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How Many Agents Worked in Arlington Last Year?

elieliresidentialcom Arlington , , , , , , , 0 Comment
How Many Agents Worked in Arlington Last Year?

Question: How many different real estate agents do business in Arlington in a typical year?

Answer: There were 3,535 real estate transactions in Arlington in 2021, well above the 2,770 and 2,782 in the previous two years, totaling over $2.786B in total sales volume, up from $2.16B and $1.96B in 2020 and 2019, respectively.

Most people would probably assume a few hundred different real estate agents worked on those 3,535 transactions, but in fact there were 2,799 different agents who were involved at least one transaction in Arlington last year (remember, most transactions have two agents involved).

I looked over the 2021 Arlington transaction data and pulled out some interesting highlights below. Of note, there are real estate teams that enter all sales under one agent’s name, so in these cases, individual numbers represent the production of multiple agents rolled into one agent’s name (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.

  • 57.9% of the agents who did business in Arlington last year were involved in just one Arlington transaction (many did other business outside of Arlington)
  • Just 3.5% of agents handled 10 or more transactions in Arlington and .6% handled 20 or more transactions
  •  1,894 different agents represented buyers in Arlington and 25 of them (1.3%) worked with 10 or more buyers in Arlington
  • 1,639 different agents represented sellers in Arlington and 42 of them (2.6%) worked with 10 or more sellers in Arlington
  • Of the 1,178 agents who handled 2 or more transactions in Arlington, they averaged 4.5 transactions each
  • Keri Shull and her team once again led Arlington in transactions and sales volume, by a wide margin, participating in roughly 7.9% of the transactions in Arlington and handling just under $160M in Arlington sales volume.

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 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.

Video summaries of some articles can be found on YouTube on the Ask Eli, Live With Jean playlist.

Arlington Condo Mid-Year Review

elieliresidentialcom Arlington, Buyer, Home Owner, Seller , , 0 Comment
Arlington Condo Mid-Year Review

Question: How has Arlington’s condo market performed in the first half of 2021?

Answer: Given the tremendous appreciation we’ve seen locally and nationally on prices for single-family homes and townhouses, the mostly unchanged values of condos in Arlington highlights how much the condo market has struggled compared to the rest of the housing market. We did experience some periods of value loss in the last quarter of 2020 and early in 2021, but the first half data (and my experience in the market) suggests that prices have recovered and leveled out to about the same values we saw in 2019.

The biggest question I have is whether we will sustain these prices or see a slow decline as people adjust to new work arrangements and housing preferences in the wake of COVID. While it’s possible that we could see a delayed price surge due to sustained low interest rates and returns to offices, I think that scenario is unlikely.

This week we will take a look at Arlington’s condo market in the first half of 2021. Note that the data does not include Cooperatives (e.g. River Place) or age restricted housing (e.g. The Jefferson).

Prices Relatively Flat, Listing Volume and Inventory Up

I think the biggest story in the condo market for Arlington and the DC Metro area is the historically high number of condos being listed for sale since Q3 2020. There is clearly a flight out of condos by homeowners and investors and the demand is not high enough to absorb the extra supply, so inventory levels have returned to 2015-2016 levels when we were in the midst of a near zero-growth condo market (in Arlington).

The return to 2015-2016 inventory levels isn’t a bad thing, but the suddenness of that shift was difficult for sellers to manage after we experienced a red-hot condo market from late 2018 (Amazon HQ2 announcement) to early 2020 (pre-pandemic).

Demand Metrics Down, Disaster Avoided

Demand metrics like days on market, percentage of homes selling within a week, and the percentage of sold price to the original asking price are all down to 2017-2018 levels (pre-Amazon announcement) and prices are more reflective of what we saw in the first half of 2019.

During the pandemic, there were concerns of a fundamental shift in the condo market that would lead to a significant re-pricing of condo values but that’s clearly not the case. Sure, it’s tough for condo owners to take a step backward while the single-family/townhouse market surges ahead, but the condo market looks to be recovered and safe at this point.

If you’re interested in seeing last week’s mid-year analysis of the single-family housing market, you can check it out here.

