Podcast with ARLnow: Market Conditions, Missing Middle, and More

Answer: Last week I joined ARLnow founder and leader, Scott Brodbeck, for a live podcast discussing a range of local real estate topics including market conditions, the struggle of buying, Missing Middle, and more! Scott and I hope to continue doing live podcasts when there is a good intersection of news and real estate. Look for us to go live on social media so that you can listen in or ask questions live on the podcast.

The full podcast transcript is copied below, if you’d like to search for specific words and look at where it’s discussed in the video:

Scott: [00:00:00] All right. So thank you for joining us today. We’re going to talk for about half an hour this afternoon about the state of the Arlington real estate market. This is the first time we’ve done anything like this live. So it’s a bit of an experiment. So bear with us if some of the technology does not go perfectly.

So Eli, you are noted by our readers from your Ask Eli column for just having mounds of data from which you pull insights. What is your take on the current state of the real estate market in Arlington, where we have 8 percent interest rates, and it seems like a weird place. Help us out. What’s going on?

Eli: Yeah, so it is a weird place. And where we’re at now is oftentimes, not just this year, but in other years, you get some scary feelings about what’s next. Things start to slow down and it’s generally a fairly significant slowdown from earlier in the year. And so we are experiencing fairly normal seasonality right now.

The metrics are [00:01:00] aligned with what we usually experience this time of year. Demand is petering off. Inventory is slowing down. Properties are sitting on the market a bit longer. There’s more price reduction. So this happens this time every single year, and oftentimes people make the mistake of getting lulled to sleep and thinking that they can just let the holidays come and roll easily into

the next year and buy. But that’s what everybody plans to do and oftentimes we see demand in the market quickly turn by the second or third week of January. But what we’re seeing is a little bit extreme of a version of some of those data points. And it’s because both buyers and sellers are getting pulled away from the market because of primarily the high interest rates.

There’s a lot of both parties sitting on the sideline. And so the change in days on market that we’re experiencing now is more significant [00:02:00] than compared to earlier this year than what we would experience in a normal year. We do have a larger percentage of properties on the market that are reducing their price, but we’re talking about just percentages.

So right now in Arlington, I think something a little under 40 percent of homes have reduced the price that are sitting on the market. That’s normally like in the mid thirties. And so it’s similar, but a little bit more extreme version of that. We’ve got low inventory, but an extreme version of it, right?

We are down 20, 30 percent in the amount of inventory that would normally be coming to market this time of year, even though it’s normally still pretty slow. And all of that, even though demand is particularly slow because of high interest rates, there’s enough sellers sitting things out and sitting on the sideline and keeping supply low that it’s like this balancing effect on the supply demand. And prices are mostly staying level. There’s more deals [00:03:00] out there right now than you would expect in early part of the year, but we’re certainly not bottoming out, even though it might seem that way to some sellers who after three weeks don’t have an offer and their hair’s on fire a little bit, but that’s normal for this sort of this time of year.

Scott: So if you were to compare this market to let’s say 10 years ago, I don’t remember where the interest rates were 10 years ago, but it certainly wasn’t at two and I believe lower than eight, correct me if I’m wrong, 

Eli: –four fives ish. In the early part of the decade there. We had moved into a low interest rate environment due to the stimulus and everything from the great recession

and it was low rates. And so I think generally, if I recall, we were in the fours and fives. 

Scott: So is this at all comparable to that market where the interest rates were a little slightly higher than they were a few couple of years ago? I don’t know. I was not in the real estate market myself at that point.

Eli: You know, the most recent memory people have of major shifts in the real estate market [00:04:00] is the great recession, right? Is kind of 11, 12, right? And people have been looking for patterns that would suggest we are moving into a similar pattern as that, but it’s just a totally different situation. It’s a wildly different set of economics that we’re dealing with. It’s not comparable really at all. That shock was one brought on by collapsing mortgages, enormous supply, people unable to afford their homes, short sales and foreclosures, which were sending tons of inventory to the market while at the same time, demand was down because markets were collapsing in general, stock prices were down, people were losing their jobs. And that’s why prices dropped. And so the recovery phase was a winding down of all that inventory and a rebuilding of demand as people started to get more confident around 11, 12, 13. We don’t have [00:05:00] that kind of inventory, right?

And so prices are not falling. I think it, one, speaks to the kind of the stability and strength of the Arlington market and the local DC area market. That’s what a lot of the markets in the country are experiencing just because supply is so low. So it’s not allowing the week in demand and the interest rates to really push prices down.

And so there’s not really a lot of similarities to what we had happening 10 to 15 years ago. And this interest rate shock is significant if rates come down a little bit, like they did moving through the recession, which helped to stimulate some of the market. If we drop by a percentage or two, I think, hold on, right?

