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Alexandria and Arlington are the two most competitive housing markets in the country, according to a study released by Redfin on Monday.
If you’ve been following the forecasts since Crystal City was announced as Amazon’s second headquarter location, that might not surprise you. And this study isn’t the first to point it out: Amazon’s home in the Pacific Northwest has dealt with housing controversies for years. In Northern Virginia, realty experts have expected that the anticipation of Amazon’s arrival would crank up property values.
But, as with any study, there are caveats. We’ll break it down with local experts and tell you what a competitive market looks like on the ground.
Produced by Maura Currie
- Terry Clower Director, George Mason University's Center for Regional Analysis; GMU_CRA
- Ava Nguyen Northern Virginia realtor; Board of Directors, Northern Virginia Association for Realtors
KOJO NNAMDIYou're tuned in to the Kojo Nnamdi Show on WAMU 88.5, welcome. Later in the broadcast back to school shopping season can get expensive for families with growing kids, and it's not great for the environment either. Could thrift shopping be the perfect solution? But first San Francisco and Manhattan are no longer the most competitive real estate markets in the country, according to a new study from the real estate website Redfin. It's not even the current Amazon hub, Seattle. It's Amazon's future home in Northern Virginia, Alexandria and Arlington topped Redfin's list of most competitive housing markets. That list took into account above listing price offers, the number of bidding war and how fast properties sold among other factors.
KOJO NNAMDIBut putting aside the Amazon effect for the moment, what does a competitive market actually look like on the ground? And what should you expect if you're trying to buy or sell a home in Northern Virginia? Joining me in studio is Ava Nguyen. Ava Nguyen is a realtor in Northern Virginia. She's also on the Board of Directors for the Northern Virginia Association of Realtors. Ava, thank you for joining us.
AVA NGUYENThank you for having me.
NNAMDIAlso with us in studio is Terry Clower. He is the Director of George Mason University's Center for Regional Analysis. Terry, thank you for joining us.
TERRY CLOWERThank you.
NNAMDIAva, so what does this study mean when it says that Alexandria and Arlington are competitive housing markets?
NGUYENWell, a competitive market usually means that if you list a home the days on market is much shorter. If you were to hold an open house, you will see much more traffic coming in to look at the homes. Your number of offers tend to be higher. Multiply offer situations and then many times the sale price as a percentage of list price is also higher. In some cases where we do see it in Arlington and Alexandria, the contingency waivers, many times they'll waive the home inspection or the appraisal contingencies. You'll see a decrease in inventory, because the supply -- of the law of supply and demand. And then also you'll see investors from elsewhere or even local play a major part in that. Also many cases to be competitive you would more likely get a cash offer versus a finance offer, because cash is still king. And then in some cases in this area it's attractive to foreign investment.
NNAMDIBut that's the same as being the most expensive real estate market, right? We're not suddenly more expensive than New York or San Francisco?
NGUYENWe're not there. No, we're not there yet.
NNAMDIWhat does that look like in practice for buyers and sellers?
NGUYENSo in practice basically if you list a home you're prepping it for sale you put out a coming soon sign. You may get knocking on your door finding out and trying to be the first one to offer on that house, so things are moving much faster and everybody is looking for the inside edge.
NNAMDITerry Clower, what limitations does this study have? Do the data tell the full story?
CLOWERWell, the data measure several different aspects as Ava was suggesting including things like the level of sale price to original offer price to number of houses in the inventory. And it's all interesting to look at that data. But oftentimes we focus on very hyper local markets. In other words even down to zip code levels. And what happens with that is that you wind up with having the factor of what particular homes. So keep in mind these data that we use for sales are the houses that actually transact. It doesn't mean that everybody's house in the market has gone up that much.
CLOWERIt's a factor of what's the particular characteristics of your home. So if out of the 11 homes that sold in the Crystal City area in July happen to be a little bit smaller or a little bit older the number might have gone down. If they happen to be a little bigger or a little bit newer that number could rise and the month to month fluctuations can look rather dramatic. So one of the things to keep in mind is unfortunately for Arlington County this doesn't mean that if you see a 25 percent rise in prices comparing one month to a year previous that means that they can go out and raise everybody's property tax or, you know, assessments.
NNAMDIHow much of this increased competition do we think is tied to Amazon?
CLOWERCertainly we have seen a surge in activity and interest particularly from outside investors since the announcement in November. So it really started showing up in our data in January and February as sales were transacted. However, inventories in this market in this region have been generally shrinking now since 2015. So this is just a continuation and actually a little bit of an acceleration of our trend where we have population growth. The economy is doing well, but we simply are not building as many houses as we have people moving to the area.
NNAMDIWell, @theclevelandguy tweeted simply this, It's the schools. What other factors could be at play here?
CLOWERWell, so certainly the schools matter, and in fact it's not even a school district. It gets down to the catchment area of a particular school, elementary, middle school, high school that matters. For some folks it's even how well the football team at the high school plays, you know, that can be a factor. But in the market averages it still matters where you are, how far away are you from transit accessibility, how close are you to other amenities and services. So all those factors that normally make up the housing market still play here.