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

Arlington Is Running Out Of Homes For Sale

judson726 Arlington, Buyer, Seller 0 Comment

Question: We have been searching for a home for over 6 months and have expanded both our criteria and budget, but still not finding something we like. We have heard that the housing supply is low, is that true for Arlington?

Answer: The housing supply shortage in Arlington is a big problem and it’s not just Arlington that is feeling the pain, it’s most of Northern VA and the greater DC Metro (nationwide as well).

You’re not alone in your experience either, we have a handful of clients who have been looking for the better part of a year while also expanding their search area and budget, but unhappy with what’s available.

So, is the housing shortage mostly anecdotal and buyers are just too picky or to cheap? Nope… here are some charts that highlight the alarmingly low housing inventory in Arlington:

Eight Consecutive Quarters of Fewer Homes For Sale, Year over Year (YoY)

After seven straight quarters of YoY decreases in the number of homes for sale, Q1 2018 brought us the largest drop in YoY homes for sale with 21.1% fewer homes for sale than Q1 2017, which was already 7.2% lower than the number of homes for sale in Q1 2016. The chart below represents all homes for sale in Arlington.

 

Existing Housing Supply Would Only Last 1.5 Months

Months of supply measures how long the existing housing inventory would last given the last 6 months of demands (absorption). Most economists say that 4-6 months of supply represents a well balance housing market and Arlington has hovered around 1.5 months of supply for the last 6 months.

I broke out the chart below by housing type (detached, townhouse, and condo) to highlight the fact that the problem exists across all housing types, but town-homes have historically been the least supplied type of housing in Arlington.

 

Good Homes Are Selling Much Faster

This chart shows the YoY change in the number of homes sold within the first 10 days on market, which has increased the last six quarters in a row. There was an impressive 53.4% YoY increase from Q1 2016 to Q1 2017, followed by yet another double digit increase in homes sold within the first 10 days from Q1 2017 to Q1 2018.

 

The $1M+ Home Market Is Healthy

The only sub-market in Arlington with a healthy supply are homes listed for over $1M, with around four months of supply, while everything priced from $300k-$800k is under one month of supply.

However, the $1M+ sub-market is only “healthy” on paper, take a deeper look and you’ll see two major problems (cue comments that the problem with $1M+ homes is that they are $1M+). First, most of those homes are actually $1.5M-$2M and second, most of those homes are tear down/new construction with very similar size and design, leaving wealthy buyers who don’t like new construction with very few options.

 

Tips For Buyers

Here are some tips for buyers searching for hard-to-find homes in a tough market:

  • There are few, if any, great deals in an under-supplied market. In this market, good value is finding a home that meets most of your criteria, that you’ll be happy in, that you can afford.
  • If you want to negotiate, your best bet is to find something that has been on market for at least 2-3 weeks otherwise you’ll accumulate more rejected offers than homes currently on the market
  • Put in the time early in your search to understand the market so you can recognize the right home when it comes on market
  • Base your offer on what the home is worth to you, not just the asking price
  • Understand how Escalation Clauses work and use them to your advantage
  • Find out if there are offer deadlines (usually the Monday or Tuesday following the first day on market)
  • Understand the cost-benefit of contingencies (inspection, financing, appraisal are the standard contingencies) and how you can maximize the strength of your offer with limited risk exposure
  • Consider doing a pre-inspection — a home inspection before you make your offer
  • Have a strong financing approval letter from a reputable lender

A lot of readers have reservations about the value real estate agents provide in buying or selling homes, but without coming off as too much of a salesman for my industry, difficult markets like this are where having a strong agent makes a big difference. Not just somebody to open doors for you and draft a contract, but somebody who understands your needs that you trust to advise you on making the right offer, at the right time.

If you have an agent you trust, rely on them. If you’re looking for somebody, I’m available every day of the week to talk or meet, just send me an email at Eli@EliResidential.com and I’ll be happy to help.

Arlington Rental Market

judson726 Arlington, Investor, Rental 0 Comment

Question: I am moving to Arlington from out of town and not yet ready to buy. I’ve heard the rental market is high in the DC area and wondering approximately how much it costs per bedroom to rent in Arlington.