If the average rate comes down to five and a half, 6%, which I don’t think it will anytime soon, but if something happens that causes that to happen relatively quickly. I mean, hold on, there’s going to be a wave of buyers coming off the market. And are off the bench and much faster than sellers will come off the [00:06:00] bench and decide it’s time for them to move.

And things could get pretty interesting.

Scott: That would be exciting. Although there are a lot of people saying that these interest rates are going to remain higher for longer. So we’ll see what happens. We’ll do a quick reset here for anybody watching live. Uh, we’re talking with ARLnow real estate columnist, Eli Tucker. He’s been doing our real estate column for four years and you agreed, Eli, thankfully to do this little experiment with us where this is for a podcast, but it’s also going out live. We’re accepting questions. If anybody’s watching on Facebook right now, you’re welcome to type a question into the comments and we’ve never done this before. So, please forgive us if it’s not working exactly as we were intending. Eli, you talked about the demand is still there in the market and DC area potentially remaining strong. I wanted to ask you about two potential factors that might be playing into the market right now. You have 10, 000 plus employees.

We don’t know how many exactly moved here for the job versus we’re already [00:07:00] there. But you have a very large private employer that keeps hiring people down in the Pentagon city area. Do you see any evidence that is contributing to increased demand on the ground in Arlington? 

Eli: Yeah, I have found a handful of new Amazon employees who have moved into the area shopping around listings, open houses and things. So you are seeing some signs of that. I don’t think that it is enough that it has caused a real material effect On the demand in the Arlington market, because they’re not only buying in Arlington, right? They’re going to be looking across the DC metro area, Fairfax County, Alexandria. And so I’m not sure where we would find support to say that these new employees moving here are creating some sort of new demand, but I haven’t gotten that sense at all.

I think what we saw, the biggest impact that we will feel is that [00:08:00] initial spark that we got, particularly in the condo market when they announced at the end of 2018 and what that did to the condo market from late 2018 to early 2020 until COVID shutdowns sent condo market into a tailspin. That market appreciated up 8, 10 percent in that time, which is totally abnormal for the condo market.

And so I think it’ll be more incremental, what we see and feel. And I think it will be hard to truly measure, especially with all the other employment that’s happening around here, and all the people coming and going. Turning over of political offices and things like that. I think it’ll be hard to truly measure.

Scott: So another factor that’s potentially weighing into the real estate market, although on a small scale at this point, to be clear is Missing Middle. We’ve done numerous stories on the passing of the Missing Middle ordinance in Arlington. It essentially takes what were formerly area zone just for single family housing and [00:09:00] opened it up to buildings of up to six units a piece.

We’re seeing a fair number of duplexes townhomes in terms of permits for that kind of construction. We’re also seeing some six plexes mixed in there, mostly around the Metro corridor. But we’re just at the beginning of this, cause it was only a couple of months ago that they opened up the permitting process and in terms of.

Missing Middle units getting built, I’m not exactly privy to how many are under construction, if any, but we’re in the very early stages of this. And even if there was a flood of applicants, the county in their approval of Missing Middle limited the number that can get approved in a given year. So this is a bit of a small scale thing. But nonetheless, I’m sure a lot of people are wondering. Is it having any impact, excuse me, on the real estate market here in Arlington? 

Eli: From a data standpoint, from a pricing standpoint, no. There’s absolutely no impact to the market at this point from Missing Middle The impact to the [00:10:00] market is all of the noise and the conversation around it. That’s where all the energy is coming from and the policy side of things.

And also, unfortunately for the handful of neighbors who are seeing Missing Middle approved applications or Missing Middle pending applications right next to them, where it’s going to directly affect their parking and their experience and privacy and things on a day to day basis. That impact is very real. But from a market standpoint, I think we are a long ways off from seeing it move the needle in any meaningful way.

I think they started accepting applications July one, if I’m not mistaken. And in the first month or so, there were quite a few applications coming in. But it’s really slowed down to a trickle since then. Maybe one new application a week, a lot of applications getting rejected and sent back for review [00:11:00] and a handful, I think maybe seven or eight total have been approved.

And from anybody that I’ve talked to and the numbers that I’ve run, I’ve looked at this from a number of different angles with a couple of developers and some architects, and it’s really hard to find situations where you can justify paying more for land for a teardown for Missing Middle at this stage than you would for single family.

And so I think most of the folks buying up or looking for Missing Middle, especially with the lawsuit out there that provides a big question mark as to what this all looks like and a lot of potential risk, I think that it’s very hard for somebody who’s paying attention to the market and understands the market to pay more for land than they would be able to profit and do well with a single family house.

