Ripple, Wave or Tsunami – Part I
There has been much national conversation that the COVID-19 pandemic has caused a “flight to the suburbs” as urban dwellers seek more elbow room. Has that happened in the metro Washington, DC market?
The region began to shut down in mid-March of this year, so we examined new contract activity from March 15 through the end of July for 2020 and compared that to the average activity of the same four-and-a-half-month time period for 2017-2019. As the chart indicates, there is no question that the outer suburban markets have fared better than Washington, DC and the close-in suburbs. Washington, DC contract activity is down a little over 9.2%, and Arlington is off over 20%, while Loudoun and Prince William Counties are only off between 3% and 4%. And in those areas most impacted by COVID, the condo market has been hit even harder. But there is nothing in these numbers to suggest that consumers are fleeing the city in droves. It’s not a tsunami – it’s somewhere between a ripple and a wave.
The impact of COVID has also been felt disproportionately at the lower end of the price spectrum. Job losses have been heavily concentrated in the service and hospitality sectors, and entry-level home purchases have been hit pretty hard. While the overall drop in contract activity in the region has been 8.7%, homes priced less than $300,000 have fallen by almost 35%, while activity for homes priced more than $500,000 has actually risen. Total new contract activity for condos is off 12.3%, while attached and detached homes are off 8.0% and 7.3% respectively. This is another indication that there has been some movement away from more dense living conditions, but it hasn’t been massive.
We are very encouraged by the rebound in contract activity since the middle of May, and the region’s real estate market is in far better health than we would have guessed just a few months ago. Yet a rebound and a recovery are not the same things. There is still an enormous amount of uncertainty about the future path of the COVID virus, and it will take a long time to fully replace the jobs lost and to climb out of the deep economic hole that COVID-19 has produced. We have been proud members of the Washington, DC real estate community for 40 years and continue to believe that this is the best place to live and work in the world. We are realistic in knowing that we are a long way from a full recovery, but optimistic that we will recover here better than almost anywhere.
— David Howell, Chief Information Officer, McEnearney Associates, “Has COVID changed consumer behavior in the D.C. metro area?