This regularly scheduled sponsored Q&A column is written by Eli Tucker, Arlington-based Realtor and Arlington resident. Please submit your questions to him via email for response in future columns. Video summaries of some articles can be found on YouTube on the Eli Residential channel. Enjoy!
Question: How did the Arlington condo market perform in 2022?
TL;DR (3:18)
Answer: Last week, I detailed the 2022 Arlington Single-Family market performance so this week we’ll do a deep dive into Arlington’s 2022 condo market performance.
Like the rest of the housing market, the condo market started the year off strong due to low interest rates and a return to more normal condo buying habits, after the flight from condos seen during the ’20-’21 pandemic years. Despite the interest-rate driven slowdown in the second half of the year, the aggregate performance of the condo market in 2022 was flat to slightly up, depending on how you look at the data.
The Condo Market Has Returned to Normal…
What is a normal condo market in Arlington? It’s hard to remember what a normal condo market looks like because we haven’t seen one since ~2017/2018. The market went red hot at the end of 2018 after the Amazon HQ2 announcement until being frozen by COVID in early 2020 and then from summer ’20 through 2021 we saw a flood of condo inventory hitting the market as people left for more space, which kept prices from increasing like the single-family and townhouse market.
So what is normal? Normal is about 1-2% annual appreciation and an average over 30-45 days on market. When you strip out the gains related to more expensive new construction condos being sold and just look at resales of existing condos, you’ll see that the long-term norm for Arlington apartment-style condos is a modest 1-2% annual appreciation.
…Except Inventory Levels
However, there are some signs that we might see stronger appreciation in 2023/2024 due the supply of condos for sale trailing well behind the 10yr average. The chart below highlights just how extreme the transitions were into the post-Amazon HQ2 announcement market (Nov’18) and then into the COVID market. With a very weak pipeline of new condo deliveries in Arlington, supply will come from an already limited inventory of existing condos for sale and should create some upward pressure on pricing.
Data Highlights and Analysis
The following data is for apartment-style/multi-family condos (aka buildings only, excluding townhouse-style condos like you see in Fairlington) and does not include age-restricted condos (The Jefferson) or Coops (Riverplace). All prices are based on net sold price (purchase price less any seller-paid closing cost credits):
- The average price of an Arlington condo increased by 2.6% to $502,000 and the median price increased 1.7% to $427,000. If you remove new construction sales from the data, the average price increased by only .6% to an average price of $463,000.
- The average 1BR condo increased .1% with new construction included and .7% without new construction included. The average 2BR increased 5.4% with new construction as opposed to just 1.3% without new construction (2000 Clarendon had a lot of 2BR units).
- Since 2018 (five years), condos have appreciated by just 10-20%, depending on the sub-market you’re looking at and data you’re using, and almost all of that growth came in the ~12-14 months between the Amazon HQ2 announcement and COVID lockdowns. That appreciation drops by almost half when you remove new construction from the data. Single-family homes have appreciated about 2-3x+ faster over the last five years.
- Most of the 5yr price appreciation of the 2BR and North Arlington market segments is due to higher priced new construction buildings that have come online during that time and not actual price growth. When removing new construction, the 5yr growth for a 2BR drops from 20.1% to 10.5% and for North Arlington from 18.1% to 9.9%.
- Over the past five years about 2% of condo sales have been studios (no legal bedroom), 39% 1BR, 51% 2BR, 8% 3BR, and ~.5% have been 4+BR.