And so I don’t think it’s moving the needle very much. And there’s just so many unknowns right now. For me as [00:12:00] a real estate agent, where it’s my job to value things, to understand what the appropriate acquisition price should be, what the likely out sale is going to be for a four unit or a six unit, that’s really hard right now because we don’t really know what these are going to look like. We don’t really know how the market is going to respond to different product categories and in locations that haven’t really had those types of products in them. So when you have that much unknown in what the outsale is going to be, you have to be particularly careful in what you’re acquiring them for.

So I think that we’re going to slowly learn about how the market is going to interact with missing middle, where it works, where it doesn’t work. There’s going to be some mistakes and successes. There’s going to be some great ideas and some bad ideas. And I believe this was intentional from the county that it will probably be three, four, five years before there’s enough examples and we’ve seen enough where more people are willing to put their money in confidently and actually [00:13:00] start to intentionally buy up Missing Middle and implement it. If there’s profit there. We may find out in three or four years that there’s very little room for missing middle to be profitable in a lot of areas and that’s possible.

So I think we’re a ways off from seeing an actual effect on the market. Some people I think would applaud that. I think a lot of people would also say you totally missed the point and we missed the boat here in the policy. 

Scott: You mentioned that it’s hard to get it to pencil out and people who know the market might be avoiding it.

What are you seeing in terms of who’s building it? Is it smaller builders that don’t do as much work in Arlington? Do you see any of the bigger builders dipping their toe in the water to see how it goes? What are you seeing from that standpoint in terms of who is building this out there? 

Eli: Like most one-off development in this area, it’s a combination of those things. There are some small folks names I don’t recognize, but there are also some bigger players getting involved. I don’t think [00:14:00] that they would have any problem with being mentioned in this, but Classic Cottages, they’re a huge player in the single family development game in Arlington. And as far as I can tell, they hold the most pending and approved permits of anybody. There’s not a whole lot out there. And I think they probably have four or five, maybe five or six in process or approved. And I spoke with them and one of the fears that people have is that these are going to turn into rentals.

And I certainly understand that concern. I don’t think that the numbers work out in a lot of cases for these to be rentals in a lot of the areas, but Classic Cottages has no intention to rent, right? This is for resale. They plan to build to a similar style and quality as their 2 million dollar single family homes, right?

It’ll be tuned to the price point, but they’re very conscious of their brand and their name, and they don’t want to spoil what they have in the rest of the market. I think that any builder who has a brand in Arlington, I think we will see some of the mid sized to bigger [00:15:00] players getting involved eventually.

I think that they’re going to be very careful to deliver a product that represents also the quality of their single family product. And so it is a combination. I also think that a lot of the applications in are just from homeowners. I’ve looked back at some of the public records and sales history, and it doesn’t look like there’s been, for many of these, a sale recently. To me, that indicates that a lot of these applications are from, you know, existing homeowners.

 They might’ve been renting the property out or they’re living there and they’re just curious that they’ve heard all of this money that can be made for Missing Middle. It costs nothing to put an application in. It’s fairly simple to do. You have to provide some plans and permits. That’s not very difficult. I am not convinced that a lot of those folks have truly run the profit and loss models that a builder would to bring it to market. And so, for a lot of those folks, I wonder, and I’ve wondered [00:16:00] publicly on some of my articles that I don’t know how many of these will actually make it to construction because when it comes down to starting to spend a million bucks plus on construction, that’s where really the rubber meets the road.

And you start to get into the land disturbance stuff with stormwater, which is really challenging in Arlington to get through those. And none of that has not been done yet to get to an approved Missing Middle permit. So I think that there’s also a lot of homeowners who are maybe going to get to the approved application and then try to find a builder or an investor who wants to buy a lot from them with an approved application.

And who knows at that time, if anybody’s going to agree that it’s profitable. I would guess that there is a percentage of properties that fall into that category as well. 

Scott: So a bit of a fraught question. Apologies if it touches on a sensitive area But I was wondering what do real estate agents in Arlington in general think of Missing Middle?

We’ve [00:17:00] cited in our reporting a newsletter from a real estate agent, natalie Roy, who seems to be very much opposed to it. And in fact, ran for county board essentially on a platform opposed to it. On the other hand, there are a lot of people assuming in comments, both through elected officials and in our comment section that developers and real estate agents must be all for it because you’re gaining more inventory.

So where, where does the truth lie? 

Eli: You know, Natalie, I think is doing amazing things reporting on Missing Middle and I commend her for that. I think she’s making some great arguments and really supporting a large percentage of the community. Her and I are actually overdue for some coffee to talk about Missing Middle. She disagrees with a number of my opinions on the topic. And Natalie, if you listen to this, we’re still on for coffee. I think a lot of it has to do with where the agents live. And I think for agents who live in Arlington and can be negatively affected by missing middle, they’re in a [00:18:00] single family neighborhood.

