Falls Church News-Press Winter Real Estate Guide 2018

R EA L E STATE

FALLS CHURCH NEWS-PRESS | FCNP.COM

WINTER 2018 | PAGE 13

Real Estate Winter 2018

New Tax Law Breeds Uncertainty In F.C. Projects, Housing Markets

by Matt Delaney

Falls Church News-Press

The passage of the Tax Cuts and Jobs Act into law brings major changes to the local real estate market that prompt anxious anticipation about the shifting role and rewards of homeownership.

Depending on the resulting effects the law has on home evaluations, it could cause the Falls Church City Council to adjust previous promises in order to keep recently approved major public projects on schedule for completion.

Here are the basics of the law’s alterations to the real estate market: It reduces the limit of the mortgage interest deduction (MID)

from $1 million to $750,000 for all loans taken out after Dec. 15, 2017, applies a cap to itemized state and local tax (SALT) deductions at $10,000 while doubling the standard deduction for all filing status categories.

The law also preserves the capital gains exclusion that allows single taxpayers to exclude up to $250,000 (and $500,000 for married couples) from a home sale as long as they’ve lived in the home for two of the past five years. The capital gains exclusion was a necessary victory for realtors in the transient Washington, D.C. area (and more relevantly, in the City of Falls Church) since it makes home sales much more palatable

for owners who may be required to move due to work obligations.

Essentially, the law is expected to cool the hot housing market by trimming the amount of tax incentives associated with purchasing a home and slow the natural appreciation of home values in the process. It makes the absolute value of buying a home cheaper, but also decreases the financial support given by the government.

Increases to the standard deduction makes the tax differential between 90 percent of renters and homeowners nominal, according to the National Association of Realtors. Add in the lowered MID and the cap on SALT deductions and owning one of the high-

YOU COULD being see a lot less, or a lot more, of these signs all over Falls Church depending on how the local real estate market shakes out under the new Tax Cuts and Jobs Act. (Photo: Matt Delaney) priced homes that are standard to the D.C. metro area rather than renting a modest flat becomes less savory. But even with all the changes, realtors don’t believe it will have a pronounced effect on local sales despite some decline in home values.

“If homes are priced correctly, they will sell,” Lorraine Arrora, Chairman of the Northern Virginia

Association of Realtors (NVAR) and managing broker at Weichert Realtors in Fairfax, said. “[Homes sold] during the savings and loan crisis and when interest rates were at 18 percent. It will be a bit of a challenge, but buyers have to see what’s right for them because it’s so specialized. We may see a

Continued on Page 14

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R EA L E STATE

PAGE 14 | WINTER 2018

FALLS CHURCH NEWS-PRESS | FCNP.COM

More Legislation Raises More Problems for Owners Continued from Page 13

dip [in sales], but we’ve seen that before.”

Arrora’s sentiment is agreed with by Re/Max West End agent Louise Molton, who works in the City. Molton acknowledges that certain parts of the new law, such as stripping away personal exemptions, even out the clear benefits of the law’s other aspects such as the doubled standard deduction.

But in general, most people will be paying less overall in taxes and therefore will have more money to spend on items such as housing – as long as the price is right.

However, Molton felt the MID reduction could have an indirect effect on sellers. Without government subsidies being as generous toward prospective buyers, many may decide to pursue houses outside of the City that fall comfortably within their price range.

If buyers become fickle, sellers may consider hovering around the $750K threshold in order to make a stronger case in the market.

Or, they could become dissatisfied that their investment isn’t appreciating at the expected rate and hold out until the market becomes ripe again, according to Nicholas Lagos, an NVAR board member and associate broker at Century 21 in Arlington. Since the buyers of larger homes are typically the sellers of smaller homes, Lagos believes the law runs the risk of bogging down the natural turnover in ownership that facilitates the dispersion of wealth in society.

Reducing the MID was a curious move due to the deduction’s legacy in modern American lore.

Both political parties have touted homeownership as the surest path to middle class stability and the bedrock of the American Dream.

The MID has been pitched as the vehicle to help people achieve that dream.

Now tax benefits between a large majority of renters and homeowners will be negligible.

Though the equity advantage of owning a home versus renting will still remain, it begs the question of why exactly homeownership is being de-emphasized as the building block toward financial security.

“The jury’s still out on that one,” Lagos said. “One of the biggest benefits of purchasing a home is to have that deductibility.

In a sense, this almost discourages homeownership.”

