Will Amazon’s HQ2 Trigger a Housing Market Frenzy?
Speculation is rampant. Here's what the numbers show so far.
Remember the-sky-is-falling predictions that forecasters broadcast each time a hurricane threatens the D.C. area? As the storm churns in the Atlantic and crawls up the coast, the outlook here grows more dire and deadly. But more often than not, we get some huffs and puffs and not much else.
Hurricane Amazon could be like that.
The hype has Amazon blowing into town with thousands of new employees who scoop up every million-dollar home within a 20-mile radius of National Landing. Inventory dries up. Home prices surge. Everyone gets rich except the poor schmucks who sold before the residential ball got rolling.
In reality, Amazon’s arrival may be more like a spring shower. Sure, it’s likely to add another 37,850 jobs to the local economy over the next 16 years. But the Washington region has welcomed more than 763,000 new jobs in the past 20 years, according to IHS Markit forecasters, and is expected to add another 593,000 in the next two decades.
Amazon’s new, nongovernment jobs will amount to about an 8 percent boost in job growth for the region, according to the Stephen S. Fuller Institute at George Mason University. Researchers there describe the number as significant but within “historic norms.”
Of course, those new workers will have to live somewhere. And JBG Smith, Amazon’s landlord and development partner, is planning to add between 4,000 and 5,000 residential units, mostly rentals, within a half-mile of HQ2. Those units will provide more supply for the area’s housing demand and perhaps put a damper on rising home prices.
“The market is so many factors beyond Amazon,” says Andy VanHorn, JBG Smith executive vice president. “There will be a lot of people like us meeting housing needs.”
There’s the rub. Do individual homeowners, who divine a market shift and surge, really think that bigtime developers don’t see the opportunity? And if one single-family homeowner in Falls Church can reap a windfall from the Amazon effect, won’t real estate developers want their taste, too, and deliver thousands of units of new housing?
Also, nobody knows for sure how many of Amazon’s HQ2 employees will be new to the D.C. area, where they will choose to live or what percentage will be buyers rather than renters. “The company has only hired a couple hundred people so far,” says VanHorn (as of January 2020, the number was just north of 400), “and they’re almost all local. Amazon is hoping to hire locally as much as possible.”
For now, the market frenzy appears to be most concentrated in the areas closest to National Landing, although Northern Virginia as a whole is trending warmer. A broader look at the 16 ZIP codes comprising Arlington, Falls Church and McLean finds that from 2018 to 2019, the average home sale price rose a modest 3.6 percent, according to Bright MLS data, and inventory (expressed as the number of homes sold) was down 6.2 percent.
But homes are selling faster across the board. From 2018 to 2019, the average days on market for a house in Arlington, McLean or Falls Church dropped 24.6 percent. And the ratio of median sale price to list price is currently at 100 percent in Arlington and Falls Church City, indicating that sellers in those places are getting what they’re asking for.
How much of that can be attributed to Amazon, of course, is debatable. Northern Virginia’s housing market was hot before Jeff Bezos came to town. And market psychology is a funny thing.
VanHorn, who lives in Kensington, Maryland, doesn’t want to see homeowners betting their nests and nest eggs on how the Amazon effect will play out.