New Construction

Will New Homes Prices in Arlington Drop Due to Toll Brothers Project?

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Will New Homes Prices in Arlington Drop Due to Toll Brothers Project?

Question: What impact will the new Toll Brothers community have on the Arlington housing market?

Answer: If you have enjoyed my real estate columns over the years, I would greatly appreciate your vote for Arlington Magazine’s Best Of Arlington, Real Estate Agent (in the Home section) and encourage you to support all of your favorite Arlington businesses with a meaningful vote!

Toll Brothers will open sales of 40 new single-family homes at The Grove at Dominion Hills very soon (projected by this fall) starting in the $1.9Ms (really $2M) and I suspect most of the homes will have a final price tag of $2.1M-$2.3M.

All 40 homes will not be available at once, rather they’ll be released in phases based on the pace of sales, but the addition of these homes to the market will have a significant impact on the supply of new construction homes in Arlington and I expect will put downward pressure on the price of new builds under ~$2.6M.

The Grove Will Be a Big Percentage of New Construction Supply

Arlington has averaged just over 95 new homes sold per year since 2018 (per MLS, which includes most but not all new homes sold) so even if it takes two years for Toll Brothers to release all 40 home sites, those homes will represent a significant percent increase in the supply of new homes in Arlington.

If you look at the sales of comparably priced homes ($2M-$2.4M), The Grove will bring an increase of 60-70% more new builds to market over the next 18-24 months (assuming that’s the timeframe they release all 40 home sites within).

Most new homes in Arlington are located in the 22207 zip code, with 52% of new home sales (275 of 524) since 2018. The Grove is in the 22205 zip code and while it’s just 1.5 miles from 22207 and 22205 also commands premium pricing and shares many of the same characteristics as the 22207 zip code, there’s no data to support whether or not the 22205 market is prepared to absorb 40 new homes at this price point. Of the 73 new homes sold in 22205 since 2018, just seven have closed at or above $2.1M – one more is under contract and three are for sale.

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And New Homes Are Already in a Softer Sub-Market

Adding that kind of supply to any market is bound to put downward pressure on prices, but I have no doubt that the market would happily gobble up dozens of 2,500-4,000 SqFt homes in the $1M-$1.5M+ range. However when you get into the 5,000+ SqFt market (I imagine most of the 40 homes will finish with 4,500-5,000+ SqFt) and in the $2M-$2.5M range, you enter into that is already pretty well balance between buyers and sellers, softer than the rest of the housing market, without the inventory from The Grove.

The first chart, courtesy of Altos Research, shows the percentage of homes with a price reduction in the “upper” price range of the Arlington single-family home market, which The Grove community will fall within. Notice the upward trend of price reductions this year highlighted by ~30% of homes reducing price this spring compared to previous spring markets with just 20-25% of homes with a price reduction.

I have seen this play out anecdotally as well with more new builds reducing the asking price or accepting larger discounts from ask than in years past. I would expect this trend to continue as the market adjusts to the Toll Brothers inventory rolling in later this year and in 2024-25

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The Months of Supply (MoS) chart below, a good measure of supply and demand where higher MoS suggests a market more favorable for buyers, shows us that the market for homes with 5,000+ SqFt is very much in balance between buyers and sellers, with about six Months of Supply. Most housing economists say that six MoS is a balanced market, below six favors sellers, and above six favors buyers. For comparison, the overall Arlington market measured 1.4 MoS in Q2 2023.

So this chart tells us that unless demand picks up sharply for large homes, the extra supply added by Toll Brothers will likely push this sub-market (~5,000+ SqFt) into a buyer’s market.

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Local/Smaller Builders Will Bear the Burden

Most likely, none of this will matter to Toll Brothers and it will be a problem for their competition (everybody else building in Arlington) to bear. Toll Brothers can afford to wait for premium buyers longer than smaller builders can, Toll Brothers has an exceptionally efficient and proficient sales machine including full-time sales staff, model homes, and a nationally recognized brand, and Toll Brothers can offer incentives smaller builders can’t compete with, most notably through the Toll Brothers mortgage company.

If I was a builder in Arlington, I would be careful over the next couple of years on projects in the $2M-$2.5M range with tight margins.

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.

Six Tips for Selling to a Builder

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Six Tips for Selling to a Builder

Question: I’m planning to sell my home to a builder to be torn down, do you have any advice?