As the dust settles, it will become easier to forecast the law’s concrete effects on the local

real estate market. City Assessor Ryan Davis estimates it could take until early 2019, at the latest early 2020, to identify any detectable trend in shifting home valuations, though Treasurer Jody Acosta believes a viable projection could be possible by the fourth quarter of this fiscal year.

While the market takes shape, the City government prepares itself for the perceivable obstacles the law presents toward the completion of the Capital Improvement Projects (CIP). Property taxes account for roughly 60 percent of the City’s total revenue. If home values take a hit due to the new law, then so does the City’s wallet during a historically ambitious period of public works with the renovations of City Hall, Mary Riley Styles Library and the construction of a new George Mason High School all on tap for the next six years.

As the News-Press reported back in September, City Manager Wyatt Shields alerted the City Council that a projected six-cent increase to the real estate tax will be required for the first four years before being reduced to a four cent increase in order to front load the borrowing to fund the CIP. The City has diversified its revenue stream with growing commercial development, but property taxes are still provide the lion’s share of Falls Church’s revenue. If home values sink to an uncomfortable level, the City may be inclined to raise the tax rate even more to ensure the projects stay on schedule.

“As long as there’s that political will to raise the tax rate to what it should be, then no, there shouldn’t be [delays to the CIP],” Acosta said. “But I don’t know if there’s that political will out there to adjust the tax rate if needed.”

Per Acosta, the City likes the idea of modifying the tax rate to equalize any shift in assessments that occur due to market or legislative circumstances. But since she joined the City government in 2006, she’s only seen the tax rate adjusted once because of changes in assessments — when they ballooned in the period leading up to the Great Recession. Otherwise, she expects them to keep rates the same due to already high expenses the City is saddled with.

Falls Church’s ability to absorb financial shocks shouldn’t be discounted. It endured and recovered from the Great Recession and some unfavorable court rulings on its ability to draw a return on investment from its water system.

And it did so at an accelerated

MODEST HOMES (top) won’t have as much trouble attracting buyers since their values are closer to the recently lowered threshold for the mortgage interest deduction of $750,000. However, for larger, newer homes, sellers will have a hard time parting with their property if they feel it hasn’t appreciated to a level of their liking in the coming years. (Photos: Matt Delaney) rate due to the upper-middle class demographic that flocks to the City for its schools and homey feel.

Residents are so well-heeled that the flood of property taxes paid to beat the enacting of the Tax Cuts and Jobs Act in recent weeks were largely done out of pocket, rather than through an escrowed account with a mortgage

lender. That prevalence of wealth could signal that reductions to the MID and SALT may not be as detrimental to home sales in the City as some fear.

However, it’s still in a “wait and see” mode. Molton speculated that lowered SALT deductions on top of CIP tax hikes could dissuade prospective buyers from living in Falls Church. If

housing inventory grows, it would put a downward pressure on the assessments and put the City government in the aforementioned bind regarding what to do about tax rates. Though with no solid answers on how the market will react to the new law until at least the early summer, no new solutions can be broached about how to move forward.

FALLS CHURCH NEWS-PRESS | FCNP.COM

R EA L E STATE

WINTER 2018 | PAGE 15

Rebuilding Together Helps Seniors Age in Place with Safer Homes

BY PATRICIA LESLIE

FALLS CHURCH NEWS-PRESS

When Frances Stallings opened her property tax mailing from Fairfax County, she studied an insert with information about an organization working to help low-income homeowners. Little did she know it would lead to long-needed improvements to her Alexandria home where she has lived for decades.

“I am indeed grateful to Rebuilding Together,” Stallings said. “My husband passed in 2004 and there really is a lot of upkeep for a house.

Given the fact, too, that it’s 48 years old, it requires a lot of maintenance.”

Rebuilding Together is a national non-profit organization which brings volunteers and communities together to improve the homes and lives of low-income homeowners.

According to Patti Klein, the executive director of the organization’s Arlington/Fairfax/Falls Church affiliate, improvements to Stallings’ home matched one of the organization’s top goals: to improve safety in houses.

“We mobilize teams who volunteer their time and go out and make repairs for homeowners,” Klein said. “We target people with limited incomes, most of whom are

seniors who live on Social Security and, often at one time, could support themselves but through illness, divorce, or a loss of job now find themselves in vulnerable positions” when it’s hard to make home repairs themselves.

Rebuilding has a checklist it uses to assess homes before teams begin work. That includes making sure stairs and individual steps are safe and secure, discovering any obscure tripping hazards as well as detecting moisture problems that can lead to mildew and attract pests.

