The NVAR condo market in 2020 was marked by upheaval. The onset of the pandemic resulted in homeowners reconsidering their living arrangements from numerous perspectives. Those working from home needed additional space for a home office (or two). Those with children needed even more space to accommodate online schooling. More time spent at home meant more time in the kitchen, leading some to want upgrades to their culinary surroundings. Undoubtedly, these considerations are more acute for condo owners, most of whom have less living space than a single-family or townhome owner. Moreover, social distancing has made high-rise living much less convenient, with residents navigating common areas and elevators. This article reviews data showing some of the pandemic fall-out impacting our region’s condo market.
The pandemic undeniably flipped the persistent story of the NVAR condo market for the past several years: declining inventory. Active listings of condo units in the NVAR region reached a peak of 1,639 units in July 2015 (Figure 1). From this peak, the number of active listings of condos declined unrelentingly. In July 2018, there were just 995 active listings of condo units. Four months later, when Amazon announced its second headquarters would be located in Northern Virginia, the number of active listings declined 31%, year-over-year. From November 2018 through November 2019, the year-over-year change in the number of active condo listings averaged an almost 50% drop. In December 2019, the number of active listings hit a low of just 292 active listings of condo units for all of Alexandria, Arlington Fairfax, Fairfax City, and Falls Church combined.
Over the next several months, it appeared that price increases were starting to draw more sellers into the market. However, the onset of the pandemic and resulting activity restrictions briefly paused market activity and then sparked a major market shift. A comparative flood of condo units entered the market last summer with active listings in July 2020 being 52% higher than July of 2019. By October, the number of active condos listings was three times higher than a year earlier. As fall 2020 turned into winter, the number of active listing showed a seasonable drop but still remained at levels not seen in winter since 2016-2017.
Figure 1. Active Listings in the NVAR Region
Days on Market (DOM)
At the beginning of 2019, as condo inventory in the NVAR region dwindled, the median days on market (DOM) sank and remained extraordinarily low for nearly two years (Figure 2). In January 2019, the median DOM for condos was 24 days, by March 2019 the median DOM for condos declined to 7 days. From March 2019 through October 2020, the median DOM averaged 7.25 days. Anything that was put on the market was gone in about a week, on average.
While inventory levels suggested that some owners decided to bail on condo living, sales numbers and the days on market stats through much of summer show the presence of willing buyers. However, as inventory continued to rise in early fall, the median DOM finally began to increase. The median DOM for sold condo units increased to 13 days in November 2020, 19 days in December 2020, and 31 days in January 2021. The last time that the median DOM for sold condo units was above 30 days was in January 2018. While the median DOM in February declined to 17 days, February 2018 was the last time February DOM was higher.
Figure 2. Median Days on Market
Median Sales Price
The median sales price of sold condo units had been having an impressive upward trend since late 2018, reflecting strong demand and very attractive mortgage interest rates. The drop in mortgage rates allowed more households to enter the ownership market, but effectively boosted prices as new entrants competed for sparse inventory. By August and September of 2020, the regional median price of a condo unit set a new record of $345,000. However, the rise in inventory eventually worked through the most motivated buyers and price pressures shifted downward – the rule of supply and demand in action. By January 2021, median sales prices softened to $321,000 before rebounding slightly to $339,999 in February 2021.
Figure 3. Median Sales Price of Sold Condos
Map Change in Prices by Zip Code
While the median price of sold condos has generally increased in the NVAR region, there was substantial variation within the region (Figure 4). The map illustrates the percent change in the median price of sold condos by zip code from February 2020 to February 2021 for zip codes that had more than 10 sales in February 2021. There were notable price declines in Tysons Corner, Seven Corners, and Alexandria West. The corridor along Wilson Boulevard has also generally underperformed. The zip codes that recorded the largest prices gains were all less dense areas around Amazon HQ2, including South Arlington, Pinecrest, and Del Ray/Rosemont.
Figure 4. Year-Over-Year Percent Change in Median Sales Price of Sold Condos by Zip Code
Condo Projects Pipeline
Looking ahead at the pipeline of condo projects provides some evidence that condo price drops recorded in Arlington may not rebound in the near term. According to data by Delta Associates, there were 861 units in projects that were either being marketed or under contract in the Q3 2020, 490 of these units located in Arlington and Alexandria. These new units will be competing with the recent influx of existing condo inventory.
There are no projects planned that would likely have sales in the next three years. There is also only a single planned project of 124 units in Fairfax County/Falls Church that is likely to have sales within the next three years. This lack of pipeline in the longer-term may ultimately result in the return of supply shortages, especially if demand patterns return to pre-pandemic levels once the region attains herd immunity.
As the vaccine rollout continues, the condo market is likely to steady. However, there has been significant upheaval, with some trends that are likely to last into the near-term. Inventory of condo units soared to levels not seen since 2016. Although prices initially increased, they have softened as inventory accumulates and condo units remain on the market longer. Looking ahead, the pipeline of condo projects is going to be delivered in the sub-regions where prices have recently dropped. These deliveries may suppress prices further if inventory remains elevated. Condos in close-in locations present a critical market opportunity for new homeowners, especially for younger professionals planning to return to a workplace environment as pandemic restrictions ease.
Dr. Keith Waters is a research associate for the George Mason University Center for Regional Analysis.
Dr. Terry Clower is the director of the George Mason University Center for Regional Analysis.