Urban Pace Q1 YOY Market Report

Q1 YOY MA R K E T REPORT WASHINGTON, DC REGION ACTIVITY AMIDST COVID-19

1

EXECUTIVE SUMMARY In order to prepare for the coming weeks, we thought it would be helpful to provide a detailed look at current market conditions and the impact COVID-19 has already had on real estate in our region. Following the end of the first quarter, Urban Pace tracked and analyzed year-over-year market activity for Q1 2020 compared to Q1 2019 for the Washington, DC region.

This report analyzes activity for all residential sales including condos, townhomes and single-family homes. Given that new construction data can vary by quarter based on the delivery schedules of new projects, we chose to focus on MLS statistics to provide a larger and more consistent sample size and study data on contracts written rather than closed data, to provide a more accurate snapshot of week-to-week activity in an ever-changing market. Our team then plotted this data on a timeline that included major international, national and local milestones in the COVID-19 outbreak. We tracked this data on a weekly basis and the following charts provide a summary of the volume and pricing for the region as a whole and broken down for DC, MD and VA. What we found is that the Washington, DC Metro real estate market fundamentals are strong and had a healthy start to the year. The DMV continued to be undersupplied, the unemployment rate was at 3.5%, and interest rates were at historic lows. These factors created a competitive sales environment where home prices continued to rise and days on market continued to decrease.

By the third week of January, the DC region saw contracts written at an average sales price of $603,167, a 12.85% increase over the same week the previous year. Within the first 30 days of 2020, the market saw increased sales activity at significantly higher pricing than the previous year. This trend continued for most of the first quarter, with pricing and volume outpacing the previous year every single week until the 12th week of the year, when we first saw a negative impact on the real estate market as a result of COVID-19. By Week 13, as increased restrictions were placed on residents and many employers moved to teleworking policies, we saw a 19.5% decrease in year-over-year sales volume from the previous year. Despite the slowdown toward the end of the first quarter, the region still ended Q1 2020 with 2.3% higher sales volume than the previous year.

NOTE: The following charts reflect data that was pulled for all sales based on contract dates in Bright MLS from the first quarter 2019 compared to the first quarter 2020 for closed, pending and under contract listings. The charts referencing the DMV include sales from Washington, DC as well as Montgomery, Prince George’s, Arlington, Alexandria, Fairfax and Loudon Counties.

COVID-19 DMV TIMELINE Jan 11th China records 1st COVID-19 Death Jan 2nd Chinese authorities identify a new type of coronavirus

W1 2

JANUARY

Jan 30th WHO declares a global public health emergency

Jan 16th First U.S. COVID-19 case reported

W2

W3

W4

W5 FEBRUARY

Feb 12th The Dow closed at a record high of 29,551

W6

W7

Q1 2020 was trending on a positive growth pattern, with record year-over-year increases in price and volume, prior to the COVID-19 outbreak.

Q1 2020 sales volume totals outperformed Q1 2019 sales by 2.3%.

Q1 2020 KEY INSIGHTS

As of the end of Q1 2020, Maryland sales volume has been less affected by the COVID-19 outbreak than both DC and Virginia. DC saw the earliest and sharpest decline, with sales volume down 25% year-over-year in Week 12 and volume down 37% year-over-year in Week 13.

Different product types were impacted by the COVID-19 outbreak at different time periods.

Condominiums saw a decline in sales volume in Week 11, townhomes in Week 12 and single-family homes did not see a decline in sales volume until Week 13.

At the end of Q1 2020, there had not yet been significant price discounting.

March 16th Major stock market decline; DOW loses almost 3,000 points in one day

Feb 20th Italy outbreak begins

W8

March 19th-25th DMV surpasses 1,000 cases as teleworking begins and non-essential businesses close

March 12-15th DMV declares state March 7th First two COVID-19 of emergency and school/restaurant cases in DC closures begin are confirmed

W9 MARCH

W10

March 27th President Trump signs historic $2 Trillion stimulus package

W11

W12

March 30th Shelter in Place issued for all of DMV

W13 APRIL

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Q 1 YOY M AR K ET REPORT DC/MD/VA - YOY WEEKLY SALES VOLUME 1,600

SALES VOLUME

1,400 1,200 1,000 800

2019 2020

600 400

WEEK 1

WEEK 2

WEEK 3

WEEK 4

WEEK 5

WEEK 6

WEEK 7

WEEK 8

WEEK 9

WEEK 10

WEEK 11

WEEK 12

WEEK 13

WEEK SOLD (JANUARY - MARCH)

Q1 2020 started stronger than 2019 and was on track for a record quarter as it neared the start of the spring market. Sales volume slightly dipped from the COVID-19 news and shutdowns across the metro area in Week 12 but really began showing effects in Week 13 with a larger decrease in volume. Sales volume this past week (Week 13) decreased by 19.5% year-over-year compared to the same week in March 2019.

Q1 2020 sales volume totals still outpaced Q1 2019 sales by 2.3%.

DC - YOY WEEKLY SALES VOLUME 250

SALES VOLUME

200 150 100

2019 2020

50 0

WEEK 1

WEEK 2

WEEK 3

WEEK 4

WEEK 5

WEEK 6

WEEK 7

WEEK 8

WEEK 9

WEEK 10

WEEK 11

WEEK 12

WEEK 13

WEEK SOLD (JANUARY - MARCH)

When DC announced the city’s first confirmed COVID-19 case in Week 11, sales started on a downward trend. This has continued through Week 12 and 13 with restaurants, schools and non-essential businesses shutting down and sales decreasing year-over-year by 25% in Week 12 and 37% in Week 13. Even with the most recent dip, Q1 2020 sales volume in Washington, DC still beat Q1 2019 sales by 4.8%.

