Northern Virginia Stats Update: Spotlight on Arlington

The regional statistics for the Washington Metro area were released this week by MRIS, the MLS provider for our area. Over the next handful of days I will highlight specific areas within the Northern Virginia market and let the statistics do most of the talking (or at least try to). All statistics are year on year for February of ’09, in comparison to February of ’08. Arlington is clearly a diverse market, and as you will see in the data, there is no one single culprit for any of the declines shown.

Arlington County:
• Average Sales Price: -9.89% to $457,955
• Total Units Sold: -34.32% to 90
• Days on Market: +11.11%

Highlights:
• Hardest hit segment of the market for price declines was for 3 bedroom homes, which fell 18.85%
• 159 homes listed over $1m, while only 4 of these homes sold.
• 290 new listings in February, while there were 90 sold homes.
• Of 127 New Construction listings, 3  sold in February with roughly 20 under contract currently.
• 451 Active condo/coop listings, with 52 sold.
• 167 Active dettached home listings between $500k and $900k, with 14 sold.

Opinions: (yes, the hot air section)
In simple terms I venture to make the claim that the allure of Arlington, and historical assumptions therein, are working against it. I will qualify this in a moment. On the front end here, even though the DC area is the top job market in the country (4.7% unemployment was the recent measurement), let’s acknowledge together that employment fears (and loss), are not helping matters.

While much of Northern Virginia has improved numbers in regard to number of listings versus number of sales, Arlington, for the time being, is moving in the other direction. There is a glut at the bottom, in the middle and at the top of the market. The glut at the bottom is being driven, at least in part, by a combination of condition, affordability (still), fear of the condo market, and over supply (what is not represented in these figures are the new construction condo units that do not make it to the MLS). We have seen these projects continue through Ballston, Clarendon, and Courthouse, so more supply is on the way. Long term this will work itself out, but in the short term there will continue to be downward pressure on this tier. Creating plentiful opportunity for investors.

In the middle I am personally seeing reasonable demand in terms of active buyers, but little in terms of them taking action. There appears to be a disconnect with both condition and price. When a well priced home in good condition comes on the market it is swept up in no time, with escalation clauses.

As far as the $1M plus market, it is difficult to say for sure how the issues here will affect the other tiers. This market is in a period of stasis due to greater loan constraints,  most notably higher down payment requirements for jumbo loans (sometimes as high as 40%). The will is there, but the ability is not. Those who had the cash for that sort of money down 6 months ago have watched much of it dissolve as the stock market has tumbled. New construction is adding to the pressure as well, adding exponentially to supply, while demand, or more appropriately ability, has slowed to a crawl. The problem for the these homes is that until more lenders become willing to make the jumbo loans for 20% down (still $200,000) the only way to move the inventory is to drop the prices into the conforming loan limit range. In my opinion this will not happen… yet. Needless to say, if it did, the ramifications would ripple through the rest of the market.

Conclusion:
Back to my point regarding the allure of Arlington: It is my opinion that this idea that Arlington will always be in greater demand is preventing sellers from making the appropriate pricing adjustments. The days on market say that pricing is not in line with demand, so there is some correction yet to take place. I am not saying this opinion is wrong, I just feel it is a hand that is being over played at the moment. I also do not believe that much weight can be put upon the new administration having much affect on values. Historically this is a local myth that statistics just don’t support, but on top of that if members of the administration came in and scooped up high dollar homes during these times the media would have a field day.

Arlington will likely see some peaks and valleys over the coming months. However, the single most important thing that needs to happen to get things flowing is price correction. The sooner this happens the sooner we can grow again. The obvious caveat being the jumbo market, this is a conundrum that I do not have the answer to.

Regards,

Colin Storm

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