Ask Eli

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 much has the market changed in the last six months?

TL;DR (0:56)

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 [email protected].

If you’d like a question answered in my weekly column or to discuss buying, selling, renting, or investing, please send an email to [email protected]. 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

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: Do you have any information on when the Toll Brothers community in Dominion Hills will be for sale?

TL;DR (0:43)

Answer: Construction is underway on Toll Brothers upcoming 9.5 acre community, The Grove at Dominion Hills, a massive (by Arlington/inside-the-beltway standards) development of 40 brand new detached homes that will start around $2M, formerly the site of the historically significant Febrey-Lothrop property.

As of Monday, March 13 they were fully framed and under-roof on their model and one of their “quick-move-in” homes, with a third in foundation, and a fourth getting ready for foundation; all along the existing N. Madison Street.

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What I Know/Expect

Toll Brothers is as tight-lipped as it comes about new developments until their official public releases, but here’s what I know/expect:

• The community will include 40 new single-family homes
• Lot sizes will clock in around 60ft wide and about 8,000 SqFt (just over 1/6th of an acre), which is about 5% smaller than the average Arlington lot and about 10% bigger than the median Arlington lot (as we know from this column on Arlington lot sizes)
• I expect home sizes to range from about 3,500-5,500 total finished square feet depending on lot dimensions and options
• I expect most or all homes to include a two-car garage with either basement and main level entry depending on lot topography
• Toll Brothers will offer a combination of “quick move-in” homes with pre-selected options/finishes and semi-custom homes that allow buyers to choose from a pre-determined selection of elevations (exterior design), floor plans, options, and finishes

Details and Sales Opening Expected 2023

Toll Brothers is careful to not release pricing, floor plans, or most details about a project until their chosen public release date which is currently projected to occur in late summer 2023. Details will get released for the first time on their website with a community webpage. Sales are currently projected to start at the end of 2023, but that timing could easily move up or back depending on market conditions and work progress.

Toll Brothers determines their sales process based on market conditions and you can expect a multi-phased release, with prices increasing with each release (standard practice for new communities). Toll Brothers often uses a combination of option incentives and preferred lender incentives to drive demand, that smaller builders do not offer.

In my experience, they usually implement an appointment system on a first-come, first serve/meet basis. Those who register online for an appointment first, can schedule the first appointments with a sales rep and have the chance to lock in lots early so interested buyers should go into those meetings prepared to put down a deposit

Recently, and controversially, Toll Brothers implemented a blind auction system for lots at Arden, their luxury community in Great Falls. They set a starting price for a lot and had buyers submit forms stating how much they were willing to pay for the lot and what they wanted to build on it then chose the winner (presumably based on the highest lot bid).

If you’re an interested buyer, take advantage of the time between the public information release and the sales opening to learn as much about the community as possible, figure out what lots you prefer (note that the best lots usually come with a steep lot premium), compare your options with Toll Brothers to other new build opportunities, and be ready to make a decision with a lot-hold deposit at your first appointment.

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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: Do you think the Amazon HQ2 development pause will cause home prices to fall in Arlington?

TL;DR (1:25)

Answer: News broke Friday morning that Amazon will pause a majority of their HQ2 development in Arlington (link) — three 22-story buildings and their centerpiece, the 350ft Helix building. So far, Amazon has built two office towers and hired roughly 8,000 of the planned 25,000+ workers projected for HQ2.

The announcement of Amazon HQ2 in November 2018 led to a speculative boom in condo prices, so will this news cause a similar drop in prices?

Amazon HQ2 Led to a Condo Price Boom

The Amazon-effect was massive when Amazon announced its intention to build its second headquarters in Arlington on November 13, 2018. The condo market went from a multi-year annualized appreciation of less than 1% to an 11.7% increase in 2019, which was only slowed by COVID lockdowns in March 2020.

The non-condo market was appreciating nicely in the years leading up to the announcement and experienced a much smaller boost than the condo market.

Note: this data defines “condo” as multi-family/apartment-style condos, not townhouse-style condos (e.g. Fairlington)

Months of Supply (MoS), a measure of supply and demand where lower MoS means a more favorable market for sellers, fell off a cliff as soon as Amazon announced HQ2. I’ve always found this chart to be one of the best visual explanations of how immediate and extreme the Amazon-effect was on our market.

