By now, the shock that Amazon is splitting its new headquarters into two—yes, two!—separate locations has subsided. Congrats, New York and DC! But as the fairy dust settles, it’s time for a reality check: Just a couple of months after the tech giant’s long-awaited announcement, there are some early signs of the real impact this will have on housing in the two urban markets that won the prize.
So far, it’s not quite playing out the way some pundits had predicted.
Without question, real estate agents in the HQ2 neighborhoods—Long Island City, across the river from Manhattan, and Crystal City, VA, a hop, skip, and a jump away from the Pentagon —are suddenly very busy. Investors are circling, and prices are swelling in anticipation of up to 25,000 jobs with average salaries of $150,000 moving into each location. But those hoping to see home and rent prices double overnight—or even this year—will certainly be disappointed.
Amazon’s meteoric rise has boosted real estate prices in its hometown of Seattle far beyond what anyone would have expected a decade ago. The billion-dollar question: Will the same thing happen in these East Coast cities?
“We’ll see a price impact,” particularly in the immediate vicinity of where the company sets up shop, says Chief Economist Danielle Hale of realtor.com®. “[But] New York and DC are already larger markets. … They will be able to adapt without the same run-up in prices that we saw in Seattle.”
Looking at Seattle’s past to predict the future
So how will it play out?
Since Amazon’s announcement, prices have jumped 10% to 15% in both Long Island City and Crystal City, say local real estate agents. Sales in Long Island City, where hundreds of brand-new, luxury condos recently came onto the market, have spiked.
But in Crystal City (which Amazon is quixotically trying to rebrand as “National Landing”), a neighborhood of offices and hotels where inventory is extremely limited, sellers have been pulling their listings off the market. They’re hoping these properties will fetch more when the Amazon workers roll in.
Those hopes are fueled by Seattle’s example: Since Amazon began its rapid expansion there in 2010, home sale prices shot up nearly 91%, to hit a median of $725,000 in 2018, according to data from the Northwest Multiple Listing Service. In the Lake Union area, where the company is based, prices zoomed up almost 135%.
But that was over an eight-year span, starting when the housing market was near rock bottom. Prices had nowhere to go but up, especially as the economy improved and more buyers flooded the market.
“Housing prices are starting from a much higher point than we were in Seattle,” says Jeff Shulman, a marketing professor at the University of Washington, who has looked at Amazon’s impact on his city. “You can’t expect it’s going to play out the same way.”
Despite the economic recovery, homes have gotten so prohibitively expensive in many large cities that when mortgage rates went up recently, the housing market began slowing down. There are simply limits to what folks can afford, even techies making good money at companies such as Amazon.
|Market||Median List Price||Median List Price in HQ Neighborhood*||Average One-Bedroom Rent in HQ Neighborhood**|
|New York, NY||$1,087,753||$992,500||$3,056|
Seattle: South Lake Union
New York: Long Island City
Washington, DC: Crystal City
|** rental prices from apartments.com|
Salaries don’t stretch as far in NYC and DC
Let’s also face facts: A $150,000 salary simply isn’t the same in Seattle as it is in New York City and DC, which are already astronomically expensive markets. And we’re not just talking about the sticker price of homes.
There’s no state income tax in Washington state—a perk that can boost residents’ bank accounts. So while the overall tax burden (income, sales, property, and auto taxes) for those earning $150,000 was $20,153 in New York City and $12,975 in DC—it was just $8,579 in Seattle, according to the most recent Government of the District of Columbia report. There’s also a generally lower cost of living—enough of a difference to beef up a down payment, or get a larger mortgage.
“Your dollar just goes further in Seattle,” says Annie Radecki, a vice president at John Burns Real Estate Consulting.
The skinny on Long Island City
Once upon a time, Long Island City was a seedy, industrial swath of Queens filled with warehouses and crime. But developers capitalized on its proximity to Manhattan, just one subway stop away. Over the past decade or so, they’ve erected a slew of gleaming, luxury towers along the East River, building the neighborhood from the ground up. And renters and buyers have dropped big bucks to live in them.