Answer: I spend a lot of time in this column talking about buying and selling homes in Arlington, but about 54% of the County is renters, so as we head into the busiest rental months, I thought it’d be appropriate to share some helpful statistics on the cost of renting in Arlington.

For the most part, renters tend to be more focused on functional space to meet immediate needs, so I like the idea of using cost per bedroom on rentals more than I do for ownership.

The good news for renters is that developers have added thousands of new rental units over the last 5 years, particularly 1-2 bedroom units in the popular metro areas of the Rosslyn-Ballston corridor and Crystal/Pentagon City. While the cost of these newer units has increased, it’s kept the cost of renting condos and townhouses from owners pretty stable (or down).

The data I pulled below is primarily made up of non-commercial rental units (condos and townhouses owned by individuals) and restricted to units leased through the MLS (agent database), so only included a portion of the total rental activity in Arlington. I also excluded single family homes from the dataset.

Key Findings:

  • It costs about 40% more to rent a third bedroom than it does to rent a second bedroom
  • Rents have not gone up for one bedroom units, and have only increased about $100/month for two and three bedroom units
  • Most rental units are on the market for 6-7 weeks before being rented
  • There’s not nearly as much negotiating on rentals as there is purchases, with only about 1% or less negotiated off the asking price, on average
  • The least expensive rentals are in the 22204 zip code because there are not any walkable metro stations and the housing inventory tends to be substantially older
  • 22204 is the only zip code where the average rent of a two bedroom is under $2,000/mon and one of only two zip codes (22206) with an average rent under $3,000 for a three bedroom
  • 22209 is the most expensive zip code to rent by a wide margin due to the fact that it hosts two of the most expensive buildings in the DC Metro in Turnberry Tower and Waterview, as well as a host of other high-end buildings. It claims this top spot, despite also hosting one of the least expensive communities in Arlington, River Place.

 

 

One tip I’m happy to share with renters is that there’s rarely a better deal in the market than the deal you get being the first person to rent a unit in a new commercial rental building. The incentives they offer on the first lease usually include 1-2 months free rent, a period of free parking, and sometimes other fees discounted or removed (e.g. pet fee, move-in fee, etc). However, you should prepare for rents to increase substantially if you want to continue renting after your original lease expires.

Our team is happy to assist you with rentals, whether you’re a renter or landlord, so feel free to reach out if you need assistance with either!

How The Tax Bill Changes Real Estate

judson726 Arlington, Buyer, Investor, Loan, Rental, Seller , , 0 Comment

Question: What were the real estate related changes in the new tax plan and how will those changes impact our local real estate market?

Answer: Spending an hour every week working on my taxes in QuickBooks doesn’t qualify me as a tax expert, so before I provide my take, I’d like to introduce local tax expert Molly Sobhani, CPA of Klausner & Company, located in Rosslyn, to break-down the key changes in the new tax plan that will effect how buyers and homeowners make real estate decisions. Following Molly’s explanation, I will provide my personal thoughts and stats, which stand in contrast to most of the opinions I’ve read.

If you would like to follow-up with Molly about the tax bill or any other tax questions, she can be reached directly at msobhani@klausner-cpa.com or (571) 620-0159. Take it away Molly…

After weeks of confusing, convoluted and contradicting proposals introduced by the House and Senate, the Tax Cuts & Jobs Act (TCJA) was signed into law on December 22 by President Donald J. Trump. As the dust continues to settle on TCJA, taxpayers across the country are wading through the tax reform bill and the impact of those changes.

With increases to the standard deduction, changes to the deductibility of mortgage interest and limits on property tax deductions, current homeowners and potential homebuyers have a lot to think about. The housing market will undoubtedly be impacted but how – exactly – is still a big question mark.

Summary of Major Tax Law Changes Impacting Residential Home Ownership

  1. Interest will only be deductible on mortgage debts used to acquire your principal residence or a second home of up to $750,000 (or $375,000 for a married couples filing separately). The phase-out of deductible interest begins after the loan balance exceeds $750,000. This new debt limit applies to all loans incurred after December 15, 2017.
  2. Interest on home equity debt (also known as Home Equity Lines of Credit or HELOCs) will no longer be deductible. This is true regardless of when the home equity debt was incurred.
  3. State and local taxes (also known as SALT deductions) will be limited to $10,000 per year. This category of deductions also includes property taxes paid on homes.
  4. The Standard Deduction has increased substantially from $12,700 for joint filers ($6,350 for single filers) in 2017 to $24,000 for joint filers ($12,000 for single filers) in 2018.

