Amazon delivered a different kind of Christmas present to homeowners in Arlington, Virginia: an early spring home-buying season that’s setting housing prices ablaze.
The company’s November announcement that it picked the Crystal City area of Arlington for its second headquarters, or HQ2, has driven area home prices substantially higher in just a few months, according to Redfin and Realtor.com. The market is likely to heat up further as the spring sales season draws near.
And Amazon’s recent bombshell that it’s scuttling plans to locate half of HQ2 in Queens, New York, because of local political opposition has only intensified buyer interest in Arlington, says Redfin broker Brian McMahon.
The hot market is a boon for home sellers but is hurting buyers, especially those seeking low-priced starter homes.
The price surge is defying a national housing market that cooled in the second half of 2018 amid rising mortgage rates and tight inventory. Home sales across the country are expected to be down slightly this spring shopping season from a year ago. But the market should pick up steam later in 2019 as a result of moderating rates, more plentiful supplies and rising wages, says Lawrence Yun, chief economist of the National Association of Realtors.
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Higher mortgage rates and limited inventory made for listless home sales in Arlington in the months leading up to the Amazon news, McMahon says.
“It started to slide into a funk in late summer, early fall,” he says.
Amazon’s announcement that it’s bringing 25,000 to 38,000 jobs to the Crystal City area over the next dozen years – with an initial 400 coming later this year – was an adrenaline shot.
Jessica and Joel Sackett had ditched plans to put their two-bedroom condo on the market last summer after McMahon told them it wouldn’t fetch more than $575,000, marginally above what they paid for it 2 ½ years ago.
But after the Amazon news, “We said let’s try it,” Joel, 35, says. “We’re only two metro stops away from Crystal City.“
Within 24 hours of listing their Old Town, Alexandria, condo at $600,000 in early December, they had an offer for $606,000. “I was ecstatic,” Joel says.
Although that deal fell through in early January, the couple immediately relisted the unit and got a $600,000 offer, again within 24 hours. The closing was Monday, with the Sacketts moving to a larger townhouse in Alexandria.
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Home sellers across Arlington are reaping even bigger gains.
From October to January, the median home sale price in the county rose 11 percent from $545,000 to $605,000, according to Redfin’s analysis of Multiple Listing Service data. Both Redfin and Realtor.com officials largely attribute the price jump to Amazon. Homes in the larger Washington D.C. metro area dipped 3.8 percent during that period.
Meanwhile, the number of homes sold in Arlington was up 24.8 percent in December from a year earlier and 18.2 percent in January. That reverses the historical trend: Typically, sales and prices tumble through the winter months. In the October-December period a year ago, county home prices fell 13.7 percent.
Crystal City and surrounding areas are also benefiting. From October to December, median home sale prices in those communities increased 8.1 percent, compared to a 0.8 percent dip a year earlier, according to Realtor.com. Some buyers looking to move to the area are trying to snag a home before prices skyrocket, says Realtor.com Chief Economist Danielle Hale.
Many investors, meanwhile, aim to turn a quick profit or rent out units at high rates, McMahon says.
Buyers “are calling and saying, ‘We saw what happened in the Seattle area and we think the same thing will take place in the Crystal City area,’” says Virginia Smith, president of Arlington Realty in Crystal City.
Seattle area home prices have climbed 60.7 percent the past five years, partly because of growth at Amazon’s current headquarters and other tech companies, says Zillow senior economist Aaron Terrazas.
In Crystal City, office rents are also feeling the Amazon effect. Asking rates rose 69 cents in the fourth quarter to $37.33 per square foot annually, largely because of Amazon, according to CBRE.
Amazon would not comment on the rising real estate prices.
Many homeowners, meanwhile, are biding their time and hoping for a bigger payday.
“They’re holding off from listing and waiting to see what’s going to happen” when Amazon employees begin moving into the area later this year, McMahon says.
That, he says, helps explain why Arlington’s housing inventory was down 30 percent to 40 percent from a year earlier from November through January.
If a flood of eager house hunters collides with wary homeowners, it could make for a less active spring selling season that drives prices even higher, McMahon says. Yet Hale and McMahon are betting more homeowners will list their houses this spring as demand and prices rise, providing some relief to buyers.
As costs increase, though, shoppers seeking entry-level homes “will likely find themselves suddenly priced out of the area,” Hale says.