Like most people who live in single family neighborhoods and don’t want that disrupted, they’re strongly against it. I’ve talked to multiple agents who are in that situation, or most of their clients are in those positions and they don’t like it. This isn’t going to be a seismic shift in the amount of business that we can do.

Right? You’re talking about maybe if it really becomes effective, a couple dozen, a few dozen new units per year. Maybe. And mostly condo type units and stuff. And so it’s not going to be a game changer for our industry by any means, the way that the code is put together. So I would disagree that the agent community overall is supporting it just because it’s more business for us. Personally, as somebody who spends a lot of time in the housing industry, both as an Arlington resident and has a single family house with a couple of lots around me that I look at and I say, “ooh, that lot behind me could be Missing Middle. There’s a couple [00:19:00] opportunities here in my neighborhood.” I don’t like that as a resident, but I understand it. And I think that there’s progress that can and should be made on how to do this the right way. So I support it from understanding that there are gaps in our housing market that would be nice to fill.

I don’t think that the policy and the code that we have in here is going to do a good job of filling that. But hopefully this is the start of a longer term conversation to bring some new inventory and some new product to market that actually does fill some of those gaps. But without dragging the conversation all too long– No, I don’t think that the agent community is salivating it over all of this new business that’s going to come from it.

I just don’t think it lines up in that way. 

Scott: So it sounds like your answer to this is going to be yes. But just out of curiosity, is the middle actually missing? Is there a dearth of townhomes and duplexes and those kind of smaller scale [00:20:00] housing units that are somewhere between like a condo, one bedroom condo and a high rise and a single family home on its own lot?

Eli: Yeah, there is. So three and four bedroom properties exist, but a lot of those are old properties built in the forties to sixties when a lot of single family in Arlington was built and there’s not a whole lot you can do with it. We don’t have, in my opinion, enough townhouse and duplex product, and we’re certainly not missing one and two bedroom condo multifamily type housing.

That’s a ton of our housing, both rental and for purchase. And so I think when I talk about the policy, not really, in my opinion, working for what we actually the gaps that we need to work. I think the policy is going to ultimately lead to more one and two bedroom condo style development and that’s not what we need.

That’s not really what anybody is looking for. And I strongly [00:21:00] disagree with the way that the policy was structured that allows that to be the overwhelming profit driver for developers and really one of the only good paths forward. What we’re missing are the kind of 2,000 to 2,800 square foot, three to four bedroom, two and a half, three full bath that product where a young family or established family can move there, live there comfortably. It has the conveniences and the features in the floor plans that families right now are looking for. That I believe is where the gap is. And I think that it would be fantastic to find some ways to deliver that. I also think that for much of Arlington, when we talk about real neighborhoods, the suburbs where people don’t want these four to six plexes, they’re just out of place.

Those products, I do think are appropriate in some of those neighborhoods in a lot of cases, right? I don’t really have a problem with a duplex or even a well done [00:22:00] triplex or something, or we’re on a large lot for townhouses, which is not allowed now going in some areas, I think that’s the type of product that there is a gap for, but it’s not the product that is really being incentivized and the code really allows the developer community to create. 

Scott: So somewhat related question, and going back to our real estate market conversation among people my age, and I just turned 40. A lot of people my age who I’m friends with in Arlington, they are in the same boat. They bought a house at some point within the past few years when interest rates were low, or they bought a house earlier and they refinanced.

And now they’re sitting there with a low interest rate. Sitting pretty. But they bought what they expected to be a starter home. And there is just no world in which it makes any economic sense for them to trade up and go from a 3 percent interest rate or something around [00:23:00] that to an 8 percent interest rate.

Enviable position if you’re currently in the market and you’re going to be starting with that 8 percent interest rate. But nonetheless, I talked to so many people are in the same exact boat and they’re thinking, do I renovate? Do I do additions? A lot of them are taking that option, but what does that do to the market?

When you have people who bought assuming that they would be trading up at some point and now are like, I guess I stay here. 

