A recent report from NBC29 states that Governor Terry McAuliffe is unveiling new plans to strengthen the Virginia economy. A number of analysts have said that economic activity is increasing, but have raised fears that economic stagnation could be on the horizon. Read more
The housing markets in Washington D.C. and Virginia have both been rising rapidly in recent months. New data from real estate associations in both areas indicates that the housing markets are undergoing a long term recovery, which is expected to continue at least through the spring.
Housing sales in both regions have risen sharply since the beginning of the year. According to the Virginia Association of Realtors, sales in the Richmond area rose 15% between September 2014 and September 2015. The housing market in Chesterfield was even stronger, with housing sales rising 20% in the same time period.
The D.C. housing market has also been performing very well. Real estate professionals have confirmed that housing listings have risen nearly 6% since January. The market has been robust for the past couple of years, but officials are worried about the limited supply. New construction is needed to ensure the sustainability of the recovery and make housing accessible to all citizens.
While housing sales have been rising significantly, price increases have been more tepid. Price increases could follow if construction of new housing doesn’t pick up.
Factors Driving Demand for Regional Housing Market
There appear to be a number of factors that are affecting the housing markets in Virginia and D.C. The economy in parts of Western Virginia has been disappointing. It has the worst unemployment rate in the nation.
The market in the central and eastern part of the state are faring much better, which explains the rising demand for housing in the area. The thriving technology sector is one of the reasons that housing markets in many Virginia cities are booming.
The D.C. tech sector is contributing to its own housing recovery. Some experts have speculated that the district could be a smaller version of Silicon Valley as many startup businesses try to escape California’s costly regulations.
An expansion of the federal workforce could also contribute to the surging housing market. The housing market in D.C. was in trouble when federal austerity measures were imposed several years ago, because many government employees were left out of work. Virginia also suffered from the fiscal cuts, because many Virginian citizens work in D.C. The federal budget has since been restored, which is driving the local economies.
Improving Economies Expected to Spur Housing Recovery
The housing markets in D.C. and Virginia have been outperforming the national average for the past year. Sales are expected to rise even further since new economic data indicates that unemployment will continue to drop and incomes will rise. The only threat to the market is the possibility that housing construction may not be fast enough to keep up with demand, but officials in Virginia and D.C. are taking new steps to mitigate this risk.
AirBNB is one of the biggest companies in the sharing economy. Many experts believe that the company has clearly had a profound effect on the state of the national housing market, but they disagree over the exact impact. Some experts believe that it is driving up prices, while others argue that it is containing them. The discussions are creating a debate about placing new limitations on the service.
AirBNB Opponents Warn About Rising Housing Prices
D.C. Councilman Vincent Orange has warned that the AirBNB service is driving up the cost of housing in the region. He has said that the short-term rental pool creates unnecessary competition with residential rental properties, which makes it more difficult for them to stay in business. He warns that many traditional property management companies will be forced out of the market, which will ultimately drive up prices.
Orange has introduced a new bill that would place new restrictions on AirBNB. The bill would only allow owners of single family homes to rent rooms out through AirBNB. The bill would also require homeowners to notify all of their neighbors and report the tenant to the Advisory Neighborhood Commission.
Assumptions About Influence on Housing Prices Unproven
While Orange and many other critics have argued that AirBNB leads to surging housing prices, their predictions haven’t been proven so far. This doesn’t mean that their arguments are unwarranted, but other authorities have presented dissenting opinions that are equally feasible.
These experts have stated that the sharing economy has eased pressure on short-term housing solutions. This reduces the need for short-term rentals, which should keep prices from rising further.
Another argument is that most of the rising prices are in affluent communities. According to Eric Bernstein of Better Homes and Gardens Real Estate, a growing number of communities have homes with values in excess of $1 million. These aren’t neighbors where commuters looking for short-term rentals would turn, so any increase in housing prices would probably be minimal.