Answer: For many homeowners with older, smaller homes in expensive markets, selling to a builder is the easy and most profitable option when you’re ready to move. If you live in a home like this, you probably get hundreds of calls and letter from builders, investors, and real estate agents offering to buy your home as-is.

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Here are six tips and ideas if you’re considering this option…

Don’t Overvalue Cash

The idea of somebody paying cash for your home sounds exciting and more reliable than somebody getting funds from a bank. “They pay cash” is one of the most common reasons I hear from homeowners explaining why they prefer selling to a builder.

The truth is that many builders don’t buy homes with a mountain of cash they have sitting around; they rely on strong banking relationships to finance their purchase with cash-like deals (the money is available quickly and easily).

The real value of cash is that a buyer can close quickly and does not require any bank approval, but a cash-like deal from a well-qualified buyer working with a great bank can often mirror this by removing any finance or appraisal contingency and closing as fast as the bank will allow (many can close in 2-3 weeks).

The contingency (or study period) structure and Earnest Money Deposit terms are more important than the funding source being a buyer’s private cash balance vs a trusted bank/lender. I would also argue that it’s more likely that an individual or builder cash-buyer will run into a cash crunch prior to closing than an established bank/lender.

Your Home May be Worth More to a Homeowner

It’s no secret how hard it is to find entry level homes these days. You may think that your current home with a small kitchen, old roof, and unfinished basement is only worth the land it sits on, but buyers are hurting for inexpensive homes, even if they need loads of improvements. Don’t assume that just because your home is small and dated that a builder is your only option.

Make sure you’re comparing builder offers to what you can get on the open market, taking into consideration other financial (e.g. differences in commission) and non-financial (e.g. timeline and showings) differences between the two routes. There may be little downside to testing the open market before committing to a builder, depending on your situation.

Your community will also appreciate your contribution to preserving the local tree canopy!

Builders Can Offer Attractive Rent-Backs

A rent-back means that you can live in your home after closing (aka after getting paid) for a specified period, usually for little or no cost, for months after a sale. For many sellers, this extra time is perfect for searching for your next home or apartment, with cash in-hand, or taking time to clear out decades of personal belongings.

A normal buyer can also offer a rent-back, and are often happy to, but if a home is being purchased using a mortgage for a primary residence, the buyer cannot offer a rent-back over two months. A builder, even if the funding comes from a bank, or cash buyer has no restriction on the length of rent-back. It’s well within reason to negotiate 3-4+ months of free or low-cost rent-back from a builder after closing.

Share in the Builder’s Profits

Jealous of the profit a builder will generate from building a new home on your lot? Rather than selling your home to a builder, consider negotiating an equity stake in the project and getting paid based on the sale of the new home. It’ll take 10-12+ months longer to be paid and there’s more risk, but you can make a lot more than you would selling your existing home.

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Use Missing Middle to Upgrade, Stay Home

The new Missing Middle zoning code may be a great solution for many Arlington homeowners by allowing you to partner with a builder to build a Missing Middle product (duplex, townhouse, or small condo building), live in one, designed to your specifications, and leverage profit sharing on the others to significantly reduce the cost of your new home.

The cherry-on-top is getting to stay in the same place you have lived in for years/decades!

Realtor Representation Can Be a Net Benefit

A direct sale without agents/commissions is one of the primary selling points builders offer and it’s certainly a good one, but representation and commissions come in many shapes and sizes that sellers can benefit from when selling to a builder. Benefits range from understanding how to measure the value/risk of contract terms like a study period or deposit, knowing what to negotiate for based on your needs/preferences, or effectively soliciting more bids to ensure you’re getting the best price.

Even though working directly with a builder can be simple, it’s important to remember that a builder’s core business is acquiring lots with favorable terms/prices, which runs counter to your best interests.

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.

Construction Underway on 40 New Toll Brother Homes

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Construction Underway on 40 New Toll Brother Homes

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:

How Will The Grove Impact the Market?

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.

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.

Influence of New Construction on Arlington Prices

reallivingathomeblog Arlington, Buyer, Seller , , 0 Comment
Influence of New Construction on Arlington Prices

Question: How much of an effect do expensive new construction homes have on the average prices in Arlington?

Answer: A couple of weeks ago I offered a mid-year review of the single-family housing (SFH) market in Arlington and average prices were a focal point. This week, we’ll look at some pricing data with and without new construction included to understand how much new builds influence our average prices. Please note that the data used below is based on new construction sales entered into the MLS and accounts for most, not all new construction sales.

