Real Estate in NoVA (North Virginia), a bubble waiting to burst?

Question

I have been following closely the real estate market in the NoVA area and I must admittedly say the value seems ridiculously overpriced IMHO. I understand the law of demand and supply. I also grasp the whole market proximity with the DC area. I guess I could also say they run a recession proof economy with the vast list of government contractors out there. That evil voice in my head keeps saying - "the worst is yet to come". sometimes I don' trust it.

Two parts question- 1.) What's that market going to look like in 5 - 10years ? 2.) how possible would it be to find a multi family home within a 30 mile radius?

Two parts question- 1.) What's that market going to  look like in 5 - 10years ? 2.) how possible would it be to find a multi family home within a 30 mile radius?

Russell Brazil · Answer

The DC areas housing market trades st 4.5x income. We have the highest incomes in the entire country by far. For perspective, New York and San Francisco trade at about 11x income.  San Franciscos incomes are 25% less than DC yet their housing is over double DCs im nominal pricing.

So is rhe DC area expensive on a nominal value basis? Absolutely. Is it expensive in terms of affordability? No, not at all. 10% of the work force are lawyers, we have the 2nd largest tech work force in the country. 2/3 of the population have bachelors degreees, 1/3 have graduate degrees.  12 of the 25 richest counties in America by income are in the DC area.

Chris Seveney · Answer

@Justin Thorpe

The other thing to consider about this market is the lack of small multifamily. Outside of DC try and find a duplex, triplex or quad is near impossible. I live in fairfax county and they essentially do not exist. This will keep housing quantity in line.

Also don’t forget you have amazon coming which will bring more jobs.

Will the market have ups and downs - yes but long term this is a safer investment than other markets IMHO

Shadonna N. · Answer

@Russell Brazil agree with the stats.  It will be interesting to see the impact COVID and telework will have on the commercial market.  It may not impact the doctors and lawyers, possibly tech.  You have recent college grads coming out of college with a 90K job paying 2K rent for a 1BR.  Could they move to a cheaper housing market and still work for a company in Northern Virginia, yes.  You will not see a change overnight but how we work will change.

Tommy Adeoye · Answer

@Chris Seveney You are right on the money with that one. I tried looking for a multi-family property out there. No luck whatsoever. If the traffic isn't scaring residents out, I wonder what else will. I am waiting for the downs to jump right on.

Tommy Adeoye · Answer

@Russell Brazil Valuable input.

Justin Thorpe · Answer

@Russell Brazil

Thanks for those stats. Does that signal DC to be fairly valued and SF to be overvalued? Why then does DC persistently lag SF in terms of price appreciation? Is SF simply a higher PE stock like Amazon vs DC a more stable PE stock like say Coca-Cola?

Russell Brazil · Answer

@Shadonna N.

Id think logicly commercial real estate would take a beating, especially with telework and restraunts going under.  However one thing that always seems perplexing in the area that I think many are not aware of is that we have huge vacany levels in commercial real estate locally.  For some reason though, landlords (they are usually huge corporations like Federal Realty) do not ever drop their rents to get the spaces leased. They let them sit vacant instead.  Im sure there is some reason, I just always think its strange.

I wonder if @Joel Owens maybe has some insite into this.

Shadonna N. · Answer

I'm thinking Texas.  I have a friend who was trying to relocate to DC from Texas but could not find anything affordable.

Tommy Adeoye · Answer

@Shadonna N. I am thinking the same thing. I foresee FL, TX and TN growing exponentially , like you mentioned a lot of company will be thinking uhm capex savings and simultaneously a lot of employees mostly transplants may equally think - lets put money in our pocket. This is pure speculation but I'm excited to see where the RE industry is headed post-covid.

Shadonna N. · Answer

I think we should see how COVID affects the market.  Businesses have proven that they can operation with a majority of their workforce working remotely.  Some companies are taking action based on that.  Nationwide is reducing their real estate footprint.  If people can telework from anywhere, they may possibly move to a cheaper market.  I don't think this will happened to all companies in the DMV but it will have an effect on the market.

Real Estate in NoVA (North Virginia), a bubble waiting to burst?

Most Popular Reply