NNAMDIAva, did the real estate market here noticeably respond to the Amazon announcement last year?
NGUYENYes. We did see an increase in inquiries and requests from locals and people abroad and across the United States to look into these properties because they wanted to invest in the area and get ahead of the curve.
NNAMDILet's go to Keisha in Alexandria. Keisha, you're on the air. Go ahead, please.
KEISHAHi. So we're a military family. And we bought in a really hot neighborhood in Alexandria. So we were going to hold onto it for a few years, and then maybe once we retire in a couple of years like sell it and move back home. But we're tempted now to just like keep it as a rental and try to help this -- you know, make this part of our retirement plan. So any advice would be great.
NGUYENWe get a lot of those questions and it is -- again, it's all speculative, but it is most of the Amazon employees for HQ2 have not even arrived. Only a handful have been hired. What we say is that it's best to consult with a realtor and make sure you look at the comps and what you're taking in matches your principle interest, taxes, and insurance to make sure that it makes sense for your family. But it may be a couple of years before you see the return on your investment. But they did say that Amazon employees coming in, they are willing to pay a little bit higher for your rent.
NNAMDIGood luck to your, Keisha.
NNAMDIHere now is Ben Sage in Fairfax, Virginia. Ben Sage, you're on the air. Go ahead, please.
BEN SAGEThanks. I'm with a Metro study. We track the new home market. And the George Mason's study indicated that most of the demand created by the Amazon headquarters will be for sale demand, people looking to own rather than rent. But JBG and the five mile ring around National Landing says there are 40,000 residential units. And Metro Study is tracking only 3,000 of those will be for sale. So it looks like most of the planning is for apartments. So I didn't know if Terry might have some comments on how we're going to accommodate the new home demand created by Amazon.
CLOWERYeah, certainly. So my colleague, Dr. Stephen Fuller, led that particular study. I was not directly involved in it. But certainly it's kind of -- for something like that it depends on how you draw the boundaries for it. Certainly in the area immediately around Crystal City and some of the development plans that JBG has announced are going to be a mixture of rental units and condo units for sale. But I think that what we would see is the broader demand moving out beyond just Crystal City. There's going to be folks that work for Amazon that are going to choose to live in the District. There are going to be folks that want more of the suburban experience.
CLOWERSo it will be across the markets, but certainly it would make sense to think that right there in the most, you know, direct immediate area that that is going to be largely new development will probably be rental units. And in fact from an investor standpoint that probably makes a lot more sense than building for sale units.
NNAMDIHoward on Capitol Hill emailed us, I first moved to D.C. in 1987. This year will be my last. I'm still renting. And my small affordable apartment building is being turned into luxury housing. I'm moving to the Midwest where I can afford to live. Let's get back to some basic economics, Terry. What exactly is speculation and what does speculation do to a region's housing prices?
CLOWERWell, so speculation in this sense -- Ava was absolutely right. I mean, the last time I talked to somebody from Amazon, the new headquarters move had a staff of six, you know, so far. And, you know, we're supposed to add several hundred over the next, you know, couple of years. So what you're speculating on if you are buying a house in Alexandria or Arlington now with the anticipation that you are going to either sell it or rent it to an Amazonian then you are assuming that all these plans will come to fruition. And we think they will, I mean certainly, but it's all speculation. There is no guarantee of it. So you get hype. And remember think about what the stock market has done over the last few weeks where, you know, people either panic or they get overly exuberant or whatever. The same thing happens in housing markets. It's a little bit slower process but you have that.
CLOWERSo what has happened now is we've seen a real escalation in interest in certain key areas. That does not mean it's the only area that's hot. We have places in Loudoun County that the numbers in terms of days on market are just as low as what we have in Alexandria.
NNAMDIAva, it's important to know that not all of Northern Virginia is uniformly expensive. And it's not all being speculated so aggressively. Tell us about some of the internal differences you've been seeing.
NGUYENWell, in Fairfax, for example, you do see housing prices holding steady. It's increased a little bit, but there's a lot of inventory still out there. Great Falls, the days on market is a little bit longer. So different areas different price points and really what does the community offer as far as amenities would determine the cost.
NNAMDISo are there still neighborhoods in Northern Virginia that are quite, quoting here affordable and where do you see the next big pocket of growth?
NGUYENWell, I think Falls Church is a little bit further out from Arlington. So you do see people coming in and being willing to drive additional 10 minutes to buy in Falls Church. Also, I do see the bump in Fairfax, closer to the Metro is always a good thing. So I've seen a lot of requests by the millennials for my clients to request Fairfax and Falls Church.
NNAMDIHere now is EW in upper Marlboro. EW, you're on the air. Go ahead, please.
EWThank you for taking my call, Kojo.
EWI was calling to find out if your panel could tell me anything about the new miniature condos that taking on in D.C. And, you know, I know they'll probably be plentiful, but how would that impact the market? I mean these units are probably about 300 to almost 400 square feet. And you can live there with just, you know, the quarters in which you'll live. But how will that impact the market? And just wanted to know if you all heard about that?