The affiliate’s director of partnerships is Don Ryan who trains and manages teams on-site. He said Rebuilding Together’s local branch emphasizes aging in place for the seniors that make up 80 percent of Rebuilding Together’s clientele.

In its “express” program, homes can be improved for $400 or $500 with four or five volunteers in a day, Ryan said. Rebuilding Together can spend up to $15,000 or more on a home, but Klein added that the nonprofit doesn’t do “extreme makeovers.”

Rebuilding Together learns about persons in need from social agencies, referrals, hospitals, nonprofits, therapists and persons may self-apply, like Stallings did.

A CREW consisting of (from left to right) Brian Goggin, Brendan Lewis and Don Ryan measure out where to cut the wood in order to make a hand rail for Frances Stalling’s home. (P����: K��� G�����) Services are offered to individuals who own their homes and meet income requirements. The group used to known as “Christmas in April” but now it’s Christmas yearround, which is the way Stallings

described it in her church newsletter.

“I was at a point where I would not get in the tub because of the difficulty I had getting out,” Stallings continued. “But now, with the grab bars, I can take a tub bath, if I

choose to. I feel more secure moving about in the house.”

Last year about 1,200 volunteers assisted with 73 local projects. Its

Continued on Page 17

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PAGE 16 | WINTER 2018

R EA L E STATE A Falls Church News-Press Advertorial

FALLS CHURCH NEWS-PRESS | FCNP.COM

Me et Fa l l s Ch u rch’s Re a l Es t ate E xpert s Genevieve Concannon, Advon Real Estate, LLC.

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T��� M�K�����, K����� W������� Tori and her family moved to Falls Church City 20 years ago. In 1998 as a new member of Falls Church City, Tori believed a sense of community would require active participation, and she has lead by example for the past two decades. She actively supports: Falls Church City Schools, Falls Church Education Foundation, Falls Church Chamber of Commerce, FIRSTFriday/Art-a-Lot, Tinner Hill Blues Festival, Falls Church Arts, and Taste of Falls Church. Tori serves as Vice-Chair on the Housing Commission, is a member of FCCPS Business in Education, and serves on the Board of Tinner Hill Heritage Foundation.

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by Washingtonian Magazine, for five consecutive years, has been voted Best Real Estate Agent, and for 2017 has been voted Best Real Estate Group in the Falls Church News Press ‘Best of Falls Church’.

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FALLS CHURCH NEWS-PRESS | FCNP.COM

R EA L E STATE

WINTER 2018 | PAGE 17

From Hand Rails to Light Fixtures, the Work of Rebuilding Together is Diverse Continued from Page 15

“signature day” is the last Saturday in April which this year falls on April 28.

Volunteers Kate and Brian Goggin, Falls Church residents, were looking for something extra to do after they became empty nesters.

Brian is a retired agricultural attaché for the U.S. Department of Agriculture and his work took the family to Mexico and Bulgaria where “we really enjoyed volunteering as a family,” Kate said. They learned about Rebuilding Together from Brian’s colleagues.

“I’m sort of a do-it-yourselfer,” Brian said. “[At Rebuilding Together] we go in and do the most necessary repairs that relate to the needs of the client. Safety improvements are 90 percent of the work.”

Kate added: “Living in unhealthy conditions impacts your health and has a ripple effect. We work to reduce the possibility of people falling in homes and breaking a hip.”

Brian’s consulting business consumes a large part of his time, yet he finds about 12 to 16 hours a week to

volunteer for Rebuilding Together, and Kate averages between five and six hours a month while working in communications for the National Oceanic and Atmospheric Administration.

She applies those skills to Rebuilding Together work and takes before and after photographs.

Said Klein, “We can use anyone who is willing to give their time. No special talents are required, and we can use any volunteers at any skill level. It’s like a puzzle: Here are the pieces and here is what we need.”

Interested persons and companies can sign up on the website which has more information.

“There are so many people in need,” Ryan said. “Fairfax, Arlington, and Falls Church are really wealthy places, and I cannot imagine what it’s like elsewhere. With more than a shoestring budget we could do so much more.”

Rebuilding gets funding from grants, foundations, area churches, corporations, banks, construction companies, Fairfax and Arlington counties and the City of Fairfax.

“We used to apply to city of Falls

Church but it’s a big process,” Klein said, quick to add that some churches in Falls Church contribute, as well as individuals and sometimes, beneficiaries of projects, “but we never ask them.”

