An already constrained inventory coupled with developers circling the community in search of lots viable for Missing Middle-type housing could continue pushing the price of single-family homes higher in Arlington.
That’s the conclusion of a new report from the Northern Virginia Association of Realtors and Center for Regional Analysis at George Mason University, which predicts 2023 will end with Arlington single-family-home prices up an average of 9.2 percent from the year before.
That may be good news for prospective sellers, but will be a challenge for potential buyers, particularly if they have to compete with developers for a limited supply.
“The recent change in Arlington’s zoning laws, allowing some single-family homes to be converted to multi-family dwellings, may spark investor activity that drives up prices,” the report concludes. “Residents will be hard-pressed to find options for single-family homes.”
The Arlington market was among the first in region to see average single-family sales prices rise above $1 million, and more recent figures have that rate climbing ever closer to $1.5 million.
Arlington County Board members enacted the so-called Missing Middle policy earlier this year, allowing many single-family lots to be subdivided for up to six properties. But the policy, at least for now, comes with an annual limit on the number of lots where the changes will be allowed.
That may not stop developers from grabbing what they can, and when coupled with current homeowners sitting tight on rock-bottom mortgage-interest rates, makes for a challenging environment for prospective purchasers.
And those current homeowners may not be going anywhere anytime soon.
“It will be hard to justify leaving a home with a refinanced loan below 3 percent for another home with a higher price and a loan rate the could be doubled,” said Terry Clower, director of the Center for Regional Analysis.
That’s not just true in the single-family segment of the market. In fact, it may be more true in Arlington’s condominium market, where condo owners are likely to stay put. Because of the combination of higher prices, higher interest rates and lack of inventory, their usual path moving up to townhouses and single-family homes may be blocked for now.
To prepare the market survey, the Northern Virginia Association of Realtors convened experts from different industry sectors to review preliminary forecasts from the Center for Regional Analysis and offer insights into current and near-future market conditions.
The report represents a consensus forecast, and anticipates 2023 sales across Northern Virginia to be down about 10 to 15 percent from 2022, with overall sales prices up slightly.
“Well-priced units will sell quickly at or near original list price,” notes the report, which covers Arlington and Fairfax counties and the cities of Alexandria, Fairfax and Falls Church.