Northern Virginia’s short housing supply takes its toll on new home buyers

The lack of homes for sale in Northern Virginia and the Washington, D.C. metro area has taken its toll on the housing market, as it has in other markets. In every jurisdiction in Northern Virginia, there is just a little more than a month’s supply of homes on the market, says David Darakhshan, president of Galaxy Construction, a longtime developer based out of Ashburn. A balanced market has about a six-month supply of homes.

“Active listings were down 17%  in June of 2018 compared to last year around the same time in Northern Virginia. Hopefully, part of the reason listings were so low is that the milder weather for much of the winter made the buying season robust in January and February.”

The number of homes that sold in Northern Virginia dropped 4.11%  year over year for February, according to Multiple Listing Service (MLS).

“Homes in Northern Virginia may not be selling at the white-hot pace they were last year, but it’s still a very strong and healthy market,”

says Nela Richardson, chief economist of Redfin real estate brokerage in Washington, D.C.

The slower pace of sales appears to be tied to the limited availability of homes rather than any slowing of demand, says John Eric, a real estate agent with Compass real estate in Arlington, Virginia.

Washington D.C Real Estate
Photo Courtesy of Galaxy Construction

There’s definitely pent-up frustration because of the limited number of homes for sale.

“The slight uptick in interest rates is having an impact, too, because buyers feel that time is of the essence in getting into a house before rates rise more.” Says Eric.

Buyers looking at properties in the $500,000 to $1,000,000 range face a lot of competition. At a recent open house for a $700,000 listing, 50 people toured the property in one day. It’s no different at the higher price ranges. Recently, 45 buyers attended an open house at an Arlington listing priced at about $2 million.

Supply and Demand

Despite the high demand, we are currently seeing in the market, Richardson warns that:

“sellers should avoid overconfidence about the value of their homes. My advice for sellers is to not overprice” 

Richardson goes on to say;

“It’s still a hot market, but buyers are savvy. The 2007 crash taught us all a valuable lesson about overvaluing properties. Most people have learned to do their due diligence.  It’s best to stick with pricing not too far above or below market conditions.”

Buyers are much more sophisticated at evaluating price points, says Eric, and if something is overpriced, it will just sit on the market.

Gustavo Vega, president, and operator of RSI | Restoration Services Inc., a Washington, D.C. based Construction, Roofing, Fabrication, and Architectural Design firm, says

“Its not only new home buyers that are flooding the market. It’s also investors and flippers who are driving up property values in Northern Virginia.”

Since the real estate market in Northern Virginia was one of the areas in the country to be least impacted by the 2007 housing market crash, investors find the area to be a safe bet.

In Northern Virginia overall, the median sales price rose 8% in February 2018 compared with February 2017, but price appreciation varies widely from area to area.

Arlington, for example, because of its close proximity to Washington D.C., gets lots of attention for it’s from most buyers who are looking to cut down on their commute. However, home prices there increased only 0.4% between February 2017 and February 2018 due to the already high, and mostly overvalued properties, according to MLS. Prices in Fairfax County rose 7.7% during that same period, and prices in Loudoun County rose 6.8%. Median sales prices rose 18% in the city of Alexandria and 13.9% in Falls Church, Virginia.

The city of Alexandria’s jump in home prices was not only ahead of other Northern Virginia jurisdictions; it was also above the increases in the District, Montgomery County, and Prince George’s County. Among the close-in Northern Virginia suburbs, Arlington is already high-priced

“Alexandria, including both the city of Alexandria and the Alexandria section of Fairfax County, has that urban-suburban mix people are looking for. You’ve got walkability and places to go, yet the neighborhoods are also great for families. You also have a mix of condos, townhouses and single-family homes, which appeals to a lot of buyers.”

The volume of sales in the city of Alexandria rose by 18%, which was also ahead of most other areas.

What to watch in Northern Virginia

●Every community in the area has only a month’s supply of homes, well below the six-month norm.

●Low inventory is creating an acute shortage of homes in the $500,000 – $1,000,000 price range.

●Loudoun continues to build new communities that are walkable.

●Talks of Amazon’s HQ2 to the area are starting to show effects in the area’s housing market.

Amazon's HQ2 Reston Virginia
Amazon has Reston Virginia at the top of its list for its much anticipated Hq2

Northern Virginia is the clear favorite to land Amazon’s second headquarters, and D.C. is a close second, according to those with some insider information. Some of the most likely spots for the second headquarters in Northern Virginia, should the region win the bid, include Reston,  and Crystal City in Arlington.

Bovada released its list of odds for the 20 finalists to get Amazon’s 2nd HQ on Aug. 24, and Northern Virginia was at the top of the list with odds of +240. D.C. had odds of +350, followed by Austin at +400 and Boston at +450. Montgomery County, Maryland, was seventh with +1200.

Northern Virginia was one of 238 cities and regions that applied for the project, which would bring 50,000 new jobs and billions of dollars to the are. The list was shortened in January of this year, and Northern Virginia made the cut along with Washington, D.C. and Montgomery County, Maryland.

A company statement from Amazon released shortly after the new list was unveiled reads:

“Amazon evaluated each of the proposals based on the criteria outlined in the RFP [request for proposals] to create the list of 20 HQ2 candidates that will continue in the selection process.

In the coming months, Amazon will work with each of the candidate locations to dive deeper into their proposals, request additional information, and evaluate the feasibility of a future partnership that can accommodate the company’s hiring plans as well as benefit its employees and the local community. Amazon expects to make a decision in 2018.”

The D.C. area owns three spots on the short list. New York is the only other metro area on the list with more than one (New York and Newark, N.J.).