One provision that did not change is related to the capital gain exclusion of up to $500,000 for joint filers ($250,000 for single filers) on the sale of a primary residence. You still must use the home as your primary residence for at least two of the last five years in order to be eligible for the full exclusion.

So why do these new tax provisions make homeownership a trickier decision? The incentives for being a homeowner have now been substantially diminished by the new laws for many taxpayers.

A Hypothetical Scenario

A married couple earns $150,000/year in wages and is looking to buy a home in Arlington, VA. Their total state income taxes are $8,625 (5.75% of their $150,000 wages.) They have no other deductions to itemize in 2017 so they will take the $12,700 standard deduction.

In January 2018, they buy a condo for $425,000. They put down 20% and borrow $340,000 at 4%. They are under the $750,000 mortgage debt cap so they are eligible to deduct all of the interest they pay on their loan each year. In the first year, their total interest expense totals $13,491. Their property taxes are $4,233 based on Arlington’s 2017 rates for a $425,000 assessment. Our married couple has a brand new home and all these brand new deductions, right?

But wait! After we add the new property tax deduction of $4,233 to the $8,625 they already pay in state income taxes, they are over the $10,000 limit for SALT deductions. In this example, $2,858 of their property taxes are not deductible.

Fine. Let’s look at their total deductions then: they have the maximum $10,000 SALT deductions and $13,491 of mortgage interest, totaling $23,491. Under the old tax laws, they would itemize their deductions and see a reduction in their Federal and state taxes for these additional expenses.

But we’re not working under the old laws anymore, are we? Under TCJA, even after spending all this money on buying a new home, paying the interest on their mortgage and paying their property taxes, they are actually still better off taking the standard deduction of $24,000.

Why Bother?

As you can see from the example above, by increasing the standard deduction to $24,000 for a married couple filing jointly, many taxpayers who otherwise would have itemized may now benefit more from the standard deduction. This essentially takes away the tax benefit of owning a house for some people. And the question that many potential homebuyers may consider is: “Why bother?” More and more, they may delay the decision to buy in favor of renting.

Other Potential Effects on Housing Markets

Home values may be impacted, too, by the change in tax laws. If mortgage interest is limited to $750,000, houses that are listed at prices over $937,500 (assuming a buyer puts 20% down) may not be as appealing to new buyers as lower-priced homes.

Another consideration is how the disparity in state income and state property tax rates may drive homebuyers into lower tax rate states. In high tax states, there could be multiple scenarios in which taxpayers lose 100% of the tax benefit of paying property taxes.

Conclusion

Of course, there are other (wonderful) reasons to buy a home and other (wonderful) reasons to buy a home in certain neighborhoods. The upsides generated from the Tax Cuts & Jobs Act, though, are severely lacking.

Eli’s Closing Stats and Thoughts

According to The Washington Post, Moodys Analytics predicts that home values in Arlington will drop 2.3% as a result of the new tax bill, with drops of 2% in DC, 2.5% in Montgomery County, 2.6% in Loudon County and 4% nationally. Of course, this analysis is limited to the impact of the tax bill and doesn’t take any other growth factors into consideration. In other words, if Arlington continues its growth from 2017 (3.1%), we wouldn’t see actual losses, but stunted growth.

The change in SALT deductions and increase in the Standard Deduction will reduce the benefit of homeownership for many Arlington residents, but let’s take a look at how many homeowners are likely to be impacted by the reduction of the mortgage interest deduction limit to $750,000. Of the 3,100+ homes sold in Arlington in 2017, just over 400 were bought with loans exceeding $750,000. Approximately 30% of detached homes in Arlington (350 of 1,150 sales) had a loan exceeding the new limit. Keep in mind, however, that homeowners with loans over $750,000 will still be able to deduct interest on the first $750,000.

