The ‘Amazon Effect:’ Northern Virginia Becomes Nation’s Most Competitive Housing Market

When Amazon earlier this year announced Crystal City, Va., as the location of its second headquarters (HQ2), analysts said its impact would eventually be felt in housing markets throughout suburban Washington, D.C., all the way to Richmond, Va., 75 miles away.

As it turns out, the “Amazon Effect” didn’t take long. A new report from Redfin, Seattle, said Alexandria and Arlington, Va., became most competitive housing markets in the U.S. Crystal City is part of Arlington; Alexandria is just south of Crystal City.

The report ranked cities by Redfin Compete Score, which rates how tough it is for buyers to win a home using Redfin data on the number of competing offers and waived contingencies, as well as multiple listing service data on how quickly homes are going under contract and for how much above list price. Both Arlington and Alexandria earned a Compete Score of 96; Redfin Chief Economist Daryl Fairweather said Alexandria and Arlington buyers face the most intense competition anywhere in the country.

The report said n HQ2-adjacent areas, homes are going under contract far faster than the national rate–or even the D.C. metro as a whole. Homes sold in July went off the market in a median 11 days in Arlington and 14 days in Alexandria, nearly a week less than last July in both, and far lower than the 27-day median for the D.C. metro and 38 days nationally. More than half (57 percent) of all homes for sale in both Arlington and Alexandria went off the market in two weeks or less. That was true of just 40 percent of homes in the D.C. metro and just 29 percent of homes nationwide.

“The Amazon HQ2 effect has become a permanent factor in the Arlington and Alexandria housing markets,” said Redfin listing agent Marcia Burgos-Stone. “Some sellers are still opting to hold on to their homes and wait until it becomes a more concrete reality in the hopes that they’ll get more money. This has led to a shortage of homes for sale, which puts pressure on buyers who are concerned that they’ll be left behind if they can’t find a home before things get too heated up.”

In both Arlington and Alexandria, the number of homes for sale fell by nearly 50 percent year over year in July. Without enough supply to meet demand, more homes are selling above list price. Nearly half (46 percent) of Arlington homes sold in July went for more than list price, versus just 27 percent a year ago. In Alexandria, 36 percent sold for more than list, up from 24 percent a year ago. That compared to 32 percent in the D.C. metro and 24 percent nationwide.

“A market can become highly competitive when buyers agree that home values will increase steeply in the future,” Fairweather said. “If you believe home values will go up hundreds of thousands of dollars in the next five years, you will race to bid five or ten thousand dollars above asking price today. So, even though it may take a decade for Amazon’s HQ2 to grow the size of the Seattle headquarters, attracting high-earners and driving economic growth in the surrounding area, homebuyers and home sellers are already operating under the assumption that there will be strong demand for homes going forward.”

Rounding out the top five most competitive cities for home buyers were Grand Rapids, Mich. (96), Tacoma, Wash. (95) and Oakland (93). The report said Amazon is also likely a major factor in Tacoma, the fourth-most-competitive market. Buyers in nearby Seattle who have been priced out are looking to their neighbor to the south for more affordable options. Grand Rapids is also one of the most competitive markets in the country, thanks to its affordability. The median home in Grand Rapids in July sold for just $215,800, well below the national median price of $318,100.

The report can be accessed at https://www.redfin.com/blog/amazon-hq2-real-estate-virginia.