Eli: It’s so frustrating. I have eight to ten clients that I have been working with lightly for the last kind of year and a half who are in this position and they can stay in the house they’re in. And it just is crazy to triple or quadruple their monthly payments. To make that upgrade. This is the problem across the board. It is freezing the market and it’s not providing the inventory because when those folks do end up buying now [00:24:00] a starter home a duplex or a large condo or small single family house comes to market and it allows the market to churn and move, which is good because it means more people are moving into the homes that they want to be in that they’re happy. You want that. Housing is such a key ingredient to the American life and happiness, and you want people to be able to matriculate through the housing system and what we also aren’t getting is the folks at the top of the housing system, the empty nesters and retirees selling those bigger homes that they have all this extra capacity and they’re in the same boat. It doesn’t make sense for them to sell because you know, they’re going to downsize and end up in something as expensive unless they decide to pay all cash, but everything’s frozen and I think it’s going to take a while to unfreeze it. I’ve seen studies that say we’re really not going to be able to [00:25:00] unfreeze the market until rates get to about 5%. Like that upper fours, low fives is when a lot of these folks who are sidelined, who don’t want to make that move will start to come back to the table. It’s really tough because you’ve got a lot of people who have worked very hard, who have great incomes, great savings and deserve to be able to move to the next stage of housing in their lives and with their families and they can’t and renovating isn’t pretty either. Those costs have skyrocketed and that’s not necessarily the right ROI long term for a lot of families. And so there’s, when you’re in these situations where there’s not a lot of great alternatives, it’s really hard, and there’s just a lot of frustration in the housing market. Not a lot of good answers. We’ve put ourselves in a really tough spot with people locked into super low rates and now in an environment where they might not come down to that five level anytime soon. I wish I had an answer. 

Scott: I can confirm [00:26:00] that it’s frustrating, even though I count my blessings that, you know, we bought in here in Arlington when we did where it just feels like we’re stuck, which is, it’s not the worst, but it’s also, you went into it with one expectation and now it’s a completely different reality and there’s no indication that it’s going to change anytime soon. So we’ll see. Eli, we’re at the end of our half hour that we said we were going to go here. Thank you again for being gracious with your time. I did want to throw in one bonus question at the end for those who might be interested in the behind the scenes here.

So you’ve been doing the Ask Eli column on ARLnow for a number of years. You can tell me the year it started, but what sort of reaction do you get? Do you ever get stomped in the street and Hey, you’re the real estate columnist guy. 

Eli: Yeah, what I get from a recognition standpoint is people will look at me and they, it’s a familiar face type thing, but like, it’s not easy to say, “Oh, you’re from the columns.”

So if I mention it, or I ask if they read [00:27:00] ARLnow or if I’m at an open house and I mentioned it, they go, “Oh, yes.” But it’s rare that somebody will actually stop me and say, “Oh, you do the column” because it’s a really hard thing to place out in the wild, but I’ve loved it. It has taught me so much about real estate and the Arlington market and all the time and the data.

I really enjoy it. And I know the data that I get into doesn’t really appeal to everybody, but it’s really helped me grow as a professional a lot. And I appreciate very much having the platform, the opportunity to do all that. And it’s really been a wonderful experience. Eight years in, and I hope to be having these conversations and another eight years.

Scott: I appreciate you being willing to be the guinea pig for our first discussion like this. It’s much appreciated. You always bring such insight to conversations like this when you have them with myself or other people you’ve talked to who I know and in the column itself. [00:28:00] So thanks for that, Eli. Appreciate you being here.

Appreciate you taking the time and maybe we’ll do this again soon. Sounds good to me. 

Eli: All right, Scott. I appreciate it.

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.

Selling on-market/MLS returns much more than off-market

Question: Are there any studies or data comparing the results of on-market vs off-market sales?

Answer: I hope everybody had a great Labor Day Weekend! Last week, we reviewed what the MLS/Bright MLS is which is a good lead into the recent study completed by Bright MLS that looks at the performance of properties sold on-market (via Bright MLS) vs off-market (not listed for sale in the MLS). For those so inclined, the study provides a detailed explanation of their methodology that led to the data reported in this article.

Selling On-Market = Listing in MLS

When people talk about selling or buying homes on or off the market, they are generally referring to whether or not that home was listed in an MLS. Our regional MLS is called Bright MLS and is the second largest in the country including most or all of VA, DC, MD, DE, WV, PA, and NJ

Almost 95% of DC Metro Homes Sold on Market

The vast majority of homes are sold on-market, especially in the DC Metro, which has the largest percentage of on-market sales of anywhere in the Bright footprint with 90% of homes selling on-market in 2022 and 93.5% in 2023 Q1, up from 85% in 2019.

Selling On-Market = Much Better Price for Sellers

The study went to great lengths to analyze the results of comparable properties (something they failed to do in their initial study in 2021) to provide an accurate measure of the difference selling through Bright MLS makes for sellers. The chart below shows how much more a comparable home sells for when sold via Bright MLS vs off-market/MLS.

The on-market premium has increased significantly over the last three years when the market has been running red-hot. Homeowners in the DC Metro earned 18% more on comparable homes sold on-market in 2023 Q1 and 15% more in 2022.

When the market heats up like it has the last few years, you often hear homeowners talk about how easy it is to sell a home off-market because there’s so much demand. Sure that is true, but the question is not whether or not you can sell the home off-market (of course you can), the question is whether or not that nets you the best result (it rarely does).

Why Sell Off-Market?