 

I Don’t Believe The Market Will Suffer

While these stats and Moodys’ analysis are great, they fail to capture how homebuyers actually make decisions in the real world. The majority of buyers decide to purchase a home because of a major life event (marriage, kids, job change, etc) and once they’ve decided to purchase a home, their budget is based on how much they have saved for a down payment and how much they can afford each month in housing costs.

Their monthly budget is primarily based on income and the sum of mortgage payments, property taxes, any HOA fees, insurance and maintenance. SALT and mortgage interest deductions don’t factor into any of the core considerations for most homebuyers.

Let’s Be Realistic

Let’s be honest, for most people, taxes are a once-a-year afterthought and tax planning is mostly crossing their fingers, hoping for a few dollars back. For those who do pay close attention to their tax exposure and who stand to lose out on the benefits of the mortgage interest and SALT deductions, I question how much it actually matters.

Previously, the mortgage interest was capped at $1M and there were just 163 (5%) homes purchased in 2017 with a loan of $1M or more who will be “fully” effected by the change to a $750,000 cap. In the first year, the interest paid on that difference of $250,000 is about $10,000 (drops each year), so for somebody with an effective tax rate of 30%, that’s a $3,000 change to their bottom line from last year.

Adding the change in SALT deduction increases that for many people and $3,000+ is nothing to sneeze at, but we’re talking about the wealthiest homebuyers with incomes exceeding $250,000/year. I’d bet that for those who are conscious of the net effect on their bottom line, they’re more likely to find ways to save this money somewhere else than their home purchase.

Plus, the tax plan provides substantial benefits to wealthy Americans and may very well have a net positive effect on their bottom line anyway. Also, does anybody really think that somebody negotiating on a $1.5M+ home they plan to live in for 15+ years will pay $5,000 less because that’s the calculated net impact from mortgage interest and SALT on their 2019 taxes under the new tax bill? No way.

Let’s be realistic about the psychology of home buying and what determines buying power because that’s what impacts home prices, not expensive studies funded by special interest groups (yes, I’m kind of calling out the National Association of REALTORS for fear mongering).

2017 Arlington Real Estate Review

judson726 Arlington, Buyer, Investor, Seller 0 Comment

Question: How did the Arlington real estate market do in 2017?

Answer: In July I wrote that the Arlington market was picking up momentum and after two years of light growth in Arlington, we saw our first year of growth over 2% since 2014 (3.1%). Over 3,100 homes were sold in 2017 compared to approximately 2,900 in 2016 and total sales volume was nearly $2.1B compared to last year’s total of just under $1.9B.

In addition to solid price growth, other momentum indicators improved (if you’re a homeowner/seller) with homes selling nearly one week faster and for ½ percent closer to the original asking price than last year. Price growth and demand were driven almost entirely by South Arlington with 22202, 22204 and 22206 seeing some of the greatest improvement.

Top Sales

  • Once again, the most expensive sale in Arlington was a Rosslyn condo at Waterview with 3,800+ sq. ft. and unobstructed views of the Potomac. It sold for $3,258,000 and took just over a year to sell.
  • The most expensive single family home sold in Arlington was once again in Country Club Hills with nearly one acre for $2,950,000
  • The most expensive townhouse sold in Arlington was also located in Country Club Hills with over 8,000 sq. ft. located on Washington Golf & Country Club and sold for $2,825,000
  • The least expensive home sold in Arlington, not at auction, is a studio condo in The Carlton off Four Mile Run for $115,000

Price Growth: The average price of homes in Arlington has increased every year since 2010, but was slow the last two years. The 22201 and 22203 zip codes continued a steady decline, while 22205 surged forward with an incredible 6.9% YoY increase. Overall, Arlington continues to deliver as promised to most homeowners and investors… steady and stable growth.

 

Demand Growth: Outside of price growth, my two favorite indicators of demand are days on market (time from listing to ratified contract) and the ratio of sold price to original asking price (100% = buyer paid full ask). Both indicators saw their biggest improvement since 2013 with homes selling faster and for closer to their asking price in seven of nine zip codes. While changes weren’t extreme, they’re enough to say the Arlington market has officially picked up steam heading into 2018.