New Construction Prices High, Effect Limited

So far in 2022, a new SFH home has sold for an average of nearly $1,000,000 more than resales. Sales of new SFHs have accounted for 9% of total sales but only account for a 6.8% increase in Arlington’s average home value. The numbers were similar last year.

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22207 Dominates New Construction Sales

Since 2018, the 22207 zip code has accounted for 54% of all new SFH sales in Arlington and so far in 2022, 22207 has accounted for 60.3% of new SFH sales. In 2022, new home sales have accounted for 14% of all sales in 22207 and are responsible for increasing the average home price in 22207 by $120,000.

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Average New SFH Nearly $2.2M

In 2021, the average new SFH crossed over $2M for the first time and after a 7% increase in average prices so far in 2022, the average new SFH is nearly $2.2M. There are still some markets where you might find a new house under $2M including 22205 where lots, and thus homes, tend to be smaller than neighboring North Arlington zip codes.

The 22204 zip code far out-paced other zip codes in average price appreciation for new SFH, increasing by 15% from 2021 to 2022. I expect similar double-digit growth in new construction prices in 22204 for another year or two until the gap between 22204 and other Arlington neighborhoods gets tighter. So far in 2022, new SFH outside of 22204 is selling for an average of over $2,273,000, which is 45.1% higher than new homes in 22204. The percentage gap of average prices of resale homes in 22204 versus other Arlington zip codes is similar, at 48%.

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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.

Condos Must Be Aware of New Fannie Mae Guidelines

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Condos Must Be Aware of New Fannie Mae Guidelines

Question: Can you summarize the important details of Fannie Mae’s new condo loan deferred maintenance requirements?

Answer: In response to the collapse of the condo building in Surfside, FL last year, Fannie Mae issued new “temporary” lending requirements, effective Jan 1 2022, for Condos and Co-ops to protect against future deferred maintenance issues and, hopefully, incentivize Associations to address issues faster.

I will highlight some of the key changes below, but I advise Condo and Co-op Boards/Management to review the policy changes in detail to ensure properties in your communities remain warrantable (banks will lend using traditional mortgage products), otherwise you’ll risk a significant drop in property values by limiting your buyer pool to cash buyers or those who qualify for alternative lending products (non-Fannie).

Significant Deferred Maintenance and Unsafe Conditions

This is the strictest of the new requirements, but also leaves a lot of grey area and subjective decision-making by each bank’s underwriter(s). The Fannie Mae language states:

“Loans secured by units in condo and co-op projects with significant deferred maintenance or in projects that have received a directive from a regulatory authority or inspection agency to make repairs due to unsafe conditions are not eligible for purchase. These projects will remain ineligible until the required repairs have been made and documented. Acceptable documentation may include a satisfactory engineering or inspection report, certificate of occupancy, or other substantially similar documentation that shows the repairs have been completed in a manner that resolves the building’s safety, soundness, structural integrity, or habitability concerns.

Significant deferred maintenance includes deficiencies that meet one or more of the following criteria:

  • full or partial evacuation of the building to complete repairs is required for more than seven days or an unknown period of time
  • the project has deficiencies, defects, substantial damage, or deferred maintenance that
    • is severe enough to affect the safety, soundness, structural integrity, or habitability of the improvements;
    • the improvements need substantial repairs and rehabilitation, including many major components; or
    • impedes the safe and sound functioning of one or more of the building’s major structural or mechanical elements, including but not limited to the foundation, roof, load bearing structures, electrical system, HVAC, or plumbing.

…These policies do not apply to routine maintenance or repairs that a homeowners’ association (HOA) undertakes to maintain or preserve the integrity and condition of its property. Also, if damage or deferred maintenance is isolated to one or a few units does not affect the overall safety, soundness, structural integrity, or habitability of the improvements then these project eligibility requirements do not apply. Examples of this scenario include water damage to a unit due to a leaky pipe that is isolated or damage from a small fire impacting the interior of a specific unit…”

It’s possible a Fannie Mae loan can be approved on one unit and denied on another. The grey area comes from 1) how the Association responds to the questionnaire sent by the lender and 2) how each lender’s underwriter(s) determine what qualifies as significant/substantial deficiencies. It’s possible that the interpretation of a question, and thus the way that question is answer, can change based on who from the Management company is responding. The same difference an interpretation of a response and support information can occur between underwriters at different banks.