Prices Should Fall, If Real Estate Markets Were Efficient…

Given that prices increased speculatively in 2019 because of the announcement, not actual development and hiring, hypothetically, real estate prices should fall relative to the risk that Amazon cuts, materially reduces, or significantly delays their HQ2 plans.

This should probably look something like the JBG Smith (Amazon’s development partner) stock price, shown below, which dropped about 8% on Friday, after Amazon announced they were pausing HQ2, and has recovered about half of that price drop since, finishing Monday down just under 5% from Friday’s pre-announcement price.

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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: I found data that shows housing prices in D.C. are back down to the 2018 levels but anecdotal evidence suggests they are not. Can you explain whether the data I found is accurate or something is off?

Answer: The median price ($545,500) for homes sold in January ’23 in Washington, D.C. showed a 15.4% year-over-year drop and was the lowest median price for any month going back to January ’19.

TL;DR (1:26)

Did D.C. Lose Four Years of Appreciation?

Given the economic and real estate climate since this summer, with endless headlines about market corrections, it would be easy to interpret the latest D.C. median price data as proof that the bottom is falling out of the real estate market. Unfortunately for our bear-market prognosticators, or those waiting for a market crash to buy property, the chart above is misleading and not representative of the actual market.

The drop in median price is due to an unusual data set and does not mean that real property values have fallen 15.4% year-over-year and/or lost four years of appreciation.

How The Data Steers Us Wrong

Real estate data can be tricky to use correctly (aka draw accurate conclusions) so if you want to make data-driven decisions, make sure you are leveraging the right data and working with somebody who understands the strengths and weaknesses of real estate data in your local market. Here’s why the January median Washington, D.C. pricing data steers us wrong…

Timing: Pricing data lags by about 30-60 days, meaning the pricing data published in January is mostly made up of contract activity in November/December and is thus an indication of what happened in the market, not what is happening in the market. November and December are traditionally the slowest months of the year, with the least demand and lowest volume of homes being listed for sale. Sellers during this time of year also tend to be under more pressure to sell.

Combine that with the market deceleration in the 2nd half of the year due to rapidly rising interest rates and it made for an unusually slow real estate holiday season.

By the time the January pricing data was published in early February, market demand had already picked up significantly.

Sales Volume: Only 352 homes sold in D.C. in January compared to the 10-year monthly average of 718. Other than December ’22 (432 sales), no other month for the past 10+ years had registered under 450 sales and only five months registered less than 500 sales.

The unusually low sales volume means that the median price data can be skewed by unusual balances of less (or more) expensive homes in a given month, which is why most January pricing data comes in much lower than other months and why January ’23 was such an extreme version of that scenario.

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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: What design trends are you seeing in homes these days?

TL;DR (0:37)

Answer: Every year we cycle through new color, material, and design trends but it’s also rarely anything actually new, just recycled trends from past generations (e.g. wallpaper is making a big comeback). Design isn’t exactly a strength of mine, so I defer to the experts for my annual design trends column. This year I pulled from Apartment Therapy, Architectural Digest, Forbes, National Association of Realtors, The Spruce, Veranda, Wall Street Journal for their expertise and selected trends that I’ve been seeing more of.

Here’s a sharable link to the full presentation of design trends.

Red(ish) Defines Colors of the Year

Design Getting Darker, Warmer

Moody Space: A return to rich, dramatic color palettes (purple, sand, maroon, cream, chocolate brown) swathing an entire room. These spaces will maintain their minimalistic integrity, with a focus on intimate and moody forms and textures. Painted or wallpapered walls in the same color as the ceiling, trim, shades, furnishings, and/or fabrics can be modern and cool. Moody tones make spaces feel intentional.

Organic Materials and Earth Tones: In today’s chaotic world, nature has a calming effect, because of this, organic materials and earth tones are timeless and unlikely to look dated any time soon. Expect lots of wood and colors inspired by nature such as peaceful blues and mossy greens. Nature-inspired art and live edge tables are other ways to incorporate the elements in our homes.

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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.

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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 single-family housing market perform in 2022?

TL;DR (3:32)

Answer: The 2022 housing market came in like a lion and left like a lamb. The way things were reported in the news, one may be led to believe the 2nd half of the year was a disaster, with home values crashing because of higher interest rates, falling stock portfolios, the Ukrainian war, and buyer fatigue.

