By: Guest Author, Virginia REALTORS® Chief Economist, Lisa Sturtevant, PhD
Last night I attended a forum on Amazon and the Northern Virginia housing market. The audience was primarily made up of REALTORS®, along with apartment owners and managers, and the focus was on what the impact of Amazon’s arrival might be on home prices and rents in the region. If those in attendance were expecting (or hoping) to hear evidence of a dramatic spike in home prices and rents, then they might have been disappointed by what they heard. But what they heard was probably right.
Some of the key takeaways:
- The Washington region is not Seattle; it is a bigger and more concentrated economy and housing market. The impact of the Amazon HQ2 development won’t be the same in Northern Virginia as HQ1 was in Seattle.
- According to Amazon’s buildout schedule, HQ2 will bring about 38,000 total jobs over 16 years (25,000 jobs are phase 1, 3,000 are in phase 2). Another 33,000 jobs are expected as new jobs supported by HQ2 spending. This level of job growth accounts for a very small share of typical annual regional job growth, about seven or eight percent of typical annual job growth in the DC region.
- Most Amazon HQ2 workers will be homeowners but the number of new owners will constitute a very small share of homebuyers in the market. Jeannette Chapman of GMU’s Fuller Institute estimated that Amazon HQ2 will result in an increase in demand for homeownership in the Washington DC region by between just one and five percent.
- Two-thirds of Amazon-related demand will be for single-family detached homes. Not surprisingly, the strongest demand will be for housing in Arlington and Alexandria, but there will be some Amazon-related housing demand as far out as Clarke, Page, and King George counties.
- The HQ2 hysteria is much bigger than the actual impacts that will be realized in the housing market:
- Daniel Hale of realtor.com showed data on website traffic of searches for Arlington homes with a huge spike on the day of the HQ2 announcement but a quick return to normal levels of traffic.
- In an analysis of new home demand, Metrostudy’s Ben Sage cautioned about “overreaction and overspeculation” in the new home market.
- Sandy Paul of Newmark Knight Frank noted that the longer-term impacts of HQ2 on workforce development is a bigger deal than any shorter-term impacts on home prices, rents or new construction.
- Michelle Winter of the Alliance for Housing Solutions made the point that the region already has a significant housing affordability problem and a major housing shortfall; Amazon won’t change that.
I think a primary takeaway from the data and analysis presented at the event was that while Amazon’s decision is exciting for the region and will be a driver of long-term economic growth in the region, potential homebuyers and sellers, in general, should not expect a significantly different housing market than is typical in Northern Virginia’s hot market, even when Amazon-ites begin arriving. However, the market for particular product types in particular neighborhoods could be in demand by new Amazon workers and there could be price pressure in the segment of the market. For example, single-family homes in some closer-in neighborhoods in the $700,000 to $900,000 price range could see relatively strong interest from new Amazon employees.
At Virginia REALTORS®, we will be conducting more in-depth analysis of the Amazon effect in Northern Virginia to help provide meaningful information to local REALTORS®. We will be looking at questions like: What are the specific types of homes, price points, and neighborhoods that might be in most demand from Amazon workers? How might Amazon homebuyers lead to current homeowners moving within the region? Where will they go? How will new construction in the region impact housing demand and home prices?
In addition, we will broaden our research of the link between job growth and housing demand to examine other regions throughout the state. We want to help members throughout the state to better understand potential market impacts when new firms locate or expand—whether in Arlington, Allegheny, or Accomack.
If there is a new company moving into your community and you are wondering about potential market impacts, please reach out – I’d love to hear from you!