06 March 2020, 20:25
By Maggie Hartman, Sustainability Content Writer Intern, RealtySage.com
In my previous article, I assessed the livability of Arlington and the surrounding area as affected by the new Amazon HQ2 development, announced in 2018. One of the livability aspects I discussed was housing availability and pricing. As a result of the HQ2 announcement, homes were on the market for shorter time periods, resulting in fewer properties for sale at a given time. Home prices also rose after Amazon announced its development. However, in order, to understand the housing situation more fully, we need to dive a little deeper into the market trends of the last year.
The Amazon Effect
If you remember way back in 2018, Amazon announced its plans in November to develop the new HQ2 office. To understand the immediate effects of Amazon’s development on the housing market, we will compare November 2017 with November 2018. When comparing the number of home contracts signed, we see that 533 were signed in November 2017, while 1046 contracts were signed in November 2018. That’s a whopping 90% increase in housing contracts signed, year over year. Pending Sales were up 27% in Alexandria and 46% in Arlington, which are both in very close proximity to the future HQ2 campus. Therefore, this sudden surge in market activity is what many people have referred to as the “Amazon Effect”.
But this flurry of buying and selling didn’t last forever. After a while, market trends became less severe and regained some normalcy. So, we will now investigate the current market trends, after the initial “Amazon Effect”. In order to accurately do so, our study requires some categorization. We will break down our study by housing type – condos and single-family homes.
Condos accounted for a majority of the homes sold in 2019 in the 22202 area, however the inventory dropped 40% due to homeowners holding onto properties in hopes of value appreciation. Condo prices also increased an average of 22.8% and had a median increase of 18.6%. Concerning affordable housing, lower price-pointed inventory decreased by 33% for 1 BR apartments and by 60% for studio apartments. Lastly, condo properties have appreciated 8-12% one year after Amazon’s announcement.
In the area surrounding the Amazon development site, most of the detached homes were built before the 1960’s, thus, are fairly old. Following the announcement of HQ2, 2019 saw a 33% inventory drop in single-family homes, with 50 homes sold as compared to the 75 sold in 2018. It is important to note that the reduction in sales was because of decrease in inventory, and not for lack of demand. The high demand has, in fact, caused the market time of detached homes to decrease by 63%. Single-family home prices have increased by an average of 9.2% and experienced a median increase of 8.5%. During the year following the HQ2 announcement, detached properties have appreciated in two different ways – properties valued less than $1 million have appreciated 12-15% and properties valued over $1 million have appreciated 5-8%.
After assessing the differences between housing types, we can conclude that in the aftermath of the initial “Amazon effect” boom, all housing type prices leveled out a bit, but have still increased overall from their pre-Amazon price point. Both housing types also experienced substantial appreciation in value. In addition, there is definitely a lack of inventory, specifically affordable inventory, among both condo and single-family housing types.
Photo credit Unsplash
Planning for Affordability
In response to the county’s lack of housing options, Arlington County is implementing a Missing Middle Housing Study, which will “explore if and how missing middle housing could help address Arlington’s limited housing supply and inadequate housing choices.” The study will explore if and how middle housing, such as duplexes and triplexes, could be implemented into Arlington neighborhoods, providing a wider range of house-price options. Arlington Country plans will orchestrate months of community engagement in order to facilitate citizen discussion on the possible development before drafting any proposals.
Although this seems like a fairly straightforward plan to address housing in Arlington County, there are a few things to bear in mind. The focus of the project seems to be split between increasing home affordability and increasing diversity of housing types. Each of these focuses bring challenges. Concerning affordability, the increased density of new middle housing homes may decrease housing costs, but the density will likely require more tax dollars to further develop infrastructure such as schools, transportation, water treatment, etc. The affordability of new housing is also questionable – a brand new condo may not be any more affordable than an older detached home. In addition, there is also a possibility of developers building condo buildings, but renting the units instead of selling them. Luxury apartment rentals are already prevalent in Arlington, so this will likely not decrease current unit prices. Lastly, although middle housing diversifies home types, there is inevitable value in retaining a certain number of single-family homes. Northern Virginia is a center for many people to come and go, maybe only staying for a couple years, but it is a long-term location for many people as well. Long-term property owners may want to start a family and settle down in a detached home. Therefore, it is important to retain a diverse selection of all housing types.
In conclusion, the initial boom of the Amazon effect was HUGE. Inevitably, however, the market has shaken out a bit, to show a trend of overall price and demand increases and a decrease in inventory among both condo and detached housing types. The good news is Arlington County is busy working on solutions to help meet the increased demand for affordable homes. Amazon has also pledged $20 million to the Affordable Housing Investment Fund (AHIF) to help increase affordability in Arlington County at large.
If you are interested in how the Amazon HQ2 campus has effected the livability of the 22202 area, check out my previous article.
Check out www.RealtySage.com which applies intelligent sustainability data to real estate listings including the Sage Score.
* This article may contain affiliate links. Which means at no additional cost to you, if you click through and make a purchase, Realty Sage may earn revenue.
Back to news