December brought some truly incredible absorption rates in Arlington and Alexandria in the aftermath of Amazon’s HQ2 announcement, while the rest of the region continued to see more typical performance.
Compared to the previous December, contract activity in Alexandria was up 13% in December 2018 and was up 20% in Arlington. The Amazon announcement created a perfect storm – it fueled demand precisely at a time when inventory is seasonally low. In December 2017, inventory was about 40% lower than it was in September 2017 in both Alexandria and Arlington. As expected, inventory was already headed down before the Amazon announcement, so when contract activity increased in the last six weeks of the year in Arlington and Alexandria there was already less inventory to fight over. And since we were then in a time of year where relatively few listings come on the market, buyers were soaking up whatever was there.
In addition, there is no doubt that there are homeowners out there who were thinking about putting their home on the market who have now made a strategic bet, to hold off selling for now in the hope of much higher sales prices once Amazon ramps up.
And that squeeze resulted in absorption rates that we have seldom seen. In Alexandria, detached homes and condos priced between $400,000 and $1,000,000 had 66% rates and townhouse had 50%. (Bear in mind that anything above 30% is considered a seller’s market.) In Arlington, the rates were even higher. There were only 9 townhomes on the market in all of Arlington at the end of December and there were 28 that went under contract – the absorption rate for townhomes priced under $1,000,000 was 100%. Detached homes and condos under $1,000,000 had absorption rates north of 70%!
But we don’t expect these meteoric rates to continue. There was an understandable and immediate reaction to Amazon’s news and that fueled speculation, and it likely that some would-be sellers decided to hold their homes off the market, betting that prices will rise. But we do expect inventory to slowly return to more typical levels over the next few months.