Special Assessments

Associations should be much more careful when choosing to issue a special assessment (as opposed to borrowing or increasing condo dues) because of the extra scrutiny that now applies for loans and possibility that issuing a special assessment may cause properties in the building to be unwarrantable. The Fannie Mae language states:

“Any current or planned special assessment, even if paid in full for the subject unit, must be reviewed to determine acceptability… The lender is expected to obtain the financial documents necessary to confirm the association has the ability to fund any repairs. If the special assessment is related to safety, soundness, structural integrity, or habitability, all related repairs must be fully completed or the project is not eligible. Additionally, If the lender or appraiser is unable to determine that there is no adverse impact, the project is ineligible.”

Reserve Requirements

Associations are now at risk for loans not being approved if they are not allocating 10% or more of their annual budget towards Reserves. In my opinion, this is the most unreasonable of the new Fannie requirements because it doesn’t take other relevant details into account like whether or not the account is overfunded or the recommendations of the Reserve Study. To issue a blanket requirement for every Association to contribute 10% of their annual budget to Reserves is bad policy.

However, there is some flexibility in this requirement. Borrowers putting 10% or more down can get an exception that will allow them to proceed with the loan. Borrowers with less than a 10% down payment have to go through an expensive and time-consuming exception process.

The full guidance letter from Fannie Mae can be downloaded here.

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 Real Estate | @properties, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.

2021 Real Estate Market Review: Single-Family

elieliresidentialcom Arlington, Buyer, Home Owner, Investor, Seller , , , , , , 0 Comment
2021 Real Estate Market Review: Single-Family

Question: How did Arlington’s single-family home market perform in 2021?

Answer: Last week we reviewed the performance of the condo market so this week we will take a look at the market that has been a topic of conversation across the country for well over a year – the single-family (detached) housing market.

Appreciation Was Strong, Not Exceptional

The 2021 Arlington single-family market was fiercely competitive and experienced its highest appreciation in years. However, the shift in market conditions (demand and price appreciation) was not nearly as dramatic as other regional or national markets that have made headline news over the last 12+ months.

Why? Because thanks to strong market fundamentals and Amazon’s 2018 HQ2 announcement, the Arlington market was already exceptionally competitive and expensive, relative to most other regional and national markets, prior to the COVID-driven housing market mayhem.

Here are some highlights from the chart and table below (22206 and 22209 are not included due to lack of single-family homes sold):

  • The average and median price of a single-family home in Arlington increased in 2021 by 6.2% and 7.2%, respectively. Excellent appreciation for any homeowner, but not the double-digit appreciation other regional and national markets experienced last year.
  • Nearly 50% of homes sold for more than the asking price and didn’t last more than one week on market
  • More single-family homes were listed and sold in 2021 than any of the last five years. Had supply been closer to the ~1,000 homes sold in the previous three years, I suspect average and median prices may have climbed closer to double-digit year-over-year increases.
  • The median price of a house in Arlington exceeded $1M for the first time in 2021. The average price climbed above $1.2M in 2021 and has been above $1M since 2018.
  • The average buyer paid 1.1% over the asking price, which equates to about $13,000 over ask.
  • Of the homes that went under contract in one week or less (just under half), the average buyer paid 3.7% over the asking price
  • In 2017, the majority of homes (39%) sold for less than $800k, in 2021 just 15% of homes sold for less than $800k (this includes teardowns) and 19% sold for at least $1.6M.
  • In each of the last three years, over 40% of homes have sold for $800k-$1.2M

Shake-up at the Top of the Zip Code Rankings

We have a new club house leader in highest average sold price by zip code! With a 15% year-over-year increase in average price, 22213 (western Arlington) finished 2021 with the highest median and average sold price.

But wait, it gets even more interesting! Despite boasting the highest median and average price, the 22213 zip code actually has the lowest average $/SqFt, 4th lowest cost per bedroom, highest average year built by 10+ years, and tied for largest average lot size. So depending on how you look at it, 22213 is the most expensive or best value!

It’s also worth noting that 22213 has the fewest sales of the zip codes I included, with barely enough total sales for me to be comfortable using it here.

The 22201 zip code, which surrounds the Rosslyn (well, Courthouse)-Ballston Corridor, commands the most money for the least house and yard with by far the highest $/SqFt, $/Acre, and $/Bedroom.