Stallings praised the volunteers who came out to her house and installed new electrical outlets, interior and exterior railings, a carbon monoxide detector, deadbolts for her doors and new bath and tub grab bars in her bathrooms.

The volunteers also improved lighting in the house and lettering for her outside address, checked to ensure her dryer vent met safety standards and patched floor tiles and more at no cost to Stallings.

“They were wonderful,” Stallings said. “They are terrific people.”

On a tour of her home to display its improvements, Stallings’ happiness beamed across her face which seemed far younger than her age.

“I am aging, but better that than not,” she laughed.

For more information, contact the Arlington/Fairfax/Falls Church affiliate at 703-528-1999 or info@ rebuildingtogether-aff.org.

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FRANCES STALLING admires her new hand rails both inside of her shower (top) and her basement stairwell. (P����: K��� G�����)

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R EA L E STATE

PAGE 18 | WINTER 2018

FALLS CHURCH NEWS-PRESS | FCNP.COM

Unfilled Construction Jobs Causes Ripple Effect in Country

by Orrin Konheim

Falls Church News-Press

Affecting everything from the fulfillment of national infrastructure projects to the industry’s ability to stock residential developments with capable workers in metropolitan suburbs, including the City of Falls Church, multiple reports from the development sector have shown a shortage of skilled labor in the area.

Associated General Contractors of America reported in an August survey that 70 percent of construction firms report difficulty filling hourly craft positions despite half of the firms reporting an increased base pay to cope with the shortage. Additionally, a joint report from the U.S. Chamber of Commerce and materials manufacturer USG showed 67 percent of firms anticipating hiring key positions in the next six months with 95 percent reporting some difficulty.

Many sources reporting on the trend at a national level point to everything from tougher immigration laws, the effects of the economic recession that hit a decade ago and a decline of interest among the people who would potentially enter the workforce. Furthermore, a CBS news report stated that for every person entering the industry, five leave.

The News Press spoke with three contracting firms in the city – ADS Construction, L.F. Jennings and WINN Design and Build.

WINN Design and Build is a remodeling company with 12 employees who do everything from the foundation to finishing. Since the company’s inception in 2006, they have been recognized by Arlington Magazine, Remodeling Magazine and INC Magazine for their quality of work and speed of growth, but despite all these accolades, production manager Sean Du Launay said that the firm has trouble finding labor.

“To use a day labor, obviously, that’s easy, but experienced people of quality are harder to find,” he said.

In his role of hiring manager, Du Launay often has the most hit-ormiss with contractor’s assistants. As a result, he often puts them through probationary periods so he’s not penalized by the state (in terms of paying for unemployment) if things don’t work out.

In terms of unskilled labor, he often finds people who he says are referred to as a “chuck in a truck:” an unlicensed carpenter with varying levels of experience who he believes can be a stain on the industry due to their lack of professionalism.

When his firm was looking for a lead carpenter six months ago (someone capable of both running

A DEARTH OF SKILLED LABOR is making job sites like these in the City of Falls Church fewer and farther in between locally and nationwide. From brick masons to carpenters to multi-faceted handymen, the construction industry is severely lacking in interest among craftsmen ever since the Great Recession hit. While companies within the City are experiencing varying degrees of luck when it comes to finding steady help on jobs, this trend is limiting the frequency of all kinds of development. (Photo: Matt Delaney) jobs on-site and leading the manual work), Du Launay lucked out in finding a great worker but he believes those candidates are exceedingly rare.

ADS Construction Inc is a small two-man operation run by mechanical engineers Matt Sabet and Hooman Amir. They have run their business for 15 years and focus on metal and framing that relies on a labor crew of between four and 20 depending on the season. Like WINN, they have had trouble finding quality as they go to the big companies.

In response to a CBS News report this past October that of the 1.5 million construction jobs estimated, the 2008 recession drove the same number of construction workers out of the industry with only half of those jobs being recovered.

When asked if there was anything that could reverse the job market to benefit employers, Sabet joked, “a crash like the one in 2007.”

He noted, that from his experience, the recession of a decade ago forced many tradesman to either switch

jobs or expand their skills causing the quality of the work to go down.

For instance, a lot of the development was in commercial which required different skill sets and a lot of retraining.

“When we lose a mechanic, it’s hard to get one back. If we can’t find the same people we used before, and we go with a new crew, the quality goes down. We’re just going to have to work harder to make sure we keep up the quality,” said Sabet.

