Amazon’s impact on Arlington and Alexandria continued in December

McEnearney Associates’ EVP and CIO David Howell

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.

—David Howell, “Amazon’s impact on Arlington and Alexandria continued into December”

Amazon HQ2 announcement affects D.C. area contract activity in November 2018

Arlington and Alexandria’s real estate certainly got a boost in the immediate aftermath of Amazon’s announcement that they are bringing 25,000 new jobs to Northern Virginia over the next decade. A couple of weeks ago we talked about the Impact of Amazon’s HQ2 move to Northern Virginia and what to expect in the years to come, but today let’s focus on the immediate changes that we’ve noticed in the month of November.

To provide some context, absorption rates – the pace at which the market is putting the inventory of available homes under contract – is generally a bit lower in November than October. And as we have noted in this space before, rates above 60% represent an extreme seller’s market. (See chart below.)

Amazon made their big announcement on November 13 and the immediate impact on Arlington’s market was electric. Absorption rates for all property types – detached, attached and condos -throughout Arlington County were 14% higher than November of last year, and the same is true for the City of Alexandria. All property types – though not all price categories – are in the “seller’s market” range. And counter to what we typically see, the rates were considerably higher than they were in October.

The impact in Crystal City was even more dramatic. Almost all of the housing stock there is condos, and the November absorption rate was almost 85%! We typically see 6-10 condos go under contract in a given month – in November there were 22, and there probably would have been more if there were more on the market.

But we don’t expect these meteoric rates to continue. There is an understandable and immediate reaction to the news and that fuels speculation. But we think the initial reaction – perhaps overreaction – will settle into a more reasonable set of expectations. Northern Virginia and the whole metro DC area will benefit from Amazon’s move, but this is a long-term play. Those looking to score some quick gains by buying and flipping may be disappointed when things settle down.

—David Howell, “Amazon HQ2 announcement affects D.C. area contract activity in November 2018”