Something I would like to highlight with the data below is that change in average price is not necessarily reflective of actual appreciation of individual homes. For example, while 22201 and 22202 show 1% and 3% year-over-year price change, homeowners in those neighborhoods can rest assured that their home almost certainly appreciated more than that in 2021. The uncomfortably low change in average price can likely be attributed to the property mix that was sold in 2021 rather than actual appreciation. Real estate data can be difficult and full of caveats when you’re dealing with relatively small sample sizes.

New Construction, Expensive Homes Lead the Market

The average price of a new home increased 13.1% in 2021and exceeded $2M for the first time ever. New homes are bigger than ever, with the average total finished square footage coming in at just under 5,300 SqFt and averaged 5.5 bedrooms with 5.1 full bathrooms (nearly one full bathroom for each bedroom).

In the last table, I broke the market in each year down by price range (lower 25%, middle 50%, and upper 25%) to see how each cross-section of the market performed year-over-year. The 8.1% jump in average price of the lower 25% in 2020 was likely due to the wave of people leaving shared living (apartments/condos) and the 8.4% increase of the upper 25% in 2021 is likely due to the increased demand of larger, new homes that offer more work-from-home and at-home schooling space for families and low interest rates allowing buyers to increase their budgets.

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.

Cost of New Construction Homes in Northern VA

elieliresidentialcom Arlington, Buyer , , , 0 Comment
Cost of New Construction Homes in Northern VA

Question: How has the cost of new construction single-family homes changed over the last few years?

Answer: First, thank you to everybody who voted in last week’s poll to decide how we would donate to locate charities. Arlington Food Assistance Center (AFAC) received almost 2/3 of the vote and thus a donation of nearly $1,000 to help feed our neighbors in need. Now on to this week’s real estate topic…

The cost of a single-family home has skyrocketed locally and nationwide, with the average cost of a single-family home in Northern VA increasing 31.6% from October 2019 to October 2021. This data includes resales of existing homes and new construction, with the majority of the sales being resales. Let’s take a specific look at how the cost of a new single-family home in Northern VA has changed over the last three years (hint: they also got much more expensive!).

A few quick notes about the data:
  • The data is limited to what has been entered into the MLS (Realtor database of record) and not all new construction makes it into the MLS, but the majority does and thus gives us an accurate reading of the market
  • Northern VA aggregate totals includes Arlington, Fairfax, Loudoun, and Prince William Counties plus the Alexandria, Falls Church, Fairfax, and Manassas Cities
  • In the table below Alexandria, Falls Church, Fairfax, and Manassas refer to the County, not City, portions
Here are some highlights from the data I reviewed:
  • The average cost of a new single-family home in Northern VA increased a staggering 25.9% to an average sold price over $1.6M from 2019 to 2021
  • The biggest increase from the localities I reviewed was in Aldie, which increased 37.5% to an average cost over $1.25M from 2019 to 2021
  • The most expensive County for a new single-family home is Arlington, coming in at an average sold price just over $2M in 2021, trailed only slightly by Fairfax County, with an average sold price about $100,000 less than Arlington
  • The best value, on a price per square foot basis, for new construction in 2021 is in Manassas ($173/SqFt) and Dumfries ($183/SqFt) and the least value, on price per square foot, is Mclean ($380/SqFt) and Arlington ($379/SqFt)

If you are interested in learning more about new construction options in Northern VA or the DC Metro, feel free to email 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.

Financing a Major Remodel or New Construction

elieliresidentialcom Arlington, Buyer, Loan, Seller , 0 Comment
Financing a Major Remodel or New Construction

Question: We are deciding between buying a lot to build a new house on or expanding and remodeling our current home. Do you have a recommendation for a lender who can finance these projects?

Answer: Over the years, I’ve found that one of the best banks for construction or major remodeling loans, and a favorite amongst local builders, is Sandy Spring Bank. They are large enough to offer some excellent, customized products with great rates and local enough that relationships with builders and homeowners matter to the success of their business. That’s usually a good combination for a business, especially lenders.

I have worked with Skip Clasper (sclasper@sandyspringbank.com), a loan officer at Sandy Spring Bank, for years so I reached out to him to gather up some details on their popular construction and remodel loan products.