 

New Construction: 2017 was big year for new construction. We saw the release of two large condo projects – Trafalgar Flats and Key & Nash – as well as strong sales for the final phase of the luxury condos at Gaslight Square in Rosslyn. 2017 also brought the start and close-out of the highly successful Carver Place townhouse project off Columbia Pike by Craftmark, as well as the introduction of a luxury townhouse project, 1100 Block, a few blocks north of the Ballston metro.

Single family new home construction continues to impress with 130 new homes sold in 2017 for an average sale price of a whopping $1,540,000. Note that the below statistics do not include all sales of new homes, just those entered into MRIS (system of record), which is likely about 80% of total new single-family home sales.

 

Looking Ahead To 2018+: Arlington residential real estate growth will continue to hinge on our office vacancy rates. With Nestle committing to Rosslyn in 2017 and arriving in 2018, the door is open to attracting big business not directly associated with the Federal Government. There’s no doubt that their decision will generate interest from other companies who otherwise would not have considered Arlington. If we make it to the second round of Amazon’s HQ2, we should have an exciting decade ahead.

Beyond vacancy rates, growth will depend on addressing crowded schools, balancing infrastructure investment across the entire county, business improvement along Columbia Pike and Lee Highway and ensuring that the natural beauty of our neighborhoods (trees and green space) isn’t destroyed by irresponsible development. With regard to the impact the new tax plan will have, expect a full column on this in the coming weeks.

I’ll close with a recent quote by Paul T. McDermott, President and CEO of Washington REIT, who recently sold their position in a major DC building to move assets into Arlington.

“We are strategically allocating capital out of 2445 M Street and into Arlington Tower to improve our long-term growth prospects in a resurging Rosslyn…Our research indicates that Rosslyn is at an inflection point with rising rents and declining vacancy as it transitions from a 9 to 5 Federal Government and contractor hub into a 24-hour urban destination with the demographics, amenities and infrastructure to attract top-tier corporations.”

If you’re considering buying, selling, or investing within the Arlington market in 2018, I’d be happy to schedule some time to meet. You can reach me any time by email at Eli@EliResidential.com or phone at (703) 539-2529.

Are Two Bedroom Condos a Better Investment Than One Bedroom Condos?

judson726 Arlington, Buyer, Investor , , 0 Comment

Question: Is it true that two-bedroom condos are a better investment than one-bedroom condos?

Answer: If you’re asking this question strictly as an investor, the answer is purely based on the numbers. If you’re buying for yourself, you’ll want to consider appreciation as well as what makes the most sense for your lifestyle. For example, do not spend an extra $150,000 because a two-bedroom will appreciate faster, if you’ll end up using the second room for storage and an occasional guest.

Two-Bedroom Condos Appreciate More than One-Bedrooms Condos

Below is a graph showing appreciation of one and two bedroom condos in Arlington since 2010. To maintain consistency, the data set uses condos built from 2000-2008 limited to one bedroom units with 600-800 sq. ft. and two-bedroom units with 900-1,400 sq. ft.

 

The average one-bedroom sold for $364,000 in 2010 and is selling for $409,000 in 2017 while the average two-bedroom sold for $529,000 in 2010 and is selling for $638,000 today. If you bought the average one-bedroom in January 2010 with 20% down, you’d have approximately $172,000 in equity today. If you bought the average two-bedroom in January 2010 with 20% down, you’d have approximately $294,000 in equity today by putting an extra ~$33,000 down in 2010.

If You’re An Investor

If you’re an investor, you’re looking at rental income, in addition to appreciation. As I wrote this spring, rental rates have been pretty flat in Arlington, especially along the Rosslyn-Ballston corridor, due to a lot of new rental buildings being built the last 5-10 years.

 

Based on the average 2010 purchase prices, rental income and a 25% down payment (most common % down for an investor), the average investor along the Rosslyn-Ballston corridor has no cash flow from their investment. The table below does not include maintenance or property management fees and assumes average condo fees, taxes and insurance.

 

So Why Invest?

Considering that the above monthly cash flow summary does not include maintenance costs, property management fees or vacancy periods where is the value in owning an investment property?

