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How Will Amazon HQ2 Affect Washington DC’s Housing Market?

Written by on November 23, 2018 in

How Will Amazon HQ2 Affect Washington DC’s Housing Market?

Market experts have looked into it and, without a doubt, Amazon was going to drive up rental and home prices wherever they landed. Now that they’ve decided to locate Amazon HQ2 split near New York City and Washington D.C., they’ve got speculators going wild. If you’re wondering how it’s going to change the housing market, look no further.

Here are four ways Amazon’s new headquarters is going to change the D.C. housing market.

1. Here Comes the Market Squeeze

In a market squeeze, it’s typical to find high demand with low supply. The middle of the market will get priced out, and all that will be left will be at the top and the bottom. In most cases, even in D.C., suboptimal little apartments will get pushed to the top if they’re even remotely livable.

If housing production isn’t increased greatly at all price points, affordability becomes a goose chase. In order for things to remain affordable, commutes will lengthen and more families are impacted.

While D.C. isn’t the exact location for the Amazon’s HQ2, it’s the closest major metropolitan area, making it the place Amazon’s employees are likely to go. The company will hire a lot of younger employees, meaning they’re going to want to benefit from the urban experience and spend their earnings in the city.

Most likely, they won’t want to buy property but rather look for short-term rentals. As they flock into the city by the thousands, landlords will see dollar signs and start to raise their rents. They’ll charge whatever the market will bear.

If you own a federally or locally protected rental housing, there will be pressures from all sides to try to drive that price up.

2. What about Home Prices?

Again, most of the people who are going to be working for Amazon are likely to rent, not buy. However, if home prices are within reach, it inspires more people to purchase a property. If the buying market starts to heat up, prices will undoubtedly go up.

If the D.C. area wants to learn about what happens when Amazon comes to tow, they can turn to Seattle. With their 40,000 well-compensated employees, they changed the city’s economic landscape in major ways. If Seattle saw new home prices go up by 85 percent during that period – twice the national rate, D.C. should expect the same.

While the exact impact is unknown, it could be drastic. In cities like D.C., the combination of gentrification, government employees, and Amazon employees could force major price changes. Without elements in place to protect housing affordability, it’s slated to grow out of control.

If you’re an owner in these circumstances, you’re going to make a lot of money. If you haven’t invested yet, you may already be too late. Buying in D.C. now is a smart investment because this kind of growth is rapid and fierce.

3. What Happens When a Metro Region Is Built Up?

In a place like the D.C. metro region, the area has been built up almost as much as possible. There isn’t that much more land to build on. That means that the biggest impact is going to be on homes that already exist.

Infill takes time and effort that isn’t always worthwhile. City planning agencies, local organizations, and nearby residents battle over infill projects for years, slowing the market from making necessary changes. If construction isn’t started immediately, it won’t be ready for the arrival of Amazon employees.

The resale market is going to see a powerful and immediate impact when it comes to the changes inspired by HQ2.

Don’t expect a bubble or an immediate skyrocket, but do expect changes. Demand will increase, so if you need to recoup expenses on an existing home, then consider holding out for a buyer. Price your home at what you need it to be as you’ll hold a lot of the chips when it comes time to sell.

The types of income that people make working for a company like Amazon means that condos could be in high demand. If you’re working on building a residential development, demand will be knocking down your door soon. The market won’t be flipped on its head, but the demand for condos and apartments will be high.

4. The Rental Landscape

If you’re invested in a residential complex, you’re in a place to earn a lot of money. For anyone who has been offered a stake in a new residential development, rest assured that this is a deal that will make you a lot of money.

Apartment rentals will be on fire. While the D.C. rental market is already high, it can still grow with an infusion of more people in their 20s and 30s. While some estimates only put the growth around one percent in rental prices, if you need to fill in vacancies, now is the time to do it.

Vacancy rates in D.C. are below the national average, meaning that any increase in demand will bring up prices or start to push that vacancy rate lower. If the vacancy rate decreases, rents won’t go up immediately. However, in a few cycles, they’re sure to start climbing.

New units might not show an increase in rent, but that’s not always what matters. If more people are renting, even at current prices or lower, you stand to make a lot of money as the owner of a residential building.

Amazon HQ2 Is a Blessing and a Curse

Anyone who is looking at Amazon HQ2 fairly will notice that there are good points and bad points.

While they’re going to bring more jobs to wherever they land, they’re going to bring up costs for average renters and commuters. However, they’re also going to bring gifts to people who own homes and who are looking to sell.

For the complete guide to selling your D.C. area home, check out our latest sellers guide!

 

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