Allan Weiss is chief executive of Weiss Analytics, a Natick, Mass.-based firm that provides neighborhood- and house-specific value forecasting across the United States. He previously was CEO of the housing data firm Case Shiller Weiss, where he helped develop the Case Shiller Indexes.
A little more than half the houses in metro Washington are rising in value while nearly half are falling.
The opposing value directions are caused by a combination of two societal forces that are likely to continue for some time. Homeowners in the rising group may not realize their good fortune as those in the falling group are probably equally unaware. The pattern of rising versus falling houses can easily be seen in visualizations of the metro market. These visualizations also hint at the underlying causes.
Only recently have we developed tools precise enough to accurately gauge the changing values of millions of homes and anticipate how they will change in the future.
One can see the houses rising in value — color-coded green provide shorter commute times to job centers because of their location within urban centers or proximity to mass transit or highways. Houses with better commutes have always been more valuable. What’s new is that the value gap is increasing. This growing gap is caused by a combination of increasing urban congestion and the coming of age of the millennials who have become a great reurbanizing force.
The region’s growth, geography and aging transportation infrastructure have made Washington the most congested metro in the nation. It tops the list of gridlock-plagued cities, with 82 hours of delay per commuter at an annual cost of $1,834 each in time and fuel. Whether they commute or not, homeowners who live farther from the city center are paying the price in their home values. Homes within five miles of the city center are rising 6.2 percent this year while those 13 to 14 miles are up only 3.8 percent.
Washington home values also are reflecting the coming of age of the largest generation in history. Three of the region’s jurisdictions — Alexandria City, Arlington County and the District — rank among the top 10 most popular destinations in the nation for millennials. As they mature, they are buying homes. Nearly two-thirds of those who are 30 or older plan to be living inside the Beltway in three years and they are already transforming neighborhoods like the 14th Street corridor and raising home values in traditional residential communities like Petworth and Takoma Park.
Local factors such as schools, crime rates and access to shopping also create significant micro value trends as home values adjust to the tastes of the next generation of home buyers. Until recently, these trends were difficult to confirm but new house value analytics and visualizations show the forces at work.
Most consumers rely on monthly market reports based on market-wide medians to track changing home values. In these reports, micro home value trends remain invisible and even a metro level divide will wash out and reveal next to nothing. Moreover, the report only includes the homes that actually sold. This is barely more than one percent of all homes per quarter. If certain neighborhoods or house types are under-represented, the median sales price will not reliably reflect their price trends.
Over the past four years, Weiss Analytics has harnessed massive computing farms to analyze hundreds of millions of real estate records to produce millions of house specific value indexes. These indexes show two decades of price changes at the house level, in effect giving us a movie of markets around the country. These movies show that home price changes often cascade through an area like weather events. We have created these weather maps for more than 300 metro areas and 5,500 Zip codes.
By the fourth quarter of 2016, we forecast that an increasing majority of homes in the D.C. area will be gaining value. Exceptions include those in communities far from access to the city center like Frederick and Calvert counties and parts of Loudoun County.
In Arlington, in Zip code 22201, a cooling of the Clarendon and Ballston condo markets, where appreciation soared by double digits this year, may temporarily turn properties red this time next year.
Homes to the east of Georgia Avenue currently register red on the map of Zip code 20011, as well as some patches along Blair Road in Fort Totten, indicating homes are depreciating (above). But by the end of next year the entire Zip code will turn green.
Three years ago, large tracts of homes inside the Beltway in Hillcrest Heights and Marlow Heights and outside it in Temple Hills (Zip code 20748)) were depreciating. By the end of next year (above), only a few homes in Marlow Heights should still be light red and the balance will be dark green indicating more appreciating on a monthly basis.
Years of disruptive construction ended for Fairfax County residents on both sides of Interstate 495 with the completion of high-occupancy toll lanes three years ago (Zip code 22093). By October 2016 only a few speckles of red should remain in Annandale (above) as homeowners finally reap the rewards of their patience.
Monthly value changes in Takoma DC (20012) are currently declining on a monthly basis (above) as the area recovers from super-hot values that have been rising 14 percent or more a year. Takoma D.C.’s tree-lined streets and restored Victorian homes popular with millennials and boomers alike will settle down next year to annual appreciation rates around 4.5 percent.
Northern Silver Spring, including Wheaton and Glenmont (20902), marks the northern terminus of Metro’s Red line. Values have improved markedly since January and currently 70 to 80 percent of homes are gaining value. The Zip code as a whole is experiencing annual appreciation in the range of 4 to 6 percent.
For a dynamic map of metro markets and Zip codes, go to Weissindex.com.