The truth, at least locally, is that the aggregate of the first half/second half, yin and yang housing market was still marked by strong price growth across all single-family sub-markets (I’ll analyze the condo market next week).

Strong, Stable Growth Continues for Arlington Single-Family Homes (SFH)

Like a blue-chip stock, the Arlington housing market is reliably strong and stable. We didn’t experience the double-digit annual appreciation of other national housing markets from ’20-’22 but we also benefitted by excellent growth prior to the pandemic buying craze (Amazon HQ2 and overall strong local market conditions).

You can also count on the likelihood of stable growth to continue even if other markets struggle as they transition out of their reliance on pandemic-buying and ultra-low interest rates.

• The average and median price of a SFH in Arlington was $1,280,000 and $1,150,000, respectively, an increase of 4.4% and 7%.
• Over the last five years, the average and median price of a SFH in Arlington increased by 25.3% and 29.1%, respectively.
• The average buyer paid 1.9% over asking to purchase a home in 2022.
• Homes that sold within ten days of being listed sold for an average 5% over asking and 57% of homes sold in 2022 were sold within ten days.
• Low supply was a big driver in keeping prices elevated despite difficult second half market conditions. There were 30% fewer SFHs sold in 2022 than in 2021.

22205, 22201 Zip Codes Lead Growth

If we drill down into performance by zip code (note: 22206 and 22209 don’t have enough SFH sales to be included), we find some really good insights:

• 22204 is the only remaining zip code with an average price below $1M. It was only 2017 that the entire County’s average price was below $1M.
• 22201 extended its lead as the most expensive zip code to purchase a SFH, costing an average of over $100k more than the next most expensive zip code, 22213, and finishing the year with an average price of nearly $1.6M.
• 22201 and 22205 experienced the most appreciation, with YoY increases of 9.3% and 8.2%, respectively. The next highest zip code, 22203, grew by 4.9%.
• 22205 was the most competitive/frustrating for buyers, with the average home selling for 4% over ask.
• Over the last five years, the 22202 zip code (area surrounding HQ2) has, unsurprisingly, benefited from the highest appreciation at 33.8% growth since 2018 due to the Amazon HQ2 boost followed by the pandemic buying craze.

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

TL;DR (1:16)

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: A friend of mine just lost an offer on a house and there were 7 other offers, is the market competitive again?

TL;DR Summary (1:37)

Answer: If you’re letting news outlets, national real estate pundits, and Twitter guide your real estate strategy in the D.C. Metro/Northern Virginia area, you’re likely getting a very different perspective on the real estate market than what we’re seeing locally. Despite 6-8+ months of headwinds, the market did a 180 in the first few weeks of January, compared to the weeks prior (this is a common trend).

Multiple offers, escalations, and limited contingencies have returned to many parts of the market, so this week’s column is chart-heavy to show that the “crash” in the 2nd half of the year was all relative to the breakneck pace of the market in 2021 to mid 2022 and how natural supply/demand economics are keeping the market competitive and prices up, despite how much higher the monthly payments are.

Second Half 2022 was Relatively Bad, Historically Normal

Overall, across the D.C. Metro region, total sales transactions finished the year 3% above the 10-year average. Things seemed a lot worse than they were because of the massive number of sales we experienced in 2021 and 2020.

While prices in most sub-markets did drop from the first to second half of ’22, real estate in the D.C. Metro still appreciated in 2022 above the 10-year average. Even condos, which struggled through the heart of the pandemic, appreciated nicely in 2022.

In Northern Virginia, there’s a clear jump in average prices in Q1/Q2 2022, followed by a very normal drop in average prices for Q3/Q4 (this has more to do with more expensive homes being sold in the spring, not a seasonal drop in home values), but the Q3/Q4 average prices fit nicely within the normal trend line and do not suggest any sort of crash, just a jarring difference from what we experienced in the first half of the year.

Average sale price to original asking price ratios, one of the best demand metrics, fell sharply through December, from all-time highs in the spring. While the speed of the drop shocked the market, it dropped to normal Q4 levels so the “crashing market” feeling was only relative to the extreme demand in early 2022, but not so when compared to historical norms.

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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: On social media, I have seen a new loan program advertised called the All in One mortgage. Whom might this program benefit and are there any pitfalls to look out for?