  • Equity Build-Up: For a one-bedroom, your tenants would have contributed an average of $460/mon over the last 8 years ($44,000) to your equity balance and for a two-bedroom, your tenants contributed an average of $680/mon over the last 8 years ($65,000)
  • Tax Benefits: Another major benefit of investing are the tax benefits. Being able to deduct expenses like condo fees, tax payments and repairs. As well as depreciate the value of the condo and provide a huge annual financial benefit to off-set the weak monthly cash flow. A one-bedroom investor may be able to deduct about $20,000 per year and a two-bedroom investor about $30,000. Of course, you’ll want to discuss any deductions with your tax professional first.

 

If you’ve invested in property in other areas of the country, you may be shocked by how little monthly cash flow a condo along the Rosslyn-Ballston corridor produces. A major reason for the lower ROI is the lower risk that comes with investing in Arlington condos. Your downside risk during an economic dip is much lower and the rental market is consistently strong with a large pool of well-qualified renters. It follows the basic economic tenets of risk and return.

If you’re considering buying an investment property, feel free to send me an email at Eli@EliResidential.com to set-up a meeting to go through your investment goals and options.

Arlington School District With The Most Value

judson726 Arlington, Buyer , , 0 Comment

Question: How do Arlington County school systems impact the market price of homes in Arlington? Which districts offer the most value based on quality of education and the cost of buying a home?

Answer: For most families, finding the right home in Northern Virginia is a delicate balance of budget, schools and commute, with the latter two having the biggest impact on market price. If you’ve chosen to put down roots in Arlington, I’ve put together some data on Arlington County Public School districts for middle school and high school that will help you understand how your school district selection will impact your budget.

The Data

Please note that the data below is not based on all homes sold within a given school district. It is a sampling of homes within a specific sub-market in an attempt to present an apples-to-apples comparison of the premium/discount buyers can expect when searching within each district, that can be applied to other sub-markets. For example, the average sold price for homes in the Jefferson+Wakefield district is far less than $1M, but within the chosen sub-market, it is just over $1M.

In order to compare homes within a relatively similar and popular sub-market, I have chosen to use sales dating back to Jan 1, 2014 for detached homes built within the last 20 years with at least four bedrooms, excluding distressed sales. This prevents sales of tear-downs/full renovation homes from throwing off the data and gives us a pretty clear picture of the relative cost differential by school district. Not every home listing is populated with school districts (I estimate that 5-10% is missing at least one school), so those sales are excluded from the data. That is why the total sales for just middle school and just high school data are slightly higher than middle and high school combined data, because some listings just had one of the two fields populated.

School Rankings

GS Rating = GreatSchools.org rating for each school. I thought this would be an interesting, objective way to compare relative value based on a 3rd party rating, which has a huge influence on buyers’ decisions. You may also want to check out Niche.com for some different rankings of our publics schools and where Arlington County is ranked as the #1 school district in the DC area and in Virginia or US News and World Report for national rankings of our high schools.

Data Summary

For those of you familiar with the Arlington County Public School system and its impact on home prices, most of this data falls in line with expectations. Here are some comments on the findings:

  • Williamsburg+Yorktown is the highest rated school district combination in Arlington and, unsurprisingly, the most expensive to buy into.
  • Kenmore+Wakefield is the lowest rated school district combination in Arlington, but the second least expensive to buy into. However, due to the relatively low number of sales in this sub-market, the data here is slightly misleading because 2/3 of the sales are new construction which have a substantial impact on average sold price. The low number of total sales is due to the limited number of homes sold that are built in the last 20 years, not the a reflection on the total number of homes sold.
  • The best bang for your buck is the Swanson+Yorktown combination, offering the lowest cost per rating point (GreatSchools)
  • Despite having the fourth highest combined rating score (GreatSchools), Jefferson+Washington Lee is the second most expensive district to buy into. Why? It serves the popular and expensive Lyon Park community.
  • For reference, here are the Arlington County Middle School and High Schoolboundary maps.

 

Once again, please remember that this is a limited data set meant to provide relative cost differential between school districts that can be applied across sub-markets. I chose to use this sub-market (described in Data section) because it offers, in my opinion, the cleanest results available. The sold prices within this sub-market are the most expensive in Arlington because it includes homes built in the last 20 years. Each district has numerous opportunities to buy detached homes at much lower prices, as well as townhouse and apartments for even less.