CLOWERWell, certainly we have seen this and in terms of almost what amounts to shared quarters. You know, these are things that happen predominantly in places like New York or San Francisco where, you know, maybe unrelated adults are, you know, sharing common areas, you know, like kitchen, living room. And then have their own almost like a dorm room kind of thing, but this is all driven simply by sure affordability. We are having a struggle in this region and this is nothing new, but we don't have enough housing.
CLOWERAnd when we say affordable I'm not talking necessarily about the folks that are at the, you know, 30 percent of area median income. We're talking about workforce houses, people that can earn good earnings at the beginning of their career. But maybe like the millennials saddled with school debt or other things, we don't have that many affordable options for them to get into homeownership as we should.
NNAMDIBut is there a point at which Northern Virginia gets uniformly expensive as say the Bay area? At what point will building affordable housing not really make a difference in livability?
CLOWERI think the difference there is -- a little bit of geography is that there were going to be places that certainly may -- I don't know that we'll ever get quite to San Francisco, because San Francisco has a lot of regulatory differences and certainly they discourage development. I think one of the things that we have to get our head around is that we do need more dense. And maybe it's something like the micro units at 300 to 400. And it's recent adoption accessory dwelling units where can talk about having an add-on unit on an existing larger lot for a single family home. I think all of those are going to have to be a part of our solution.
NNAMDIHere is Victoria in Alexandria. Victoria, you're on the air. Go ahead, please.
VICTORIAYes. I'd just like to comment it's been very difficult. I've been in the region for almost two years now and the housing market is priced for double income families, dual income families. It's been incredibly difficult for myself and several others who are individual income families to find anything that's affordable and of the quality for the price, so many of the properties are just so -- they're in such disrepair. It's not something you want to spend that kind of money on and invest in. Really what you're paying for is the land and the ability to be close to work. Most people who work in Fairfax County, Alexandria City, Arlington City cannot afford to live there or purchase there. They have to rent or they have to make a much longer commute. Most folks I know are purchasing in Stafford, Fredericksburg. They just can't afford to live in this region.
NNAMDIThank you for your call. Ava Nguyen, who's buying in these parts of the region that we're talking about right now, Arlington, Alexandria, locals moving around internally or new residents?
NGUYENIt's a combination of both, but from my office we do see a lot of the locals moving up. So they're taking this chance to upgrade, because they are concerned of the Amazon effect, but also taking advantage of the low interest rates. Right now they want to get in sooner than later and to buy their forever home. Can I just comment real quick on what Victoria was saying?
NGUYENLike her frustration, it's definitely very real, but one thing that she can also look into is consulting various lenders. The lenders all don't have the same loan product, and it's worth consulting with several lenders, shop around. But there are VHDA, certain grants to help the buyers put down on a down payment and they don't have to repay it. But take a look at that and don't despair.
NNAMDIHere's Paul in Washington D.C. Paul, your turn.
PAULHey, Kojo. Thanks for taking my call. You know, my question is primarily centered around the lack of housing availability in the D.C. Metro area. And I'm a business owner. We're a licensed, bonded, insured contractors and architectural engineers. And, I myself am a realtor. And I come across so many clients that don't know of all of the available ways to go about purchasing properties such as off market opportunities that represent just about an equal amount of the transactions that happen on the traditional platform listing on the multiple listing service.
PAULAnd as a realtor being able to showcase these opportunities to potential clients that range from investors looking to take advantage of a hot investment opportunity to a new family looking to grow or looking -- whether it's a single individual, you know, possibly, you know, rattled with student loan debt looking to get into their first potential investment. And them only having one traditional platform by way of the real estate market looking at the MLS I think that it's a disservice for them to not understand the full landscape of all the available inventories that's available to them.
NNAMDIOkay. Thank you very much for sharing that with us, Paul. Terry Clower, we are almost out of time. But can we use this study or the data we have elsewhere to take educated guesses at what will happen to the housing market once Amazon actually gets here in full?
CLOWERWell, I think we could do that, Kojo. But what I would like us to see and the thing that the -- one of the effects of the Amazon announcement has been to call our attention to the issues of density housing affordability. Being able to have workforce housing, you know, for a wide range of folks not just the folks who will move in here to take jobs at Amazon, but the folks who already live here. Give them those options whether they're living in the District or Maryland suburbs or Northern Virginia. And so I think it is calling that attention and telling us that this gives us an immediacy to the problem.
CLOWERIt's not just the problem that we've been having for a long time in the region about affordable housing. It is more now about understanding we have to address this now, because we have not only the Amazon opportunity, but all of the other growth opportunities that are going to spin out of that like the announcement from Microsoft looking in the area and others. So on the other hand keep in mind this is a good problem to have. I'd rather us talk about, you know, the problems of meeting our challenges from growth than when we're shrinking due to sequestration or other things.
NNAMDITerry Clower is the Director of George Mason University's Center for Regional Analysis. Thank you for joining us.
NNAMDIAva Nguyen is a realtor in Northern Virginia. She's also on the Board of Directors for the Northern Virginia Association of Realtors. Thank you for joining us.
NNAMDIWe're going to take a short break. When we come back, shopping in thrift stores. Do you do it? And if so why or why not? I'm Kojo Nnamdi.
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