Debate Expected to Continue
Orange has presented his bill to the rest of the city council, so it could take a couple of months before they make any determinations. The debate on the impact of AirBNB on local housing prices will probably continue long after the proposals are finalized.
Even if bill is signed, AirBNB will probably continue to have a significant impact on housing in the D.C. region. It could be mildly beneficial for the city’s housing crisis if short-term rental facilities can be converted into units for permanent residents.
The housing market in Washington D.C. is the strongest it has been in years. According to a recent report from the Commerce Department, the robust market is likely to continue for the months to come. Daren Bloomquist, vice president of RealtyTrac, implied that the strong market is a great benefiting house flippers throughout the region.
“D.C. is one of those markets that’s still pretty on fire and that is an advantage to flippers,” Bloomquist said.
State of House Flipping in D.C.
House flipping wasn’t common in the D.C. area until a few years ago. “It seems like house flipping came late to Washington, D.C. It started in Phoenix and in some areas of California first, because prices hit bottom first in those areas. In D.C. there’s been this window of opportunity between low-priced housing stock and really high price appreciation over the past two years,” Nela Richardson, the chief economist at Redfin told WAMU.
However, the booming house market has made the practice much more appealing to investors in the D.C. region. A growing number of investors are making returns over 50% after purchasing and repairing existing houses. RealtyTrac estimates that the average house flipper makes a $107,000 profit from their homes.
Of course, a number of factors play a role in the profitability of house flipping. The zip code the home is located is one of the most influential factors. The most valuable houses that have been flipped are located in the 20743 zip code, which includes parts of Maryland.
Will House Flipping Become More Common in D.C.?
The sudden popularity of house flipping in Washington D.C. is due primarily to the rapidly growing housing market. The National Association of Realtors found that the region is home to one of the fastest growing housing markets in the country. There are a number of factors that appear to be playing a role, but one of them is the growing tech sector. The housing market is likely to grow more quickly as many businesses relocate from Silicon Valley to escape costly regulations and taxes.
If the economy maintains its current growth rate, it will continue to propel the D.C. housing market. A growing number of house flippers are expected to invest in properties as they speculate housing prices will continue to rise. In turn, their acquisitions will lift housing prices even further, which may encourage more sellers to list their properties.
The D.C. housing market has been undergoing robust growth over the past year. However, some experts have raised concerns about the limited supply of housing stocks for middle class buyers. Policymakers and contractors are taking new measures to increase the number of housing units available for working class families.
Housing sales and inventory have been rising over the past few months. However, the real estate boom has been most pronounced in parts of the city that are made up predominantly of more affluent residents. Inventory in middle class districts are rising more slowly.
However, more recent reports suggest that the market for working class family homes may be on the verge of an upswing as well. Many local real estate agents warned that homes in the area were overpriced, which was keeping many people from buying. Prices have been starting to drop, which could stimulate the market. Suzanne Des Marais, a broker with the 10 Square Team, told The Washington Post that she is encouraged by the direction of the market.
“I think Mount Rainier, which is just over the border in Prince George’s County, will change quickly since development is coming to the area, but now buyers can find less expensive homes there and the community has kind of a Takoma Park vibe with a strong arts community,” says Des Marais.
Residents Optimistic that the Market Will Improve
A recent poll from Roanoke College found that the majority of residents in Virginia and D.C. feel that the market will improve. The poll found that 52% of them remain optimistic about future housing activity and prices, but the figure is a bit lower than the second quarter poll results.
Optimism may increase in the coming months as contractors develop new properties for lower income residents. A new affordable housing project is underway in the city, which should expand the supply of housing units.
Payton Chung, a contributor for Greater Greater Washington, writes that housing construction in D.C. has reached an all-time high, but pointed out that contractors have still fallen 13% short of projections. Chung argued that the majority of construction is taking place in areas where there is less demand, but the data still indicates that the housing supply will improve in the coming years. Middle class homebuyers should expect more inventory in 2016.