From The Washington Business Journal (subscription required):
Key story highlights:
- The price per square foot for homes sold in the region has hit a new high.
- Greater Washington is also one of the most expensive places on Amazon’s HQ2 shortlist.
- While the region has a lot to offer, its costly housing could weigh down its bid.
Greater Washington hit a rather dubious housing market milestone — and it doesn’t reflect well on the region’s effort to attract Amazon Inc.’s (NASDAQ: AMZN) second headquarters.
The price per square foot for homes sold in the metro area hit $299 in May, the highest it has been in at least 10 years, according to data from MarketStats by ShowingTime. Meanwhile, the price per square foot in the District proper hit a more than 10-year high in April, rising to $568 per square foot, before dropping slightly to $565 per square foot in May.
While Greater Washington’s increasingly expensive (and for many unaffordable) housing is nothing new, the data point stresses what continues to be the region’s Achilles heel is in its hunt to be named the location for Amazon HQ2 — it’s crazy expensive to live here.
Housing affordability is one area that Amazon is considering as it winnows its 20-city short list, along with other factors such as the quality of the workforce, the amenities of the finalist cities, tax incentives and transportation. Virginia, Maryland the District recently came together to pass legislation providing for dedicated funding for the region’s struggling Metro system — but there is no quick fix for the cost of housing. Northern Virginia, the District and Montgomery County all qualified for the HQ2 shortlist.
At stake are the tech giant’s promises of a real estate footprint that could eventually grow to 8 million square feet and the lure of 50,000 high-paying jobs. When it comes to the types of workers Amazon will want, D.C.’s highly technical, highly educated population is a good fit, said Jeanette Chapman, deputy director and senior research associate at the Stephen S. Fuller Institute at George Mason University. And those types of workers are perhaps the biggest factor in Amazon’s eventual decision, she added.
Overall, Greater Washington is 7.8 percent more expensive to live in than Seattle, Amazon’s current home, while Los Angeles is 6.5 percent more expensive. Cities such as Denver, Philadelphia, Chicago and Dallas are all cheaper than Seattle, with Indianapolis 16 percent cheaper.
The biggest driver of the cost of living? You guessed it, housing costs.
“The ultimate problem is that there is more demand for housing than there is supply,” Chapman said. “Amazon is thinking about its package of needs and it’s thinking about how to house these hypothetical workers.”
Some other fun “Greater Washington is pricey” facts, including:
- Right now houses in the District stay on the market for a median of just eight days, tied for the lowest in more than 10 years.
- In a recent Charles Schwab study on wealth, people from across the country were asked how much money it takes to be wealthy. The national average was $2.4 million — people from the D.C. region said $2.7 million.
- The region also continues to struggle with low supply, and not just in D.C., but in areas like Loudoun County.
But it’s not all doom and gloom, at least for Joseph Seriki, global real estate advisor for TTR Sotheby’s International Realty, who said people can still buy houses for $300,000 to $400,000 — they just won’t be able to get that brand new house with all the features. He thinks the region’s housing market can absorb the thousands of potential workers Amazon would bring.
“D.C. is scary to people because we are starting to hit very high numbers in housing,” Seriki said. “I am telling you, you can purchase something for 400K, but what you are going to buy for 400 might not be what a person wants to buy.”
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Copyright Washington Business Journal, reprinted with permission