But the neighborhood is still cheaper than nearby Manhattan, which is key to its appeal—and may put a ceiling on just how high prices can go. Even with the higher demand for housing imposed by the torrent of new Amazon workers, prices will likely remain 10% to 15% below Manhattan prices, predicts real estate broker Eric Benaim, of the brokerage Modern Spaces. (The median Manhattan list price is $1,495,000, compared with Long Island City’s $992,500.)
“Do I see it gradually growing and increasing? Yes,” says Benaim, who’s been boosting Long Island City for a decade and has most of the listings there. “[But] I don’t see it jumping up 100%.”
But if Amazon’s presence makes Long Island City the place to be, who knows how high prices could soar?
Before the tech company’s announcement, there was a glut of luxury rentals—and to a lessor extent, condos—on the market here. Landlords and developers were slashing prices and offering concessions. But since the neighborhood was selected, interest in condos has skyrocketed with investors and buyers, and sales have spiked. About 350 to 400 condos have been sold since the November Amazon announcement—compared with the typical 15 to 20 sales during this time period, Benaim says. And prices are up 10% to 15%.
“We essentially went from a buyer’s market to a seller’s overnight,” Benaim says.
The rental market isn’t likely to spike quite as dramatically until the hordes of Amazon workers move in. But with an average monthly price of $3,056 for a one-bedroom apartment, it’s not clear how much higher even Amazon workers could afford for rents to go.
For now, there are plenty of homes to go around. There are several hundred condos still for sale and about 1,000 vacant rentals in the neighborhood. Over the next three years, an additional 2,600 condo units and 6,000 rental units are slated to come online. That amount of inventory is expected to keep prices from getting out of control.
Other nearby Queens neighborhoods, like more affordable Astoria and Woodside, and close Brooklyn communities such as Greenpoint and Williamsburg are also poised to benefit from the spillover of tech workers needing places to live. Some Amazon workers are likely to also live in Manhattan, particularly the Upper East Side, given how quick of a commute it is.
Crystal City: A new name in search of an identity
The future of Crystal City, a vast expanse of concrete-and-glass office parks in Arlington, VA, is likely to be a bit different. It’s starting off at a lower price point than Long Island City, at a median $543,000, and there is a dearth of available inventory.
Sellers are holding off putting their properties on the market in hopes of fetching higher prices when Amazon workers move in, say local real estate agents. Only eight homes in the neighborhood’s 22202 ZIP code were for sale as of Wednesday afternoon, according to realtor.com data.
Meanwhile, foreign and out-of-state investors have descended, bidding up prices as they compete against one another with all-cash offers. Local real estate agent Jordan Stuart recently sold a one-bed, one-bath condo as an investment property to an out-of-town NBA player who wants to get in on the Amazon action.
Before the announcement, the $420,000 condo had sat on the market with just four showings in the two months since it had been listed. But after the news, he had 60 showings on it and five offers on the property despite raising the sale price to $450,000.
“They’re setting new [price] thresholds,” says Stuart, of Keller Williams Capital Properties. As the neighborhood becomes more desirable, he anticipates prices will go up 20% to 25% over the next few years before hitting a plateau.
Many new residents will be forced to look outside of Crystal City for housing, at least initially. They’re apt to head into greater Arlington, where there are plenty of high-rise apartment buildings and single-family homes.
And many folks, particularly younger workers, will head to buzzy DC areas like the Wharf, the city’s new southwest waterfront district. The $2 billion development includes restaurant, retail, and office space; a 6,000-person concert hall; and hundreds of luxury apartments starting at around $2,000 a month.
But most of the Amazonians’ salaries aren’t likely to be high enough to purchase million- or multimillion-dollar homes.
“I don’t think [prices] will double. It’s not that type of market,” says Stuart. “But what will shake out is still a wild card.”
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