There are a number of scenarios where an off-market sales with limited exposure is justified – privacy (athletes/celebrities), security (high value personal possessions), interest from a family member, friend, or neighbor – and there are examples of off-market sales producing results that match or sometimes exceed what one might get via the MLS, but for the vast majority of homeowners, an on-market sale will produce significantly better results because of the tremendous increase in exposure to potential buyers.

Those considering an off-market sale should do so with a clear understanding of the disadvantages and measure those against your own reasons for considering an off-market approach.

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.

What is the MLS and Bright MLS?

Question: I often hear people reference the MLS or Bright when referring to properties for sale. Can you explain what these are?

Answer: If you’re buying or selling a home anywhere in the US, you may hear the term “MLS” and if you’re buying in the Mid-Atlantic “Bright” used a lot. The simplest way I describe it to people is that the MLS, short for Multiple Listing Service, is the real estate industry’s database(s) of record for property sales. There are hundreds of regional and local MLS’s across the country that act as the aggregator of properties for sale/rent.

Bright (MLS) is the name of our regional MLS and, with just over 110,000 participating agents, it is the second largest MLS in the country behind the California Regional MLS. Prior to 2017 it was called MRIS (Metropolitan Regional Information Systems), but in 2017 it was rebranded to Bright after a merger with 8 other regional MLS’s mostly from PA, NJ, and DE.

The map below shows the current Bright MLS footprint, meaning brokerages/agents in all of these areas input their listings into the same platform. It covers 40,000 square miles and 20M people.

Our Reach Map

What is the MLS (Multiple Listing Service)?
The MLS is a real estate information exchange platform and database created by cooperating residential real estate brokerages to improve the efficiency of their real estate market.  As a privately created and managed organization, each MLS is primarily funded through the dues of the brokerages and agents within the market it serves. There are hundreds of MLS’s across the country and each operates under its own direction and rules & regulations.

The information you find on consumer-facing websites like Zillow comes from various MLS’s and each MLS has the right to negotiate its own relationship (syndication agreements) with these sites and determine what information is made available.

Without the MLS concept, we would have an extremely fragmented industry that would make it difficult for buyers to ensure they are seeing most/all of what is for sale within their sub-market and it would be much more difficult for sellers to get top dollar because they would not have access to the entire buyer market.

What is Bright MLS?
Bright is the MLS that serves the mid-atlantic region including all of, or most major markets in, Virginia, Washington DC, Maryland, Pennsylvania, New Jersey, West Virginia, and Delaware.
The Executive Committee and Board of Directors is made up of representatives from the region’s major brokerages and directs the business of Bright, which has developed into a full-blown software, services, and technology company. Bright has adopted a strict set of rules & regulations to provide data uniformity and ensure fair play such as restrictions on marketing properties for sale that are not entered into the MLS, as discussed in this article.

MLS is a Net Benefit to Consumers and Agents
Your interaction with Bright MLS is likely to come from listings that your real estate agent sends you directly from the system, but you are also indirectly interacting with Bright whenever you search a 3rd party real estate site like Zillow because their data is pulled from Bright (and other MLS systems across the country).

While at time frustrating for brokerages, agents, and consumers (personally, I think there’s so much more they can do with data and their consumer-facing tech), the MLS structure is a tremendous net benefit for the industry and consumers by combining home sale data into one database with a common set of requirements and rules of engagement. This allows the entire industry to function more efficiently than it did prior to the MLS concept, which has led to lower commission fees.

The biggest example for consumers (and I’d also argue to Realtors) is that since Zillow and other consumer-facing sites began aggregating listing information for public use, real estate agents are no longer the “gate-keepers” of listing information and consumers have direct access to practically everything that is on the market (entered in an MLS) in nearly real-time.
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)

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.

2023 Mid-Year Single-Family Home Market Review (Arlington)

Question: How was the market for single-family homes in Arlington during the first half of the year?

Answer: All it took was 7% interest rates to stabilize prices…which is exactly what the Fed’s goal was and the Arlington single-family home market is a great example of it working. Coming into the year, there were signs that prices would fall in 2023 if rates remained high, but due to a historic supply squeeze, prices remained stable despite a significant drop in demand (the drop is supply was more significant than the drop in demand).

The data below is based on sales of single-family homes in Arlington during the first six months of the past five years.

