-B Corridor built in the last 20 years or mid-1900s (older) buildings. Here are some highlights from the data sets I reviewed:

1BR and 2BR condos along the R-B Corridor, built in the last 20 years, sold an average of 2.2% and 5.8% less, respectively, after mid-July. If you look at $/sqft, prices have dropped 1.1% and 3.6%, respectively. I believe this is the data set that most accurately reflects what’s happening in the condo market.
Older, less expensive condos across the County seem to have held onto their values better than newer, more expensive units. More expensive condos are closer in price to townhouses and I’ve seen more buyers favor lower-priced townhouses over higher-priced condos, as a result of COVID concerns. Buyers of less expensive condos don’t have many alternatives at that price point, other than renting.
The apparent appreciation of South Arlington since July 15 can be attributed to a different distribution of sales (higher volume of more expensive properties and lower follow of less expensive properties) than comparable units actually selling for more
The indicators (Sold to Ask, % Sold in <7 Days, and Days On) are what I find most interesting and a sign that the actual decrease in condo pricing isn’t fully reflected yet in the current data set:
- Across every sub-market, including those where the average price didn’t drop, buyers negotiated significantly more off the original asking price. Earlier in the year, three sub-markets averaged buyers paying at least full price and since July 15 there were none.
- The most interesting indicator is the huge drop in the percentage of units that go under contract within the first week.

Looking Forward

As I mentioned in the third paragraph, I expect future data sets for condos sold in the last quarter of 2020 and very early 2021 to show even larger decreases in values, relative to the first half of 2020. However, I think that with more positive news on COVID-19 vaccines, the start of the 2021 spring market, and more people returning to work (and realizing they value commuting convenience over extra space) I believe there’s a good chance the negative trends of the last 4-5 months will level off soon and begin to reverse by February/March.

I will continue to track trends in the Arlington condo market and provide transparency into what we’re experiencing. The townhouse and single-family home markets remain strong and I fully expect another appreciation cycle in 2021 for those sub-markets.

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

26May2020

Why Can’t I Find A House!?

elieliresidentialcom Arlington, Buyer Alrington, Home, Home Buyers, home buying, housing market, inventory, low inventory, new home, realtor 0 Comment

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	# Sold	Avg Price	Avg BRs	Avg Full BAs	Avg Finished Sqft
<1930	355	$945,345	3.6	2.4	2,302
1930s	562	$899,867	3.5	2.4	2,315
1940s	987	$827,197	3.5	2.3	2,121
1950s	961	$870,453	3.7	2.5	2,413
1960s	232	$915,818	4.2	2.9	2,760
1970s	104	$944,576	4.0	2.8	2,919
1980s	86	$1,006,018	4.2	3.0	3,193
1990s	96	$1,184,409	4.6	3.2	3,641
2000s	229	$1,430,905	4.9	4.0	4,697
2010s	584	$1,638,696	5.2	4.6	5,004
Total	4,196	$1,022,372	4.0	2.9	2,965

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.