TL;DR Video Summary (3:13)

Answer: With mortgage rates so high, we’re seeing new products or new angles on old products (like the 2-1 Buydown) and lots of mixed information about why rates are high or where rates are likely heading in 2023 and beyond. So in keeping up with my promise to provide relevant, transparent information on the mortgage market, let’s talk about another buzzy product being discussed lately, the All-in-One Mortgage.

It’s a fairly simple product, but cutting through the marketing of it to know if it’s the right product for you isn’t easy.

The rest of this article is a guest column generously written anonymously by a lender at a local bank that offers this product, but wishes to remain anonymous so they could provide an honest review. So enjoy a brutally honest review of a mortgage product that isn’t as great as the marketing makes it seem…

The creators of the AiO claim in their marketing that this loan will pay off a homeowner’s mortgage faster than a traditional mortgage, but we have found this not to be the case and that the AiO may be more expensive than a traditional mortgage, on an apples-to-apples basis.

The goal of this article is to provide a quick overview of this product, as well as discuss which situations the AiO may or may not be a good financial instrument for the purchase or refinance of a home.

Mortgage, Home Equity Line, and Checking Account “All in One”

The All in One (AiO) mortgage combines a mortgage, a home equity line of credit and a checking account, all in one financial instrument. The AiO allows you to purchase a home just like any other mortgage, where you would apply for a pre-approval, shop for a home, and once a home is under contract, the AiO would fund the majority of the home’s purchase price.

In addition, you can deposit your pay into this account, and pay all your bills from this account, just like any other checking or savings account. The account has an ATM card and allows automatic bill pay. Finally, the AiO acts like a Home Equity Line of Credit (HELOC), allowing you to access your home’s equity should you have such life events as paying for a child’s wedding or building an addition to your home.

Whether this product is a good fit for you depends on your goals and priorities, so the following summarizes how the AiO fits with certain personal and financial goals.

AiO Recalculates Interest Daily, Not Monthly

A traditional mortgage charges interest on the outstanding balance as of the date of the last mortgage payment, and you pay interest on this balance for each day of the month until the next mortgage payment. In contrast, the AiO mortgage calculates interest daily, so if you deposit your paycheck in the account, this immediately reduces the balance on which interest is calculated.

Said differently, if you make an additional payment to principal mid-month, the AiO would calculate interest on the lower balance for the remainder of the month, whereas a traditional mortgage would not. The creators of the AiO mortgage share that this feature saves interest, which it does.

However, the AiO mortgage has a higher starting interest rate than a traditional 30-year fixed mortgage and the AiO does not have a permanently fixed rate of interest, so the interest rate on this product may be higher or lower in the future, as it is market-driven.

Hence, any interest savings due to the AiO paying interest daily can be lost due to the higher initial interest rate and/or increases in the program’s interest rate down the road. This does not mean that the AiO would not save on interest; however, there are many instances when the amount of interest you pay may be higher despite the advantages of daily interest recalculations, so be sure to discuss interest rate risk with your financial advisor.

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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 Ask Eli, Live With Jean playlist. Enjoy!

Question: We’re moving to Arlington from out of state and have always had at least an acre of land. We’d like at least ½ acre in Arlington, but can’t find much. How big are most lots in Arlington?

TL;DR Video Summary (1:11)

Answer: I talk a lot about making sure the home you want exists before setting your hopes and dreams on finding it. Understanding what lot sizes you can expect to find in Arlington is a great example of that, so this week I’ll share data on lot sizes from homes sales going back to 2019.

The data is based on total square footage of a lot, including the land the home sites on. Most people think about lots in terms of acres, so here’s a quick conversion key:

Arlington Lot Size Highlights (sales since 2019):

• Average lot = 8,479 SqFt
• Median lot = 7,277 SqFt
• Lot with ¼ acre or more is in the top 83% largest lots
• 4% with ½ acre or more
• Just six of 4,355 were 1+ acre, none were 2+ acres
• More homes sold on 1/10th acre or less than ½ acre or more

The chart below shows the percentage of homes sold in Arlington within five different ranges. 69% of homes sit on lots with 5,000-9,999 SqFt.

Drilling down even further, we see that 1,672 of 4,355 lots (38%) were between 6,000 and 7,999 SqFt.

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