Competition Eases, Prices Stabilize

The Arlington single-family market will always be competitive, but the intensity of the last two years has softened and brought some stability to prices:

  • The average home price increased by 2.3% to over $1,360,000 and the median price increased by 1.7% to $1,220,000. If you remove new construction sales from the data, the average sale price actual decreased by .6% to just over $1,241,000.
  • Over the past five years, the average home price in Arlington has increased by nearly 27%
  • On average, homes are selling for just over their original asking price in 2023
  • 14% of homes sold in the first half of 2023 sold for $2M+ and only 32% sold for $1M or less
  • If you remove 2020 sales numbers (COVID lockdown), there were 26% fewer sales in the first half of 2023 than the 5yr average. That is almost exclusively due to low supply, not low demand.
  • 68% of sales in 2023 were at or above the asking price, less than 2021 and 2022 but just above 2019 and 2020
  • 64% of homes sold within 10 days on the market, last year it was 74%
  • Homes that went under contract within one week on market sold for an average of 3.9% over the asking price, in 2022 the average was 6.8% and in 2019 it was 2%
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Zip Code Prices All Over the Place

There was no consistency in average price change across Arlington zip codes:

  • Note: 22213 only has 8 sales in 2023 so the data isn’t very reliable, I considered not including it
  • 22201 led the way with an 8.9% year-over-year increase
  • After massive growth in 2021 and 2022, the 22205 zip code had the worst performance, down 8.5% from last year. However, this is not a reflection of actual home values dropping in 22205 by that much, but mostly the make-up of the data set
  • 22204, the zip code I now call home, remains the only zip code for a third year in a row with an average home price below $1M
  • 22207, the best bellwether for Arlington single-family market conditions, continued its steady appreciation clocking in at 4.2% over 2022 to an average of $1,609,000. Without new construction sales, the average price increased by 1.8% to $1,455,000.
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Looking Forward

There is no relief in sight for interest rates, with many rates returning to the 7%+ mark as of last week. Expect a noticeably less competitive, more balanced real estate market in the second half of the year. Buyers will have a better chance at finding value and sellers should level expectations.

The big question is when will rates come down (many expect to see 4-5% in the next 12-18 months) and what will that do to prices. If inventory remains low, which it’s likely to do for years to come, I think that we’ll see another surge in demand and prices when rates break through 5.5-6%. If that coincides with Q1/Q2 of 2024, expect that surge to be amplified. Until then, I expect prices to remain relatively flat with competition light to moderate, depending on the 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 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.

How’s The Market?

Question: How is the real estate market through the first quarter?

Answer: “How’s the market?” Well, technically, that answer depends on what market you’re talking about – location, property type, price point, etc but for this column, I’ll provide an overview of what we’re generally seeing in the Arlington/Northern VA/DC area market these days.

  • The market is competitive
  • Demand is moderately high
  • New listing volume is historically low
  • Rates (Hopefully) Heading Down
  • Ignore National Data

The market is Competitive

Multiple offers, escalations, and reduced or no contingencies are common.

The data visualization below is from the listings that went under contract each of the last two weeks at our brokerage, RLAH @properties, of ~400 agents in the greater DC Metro area.

Demand is Moderately High

Demand is lower now than it was from late 2020 through early 2022, due to high interest rates.

The chart below shows the quarterly absorption ratio for Northern VA over the past decade. A higher ratio = higher demand. We’ve fallen slightly from the post-Amazon HQ2 year (this was primarily driven by the condo market) and Covid buying years, but demand is still well above the “norm” established from 2013-2018.

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New Listing Volume is Historically Low

The lack of new listings is driving competition, not high demand.

The chart below highlights the dramatic drop in new listing volume for the DC Metro area for Q4 and Q1, with about 10,000 fewer homes listed for sale during the most recent Q4/Q1 compared to previous years, or a ~25-30% drop for most DC area localities.

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Rates (Hopefully) Heading Down

Inflation data suggests we’re heading firmly in the right direction and that puts downward pressure on interest rates. However, turmoil in the banking sector (SVB Collapse, commercial building loans) has caused demand for mortgage-backed securities to drop thus putting upward pressure on interest rate pricing.

Here’s a collection of some of the most recent interest rate forecasts through 2023:

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Ignore National Data

Different markets, especially west coast (struggling) vs east coast (appreciating), are seeing very different data and make national data pretty useless to the individual homeowner/buyer.

The charts below show the wide range of national real estate price forecasts and a chart showing performance for major regional real estate markets around the country. Notice the variation between regional markets and you can understand why combining all of that data into one national pricing datapoint isn’t helpful.

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

2,491 Agents Sold Real Estate in Arlington Last Year

Question: How many different real estate agents are there doing business in Arlington?

Answer: There were 2,795 real estate transactions in Arlington last year, totaling $2.264B in sales volume. This is down from over 3,500 transactions in 2021 that totaled $2.786B in sales volume, but very similar to the 2019 and 2020 numbers.

There were 2,491 licensed real estate agents involved in at least one sale in Arlington in 2022. Each transaction usually includes two real estate agents – one representing the buyer and another representing the seller.

I looked over the 2022 Arlington transaction data and pulled out some interesting highlights below. Of note, there are many real estate teams that enter all sales under one agent’s name, so in these cases, individual numbers represent the production of many agents rolled into one agent’s name, but I don’t have transparency into that data. Here’s a link to an article I wrote in 2019 explaining how different agents/teams are structured.

