Will Amazon’s HQ2 Trigger a Housing Market Frenzy?
Speculation is rampant. Here's what the numbers show so far.
Amazon announced its selection of Arlington as an HQ2 site on November 13, 2018. By the end of 2019, the average sale price for homes in ZIP code 22202 had increased 14.5 percent over the previous year, from $603,568 to $691,189, according to Bright MLS, and the average number of days a home was on the market had dropped 46.5 percent, from 34 to 18.
Inventory also tightened. The neighborhoods around National Landing saw only 139 home sales in 2019, down from 236 in 2018. Why? The 41 percent drop suggests would-be sellers may indeed be biding their time and waiting for the right moment.
By comparison, in the three preceding years (2015-2017), real estate in 22202 experienced much less volatility. The average annual change in home sales prices ranged from a 4.5 percent drop to a 3.9 percent increase.
But then came the juggernaut. “The nationwide competition [for Amazon] drew so much attention, it caused a massive shortage of homes as investors descended on the area, buying homes as quickly as they could,” Realtor.com senior economist George Ratiu surmised in a trends piece on his company’s website. “Second, homeowners and investors have been holding out on selling, anticipating that prices will only continue to increase further.”
Still, on-the-ground real estate agents like Carol Temple aren’t ready to characterize what they’re seeing as “thunderous movement in our market.”
“Crystal City residential inventory has always been low,” says Temple, a Coldwell Banker agent who’s sold Arlington real estate for more than 30 years. “And Amazon [with its development partner, JBG Smith] is building its own rentals, which will make it easy for new employees to have a place to land.”
Long-term, Temple says, Amazon will be just another element that will continue to keep our real estate market strong.
“Unfortunately,” she adds, “it will be one of many elements that will continue to make close-in real estate pricey and pretty unaffordable for many people.”
Long before Amazon’s HQ2 was a glint in Arlington’s eye, people held mixed views of Crystal City.
A county sector plan adopted in 2010 began the work of transforming the neighborhood, block by block, from a concrete prairie of office buildings and residential high-rises to a more pedestrian-friendly place with public art and pocket parks.
But for years, most workers drove or boarded the Metro to homes elsewhere, making Crystal City look abandoned and forlorn after 6 p.m.
It didn’t help that a lot of its office space was empty. The Defense Department’s 2005 Base Realignment and Closure (BRAC) sparked a mass exodus of contractors and federal agencies from the area. Then came the financial crisis of 2008. Government spending cuts (sequestration) in 2013 delivered yet another blow in the form of workforce reductions and shuttered offices. By the end of 2014, more than a quarter of Crystal City’s commercial space sat vacant, according to CoStar.
When Amazon started eyeing Crystal City as a possible HQ2 location, it didn’t see a ghost town. It saw a largely blank canvas. The company started moving into its new digs in April 2019 and is expected to occupy up to 8 million square feet of old and new office space in Arlington County over the next 20 years.
The move has shined a spotlight on an area some previously considered a best-kept secret. “Even before Amazon, Crystal City has always been a sought-after location because of its proximity to D.C., its Metro, shopping and restaurants,” says Andors, who has lived there since 1993. “I can walk home from the airport. We have restaurants four blocks away. Even during the Great Recession, home prices didn’t go down as deeply, or for as long as other areas around Arlington.”
If residential properties within walking distance of downtown Crystal City have always been hot, the Amazon announcement set them on fire.
A week after Amazon’s big reveal that it had chosen Northern Virginia and New York City as the sites for its second headquarters (New York City would later drop out), “The inventory of available properties [in Crystal City] evaporated,” Andors says. Properties in older buildings, which were a tough sell pre-Amazon, “suddenly were as popular as can be. My phone was blowing up.”
Frantic buyers included speculators hoping to cash in on Amazon fever, he says, and panicked fans of Crystal City who were watching inventory yanked out from under them. “They felt, ‘If we don’t get in now, when will we be able to?’ ”