Which District Do You Think Offers The Most Value?

What do you think about this data? Even more importantly, for those of you who have children in Arlington County Public Schools, which districts do you think offer the most value for families, meaning, the best education relative to the cost of a house in that district?

Impact Of Condo Fees On Resale

judson726 Arlington, Buyer, Investor, Seller , , 1 Comment

Question: I live in a building with above average condo fees and am wondering what impact the condo fees will have when I decide to sell?

Answer:

On Average

The average condo fee for a one bedroom apartment in Arlington is $397/month and $530/month for a two bedroom unit. On average, owners pay 50 cents per square foot they own. Looking at my favorite sales indicators, days on market and sold price to original ask ratio, there is a direct correlation between higher condo fees and the number of days on market, as well as between higher condo fees and greater buyer discounts from the original asking price (see first and second data tables below).

Pricing Around Fees

When pricing your condo, you must factor in the monthly fees compared to condos in similar communities.  Since buyers manage their total monthly payment, along with the total sale price, consider that on a 30 year mortgage with a 4 percent interest rate, increasing the mortgage by $21,000 increasing the monthly payment by $100. Thus, as a simple rule of thumb, for every $100/month difference in condo fees on a comparable unit, there should be an adjustment of about $20,000 in market value.

Data Summaries

There’s a lot of important information hidden behind data on condo fees like building services/amenities and the inclusion or exclusion of utilities and/or cable and internet, but the data on condo fees in Arlington is valuable nonetheless.

The following data summary represents apartment-style condo sales in Arlington over the last four years, broken down by condo fee ranges. Of note is that as the fee and fee per square foot increases, so does the time it takes to sell and percentage discount buyers negotiate of the asking price.

Note that of the $1,000+ fee sales, one third are from Turnberry Tower, Arlington’s premier luxury building, and another 15 percent are from Crystal Gateway, a building with expansive floor plans and the largest amenity package of any community in Arlington.

 

The following table is a cross section of the above data set, limited to sales that closed from $250,000 to $500,000, thus presenting the data within a more comparable sub-market.

 

How much does a building’s age impact the condo fees?

Most people would say that older buildings have higher condo fees because they have higher maintenance and replacement costs. Let’s take a look at the data for one and two bedrooms sales, by the decade it the community was built.

Of note is that the buildings from the 1950s and earlier have the most limited (or non-existent) amenities and there seems to be a jump in fees per square foot in buildings as they reach the 20 year mark, but leveling off after that, in-line with my expectations because most major systems require expensive repairs or replacement around the 20-30 year mark.

 

In order to truly understand the impact of condo fees on your condo, it’s necessary to drill down a few more levels within your specific sub-market(s). If you’re interested in exploring condo fee data for your unit, feel free to email me at Eli@EliResidential.comand I’d be happy to provide you with a more customized data summary.

New Construction vs. Resale Price Comparison

judson726 Arlington, Buyer, Seller , 0 Comment
New Construction vs. Resale Price Comparison

Question: We are ready to move into a house we’ll raise our family in and are set on Arlington. We want a newer home, but are not sure if it’s better to buy new construction or resale; our decision will ultimately be a financial one.

Can you put together numbers that show how the sale prices of new construction compare to resale?

Answer: Of course I can! When weighing the financial decision of new construction vs. resale, you’ll also want to consider the replacement cost of major systems like HVAC, windows, roof, water heater, appliances, etc. that carry life cycles of 10-30 years (appliances being on the early side, roof/windows coming later) as well as higher efficiency factors of new homes that significantly reduce utility costs. Many new homes also come with extended “bumper-to-bumper” warranties that you won’t get in resale.

As expected, there’s a clear premium to be paid for new construction and buyers tend to negotiate a deeper discount from the original asking price on homes being resold. The dataset is based on sales since January 1, 2014 for detached homes built since 2000 with 4-6 bedrooms, 3-5 bathrooms, and 3-4 levels.

 

Are these numbers in-line with what you expect to see on the difference in sold price between new construction and resale? Are the prices about what you assumed for new/newish homes by zip code?