  • 63% of agents who did business last year in Arlington had just one sale in Arlington (many of those had more sales outside of Arlington) and accounted for 24.4% of the total sales volume
  • 2.6% (65) of agents handled 10+ transactions in Arlington
  • 0.36% (9) of agents handled 20+ transactions in Arlington
  • 1,666 different agents represented buyers, 66 (4%) represented 5+ buyers
  • 1,379 different agents represented sellers, 115 (8.3%) represented 5+ sellers
  • The top 20% producing agents in Arlington accounted for 61% of sales volume
  • Keri Shull and her team once again led Arlington in total transaction and sales volume, representing 2.7% of buyers and sellers in Arlington and just over $94M in total sales volume, but for the first time I can recall, we have new leaders in the listing category, with Betsy Twigg leading listing sales volume at $46.5M and Kay Houghton leading listing transactions at 58
  • The highest average sale price with at least four transactions in Arlington is Julie Zelaska at more than $2.16M per sale

*Chart does not include internal sales agents

Most studies suggest that consumers are less concerned with measures like sales volume and more focused on the strength of communication and trustworthiness of the agent they’re working with, but market expertise and experience are still important factors for most people.

Many people see the low barrier to entry for real estate licensing, and the resulting high volume of agents, as a negative, but it also means that you have a lot of choices as a consumer and, with some effort, can make sure that you’re working with somebody who provides the type of service you’re looking for and the experience to match.

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.

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.

The Real Estate Market Whiplash is Crazy

Question: How much has the market changed in the last six months?

Answer: Sometimes I write columns for myself as the audience, this is one of them…I hope some of you find it as interesting as I do!

Four months ago, you couldn’t watch/read the news without hearing about the collapsing real estate market but by late January, it was obvious that low supply would prevent that from happening. Demand even prevailed through February rate spikes because 2023 was the first year that new listing volume in February was lower than January.

Market Whiplash from Q4 ’22 to Q1 ‘23

It’s normal for the market to slow in Q4 and pick back up in Q1, but the change in market conditions from Q4 2022 to Q1 2023 was the most significant on record.

To get a sense of just how much of a shift we experienced between Q4 and Q1, I compared the key performance metrics of Net Sold (sold price less seller credits) to Original Asking Price percentage and the percentage of homes going under contract within ten days. I also compared all property types, condos, and detached/townhouse/duplex. Here are the highlights:

  • Buyers lost about 6.3% of negotiation leverage on non-condos since Q4. I think that percentage accurately represents how much the market value of most non-condo properties has changed in just a few months.
  • The performance data for non-condos is surprisingly similar for Q1 ’23 and in Q1 ’22, despite 2022 being the hottest market we’ve ever experienced.
  • Market pace in Q4 was really slow, with less than 1/3 of non-condos going under contract within ten days. In Q1 that number has jumped to almost 71%.
  • The condo market in Q1 ’23 is notably more competitive than it was in Q1 ’22, despite last year’s favorable market conditions (low rates). It took buyers a while to put the pandemic-led resistance to condos behind them, but it’s now clear that condo demand has returned.

Looking ahead, it doesn’t seem like there’s any supply relief in sight, with new listing activity trending at 10-20+ year lows so even moderate demand will create upwards pressure on prices and a fast-paced market. However, you can expect demand to ease up as summer approaches and you can always count softer demand in Q4.

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

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

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

Tax Assessments vs Market Value

Question: How close are the County’s tax assessments to actual market values?

Answer: Earlier this month, Arlington announced that the next round of annual tax reassessments would increase the total residential assessment by 4.5% (this is overall, changes to individual home/land values will vary significantly). This change is meant to align with the increase in market values of Arlington homes, but assessed values remain well below actual market values for most homes. In fact, 81% of homes sold in 2022 sold for more than their most recent tax assessment value.

Homes in Arlington that sold in 2021 sold for an average of 8.7% (median 8.4%) above their most recent tax assessment.

Homeowners in the 22205 zip code benefit the most by underassessments, for a second year in a row, with an average difference between 2022 sold prices and their assessments of 14.8%, or over $194,000. Owners of single-family homes and townhouses (12.9% average difference) benefit more from underassessments than condo owners (4.1% average difference).

If County assessments were representative of actual market values, the average Arlington homeowner would pay over $900 more per year in property taxes, so don’t forget to send the Department of Real Estate Assessments a thank you card!

The following chart details the difference between how much a home in Arlington sold for in 2022 compared to its most recent County-assessed value:

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If you believe that the County’s assessment of your home’s value is too high, you have the right to appeal the assessed value; the deadline is March 1.

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

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

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