Remodel Loans

Sandy Spring Bank will give you a loan to finance the cost of your remodeling project based on the expected post-construction value of your home. Given how high market values are now, that means you can get a significant amount of financing to expand and remodel your home.

There are a few things that stand-out about the way Sandy Spring Bank handles these loans:

  • They offer 90% loan-to-value (LTV), meaning you can get financing for 90% of the future value of your completed home. Most banks limit their loans to an 80% LTV.
  • They accommodate a flexible draw schedule. Banks give borrowers/builders draws to pay for construction incrementally as the project progresses. Many banks offer their draws on a fixed schedule, but given the unexpected twists and turns construction can take, a flexible draw schedule makes for a better process for everybody.
  • You only pay interest on the money you have drawn from the loan so you only pay interest on the money you’ve used, not the money you will use
  • Interest rates are competitive with rates you will find on standard, non-construction loans. This is noteworthy because oftentimes specialized loan products require paying higher interest rates.

Construction Loans

A construction loan allows buyers more control over building a new home because it allows you to finance the purchase of the lot and construction yourself. That means you can purchase the lot you want (easier said than done) and choose the builder you work with, as opposed to hoping that the builder who acquires a lot you like is also a builder you want to work with.

Here are some highlights and key pieces of information about the Sandy Spring Bank construction loans:

  • You can purchase a tear-down/lot and finance the construction of your home with a single closing. After closing on the tear-down/lot, they will finance the construction, and then the loan will automatically convert into a permanent 30-year loan after the construction is completed.
  • The loan is interest-only until construction is completed, making your payments during the construction phase much lower
  • Sandy Spring allows cross-collateralization on construction loans, meaning they will include equity in your current home towards your future down payment when considering your loan application/qualifications for your construction loan
  • It will take 6-8+ weeks to finalize the loan on your tear-down/lot purchase, which may put you at a disadvantage in some cases if you are competing against buyers or builders who are paying cash or using a standard loan product that can close faster
  • All construction loans are Adjustable Rate Mortgages (ARMs), but can be refinanced into a fixed rate mortgage with a second closing
  • Interest rates are competitive with rates you will find on standard, non-construction loans. This is noteworthy because oftentimes specialized loan products require paying higher interest rates.

If you’d like to talk with Skip Clasper about Sandy Spring’s remodel, construction, or other loan products the best way to reach him is by email at sclasper@sandyspringbank.com or phone at 301-928-7523.

New Construction Homes vs Recently Built Homes

elieliresidentialcom Arlington, Buyer, Home Owner , , , , 0 Comment
New Construction Homes vs Recently Built Homes

Question: How much more do new construction homes sell for compared to similar homes that were recently built?

Answer: Roughly 100 new construction single-family homes have sold each year in Arlington since 2015 (per BRIGHT MLS). The cost of a new home shot up in 2018 and again in 2020 and 2021, but the size, layout, features, and design of the homes have remained mostly consistent.

Table 1: Arlington New Construction Sales Since 2015

Now that we’re seeing more resales of recently built homes, I thought I’d take a look at how the price of new construction homes compares to similar homes built in the last 5-6 years. To do this, I looked at the 2021 sales of new construction homes vs the 2021 resales of homes built from 2015-2019 in the 22207 zip code (by far the highest volume of new/newer home sales in Arlington). I also removed a few outlier sales so that we have a more accurate comparison.

Figure 1: New Construction at 3196 Pollard St Arlington VA 22207 ($2.3M)

New construction homes sold in 2021 sold for 16.9% more than similar 2021 resales of recently built homes (built 2015-2019), however, new construction homes were an average of 22% bigger (based on total finished square feet) than 2015-2019 builds sold in 2021.

As a result, new constructions homes actually sold for a lower price-per-square foot on both above grade (not including the basement) and total finished calculations. Thus, one could argue that new construction, with its lower price-per-square foot and brand new systems (HVAC, appliances, roof, windows, floors, etc), is a better value…but it’ll cost you a lot more in dollars to get there.

It’s also worth noting that while you get brand new systems in new construction, a resale has (hopefully) already gone through the initial pains of breaking in the house and the inevitable issues that come up for owners of new construction. You may also find that the first owners have invested in some improvements that a builder may not have such as upgrade exterior living spaces or landscaping.

Table 2: New Construction vs Resale of Recent Construction

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.

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 Real Estate, 4040 N Fairfax Dr #10C Arlington VA 22203. (703) 390-9460.