Sabet and Amir also are concerned about the external costs that OSHA-imposed regulations might cause, a potential raise in the minimum wage or a reduction in immigrants (the company uses Tax IDs for all their workers to make sure it’s all above board).

“One danger is if the government issues future work permits to immigrants, we don’t have much of a Plan B except to charge higher costs for mechanics,” said Amir.

For a company like L.F. Jennings which has been an area institution for 65 years, employs 400 employ-

ees and has contracted for projects as diverse as the Mosaic District in Merrifield and Union Market in Washington, D.C., it has been significantly easier to weather any fluctuations in the labor market. Still, senior vice president Mike Killelea believes the company’s high retention rate is due to a conscious effort to provide a great work atmosphere with excellent employee benefits.

“L.F. Jennings is a family business and we treat employees like family,” said Killelea.

Tradesman International cited a drop in high schools offering shop classes and an educational market geared more towards the type of white collar careers that four-year colleges offer in concluding that “a whole generation of younger workers are no longer even considering construction as a viable career option.”

L.F. Jennings has been able to connect to some of the college programs specializing in construction such as Virginia Tech’s Department of Building Construction

and Eastern Carolina University’s Construction Management Program for internships for their upper level management and works them up the pipeline. A lot of tradesmen come to the company through word of mouth, but Killelea notes that some of those workers have stayed at the company for twenty years or more.

Moreso, Killelea believes it was the company’s decision not to undergo mass layoffs during the Recession that has proved the company’s advantage to this day.

“We dug deep and invested retained earnings to train our staff, improve our systems, and invest in the latest technologies. The result is today we are better prepared serve our clients because we have the depth of experience and the continuity of the people we invested in during the recession,” said Killelea.

Like Sabet and Amir, Killelea does note that certain crafts such as bricklaying are hard to find. He also believes that the labor market is going to tighten if crackdowns on immigration continue.

R EA L E STATE

FALLS CHURCH NEWS-PRESS | FCNP.COM

Real Estate

WINTER 2018 | PAGE 19

Top Falls Church Home Sales

September-December #2 $1,700,000

#1 $1,776,000

#4 $1,608,000 #3 $1,650,000 Top 5 F.C. Home Sales September 1, 2017 – December 31, 2017 Address

#1 508 Lincoln Ave. #2 6333 Waterway Dr. #3 705 Poplar Dr. #4 6504 Manor Ridge Ct. #5 510 Lincoln Ave.

BR

6 3 5 5 5

FB

6 4 5 5 5

HB 1 1 1 0 1

List Price

$1,796,000 $1,850,000 $1,695,000 $1,626,995 $1,574,888

Sale Price

$1,776,000 $1,700,000 $1,650,000 $1,608,000 $1,550,000

Zip

22046 22044 22046 22043 22046

Date Sold 11/6/17 10/3/17 9/13/17 10/9/17 9/9/17

Source: MRIS, Inc.; Photos: MRIS, Falls Church News-Press

#5 $1,550,000

R EA L E STATE

PAGE 20 | WINTER 2018

FALLS CHURCH NEWS-PRESS | FCNP.COM

Falls Church Area Housing Market — 3rd Quarter 2017 Report Zip Code

Area

Average Price

Number of Homes Sold

Average Days on Market

22046

Falls Church City

$775,602

94

28

22041

Bailey’s Crossroads

$369,215

89

48

22042

Sleepy Hollow

$493,926

134

38

22043

Pimmit Hills

$670,980

90

36

22044

Lake Barcroft

$471,432

35

35

Home Sales Vs. 1 Year Ago

Home Prices Vs. 1 Year Ago

Change in # of Homes Sold: 3Q ‘17 vs 3Q ‘16

Change in Average Home Price: 3Q ‘17 vs 3Q ‘16

+18.99%

Change in Falls Church City (22046)

+2.64%

Change in Falls Church City (22046)

+4.71%

Change in Bailey’s X-roads (22041)

-0.77%

Change in Bailey’s X-roads (22041)

+17.54%

Change in Sleepy Hollow (22042)

-7.47%

Change in Sleepy Hollow (22042)

-21.05%

Change in Pimmit Hills (22043)

+3.25%

Change in Pimmit Hills (22043)

+6.06%

Change in Lake Barcroft (22044)

-14.22%

Change in Lake Barcroft (22044)

Source: Metropolitan Regional Information Systems, Inc. Copyright © 2018 Metropolitan Regional Information Systems, Inc.