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MD - YOY WEEKLY SALES VOLUME 600

SALES VOLUME

500 400 300 200

2019 2020

100 0 WEEK 1

WEEK 2

WEEK 3

WEEK 4

WEEK 5

WEEK 6

WEEK 7

WEEK 8

WEEK 9

WEEK 10

WEEK 11

WEEK 12

WEEK 13

WEEK SOLD (JANUARY - MARCH)

Of all three jurisdictions, Maryland was the last to be impacted. Maryland declared a state of emergency in Week 11 of Q1, but did not see a decline in sales volume until Week 13 when it saw a relatively modest 8.5% decrease in units sold when compared to sales volume from the same week the previous year. At the end of the quarter, Maryland’s total sales volume was 7.3% higher than Q1 2019.

VA - YOY WEEKLY SALES VOLUME 800 700

SALES VOLUME

600 500 400 300 200

2019 2020

100 0 WEEK 1

WEEK 2

WEEK 3

WEEK 4

WEEK 5

WEEK 6

WEEK 7

WEEK 8

WEEK 9

WEEK 10

WEEK 11

WEEK 12

WEEK 13

WEEK SOLD (JANUARY - MARCH)

Virginia has followed a similar growth trend in residential sales volume on a year-over-year basis for both Q1 2020 and Q1 2019. Regarding the COVID-19 outbreak, Virginia followed the same timeline as DC and Maryland on closures and cancellations. Virginia did not see a negative impact on sales volume until the final week of the quarter, where Virginia experienced a 22% decrease in year-over-year sales volume from the previous year. At the end of the quarter, Virginia’s total sales volume was 2.3% lower than Q1 2019.

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Q 1 YOY M AR K ET REPORT DC/MD/VA - YOY AVG SALES PRICING $650,000

2019 2020

AVG SALES PRICE

$625,000 $600,000 $575,000 $550,000 $525,000 $500,000 WEEK 1

WEEK 2

WEEK 3

WEEK 4

WEEK 5

WEEK 6

WEEK 7

WEEK 8

WEEK 9

WEEK 10

WEEK 11

WEEK 12

WEEK 13

WEEK SOLD (JANUARY - MARCH)

Q1 WEEK

2019

2020

YoY % Change

Weekly % Change

WEEK 1

$528,661

$541,898

2.50%

WEEK 2

$536,144

$546,622

1.95%

0.87%

WEEK 3

$534,496

$603,167

12.85%

10.34%

WEEK 4

$531,182

$585,264

10.18%

-2.97%

WEEK 5

$563,346

$614,514

9.08%

5.00%

WEEK 6

$561,202

$607,089

8.18%

-1.21%

WEEK 7

$554,132

$598,875

8.07%

-1.35%

WEEK 8

$549,248

$580,564

5.70%

-3.06%

WEEK 9

$572,348

$598,973

4.65%

3.17%

WEEK 10

$559,531

$604,604

8.06%

0.94%

WEEK 11

$568,344

$597,523

5.13%

-1.17%

WEEK 12

$574,572

$553,317

-3.70%

-7.40%

WEEK 13

$568,034

$557,780

-1.81%

0.81%

TOTALS

$557,160

$586,217

5.22%

In Q1 2020, the DMV has seen a significant premium in average sales pricing compared to Q1 2019. COVID-19 has slowed this growth in recent weeks, when DC, Maryland and Virginia all declared a state of emergency in Week 11 and began closures and cancellations. The initial scare resulted in a 7.4% decrease in sales prices from Week 11 to Week 12, but then saw a slight bounce back in Week 13 of almost 1% on average pricing when compared to Week 12.

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DC - YOY AVG SALES PRICING $800,000

2019 2020

$775,000

AVG SALES PRICE

$750,000 $725,000 $700,000 $675,000 $650,000 $625,000 $600,000

WEEK 1

WEEK 2

WEEK 3

WEEK 4

WEEK 5

WEEK 6

WEEK 7

WEEK 8

WEEK 9

WEEK 10

WEEK 11

WEEK 12

WEEK 13

WEEK SOLD (JANUARY - MARCH)

Q1 WEEK

2019

2020

YoY % Change

Weekly % Change

WEEK 1

$653,239

$696,745

6.66%

WEEK 2

$668,562

$700,694

4.81%

0.57%

WEEK 3

$770,203

$762,217

-1.04%

8.78%

WEEK 4

$711,185

$689,737

-3.02%

-9.51%

WEEK 5

$712,459

$764,027

7.24%

10.77%

WEEK 6

$728,731

$739,587

1.49%

-3.20%

WEEK 7

$727,857

$739,253

1.57%

-0.05%

WEEK 8

$670,498

$682,792

1.83%

-7.64%

WEEK 9

$740,086

$764,299

3.27%

11.94%

WEEK 10

$700,442

$728,775

4.05%

-4.65%

WEEK 11

$698,791

$751,130

7.49%

3.07%

WEEK 12

$700,038

$668,886

-4.45%

-10.95%

WEEK 13

$638,138

$729,842

14.37%

9.11%

TOTALS

$702,090

$728,913

3.82%

Although sales volume saw a steady decline during the final three weeks of the quarter, average pricing has remained fairly stable on a yearover-year basis. The impact of the virus has not caused a discount in pricing as of yet. In fact, there was a 14.4% premium in average pricing in Week 13 of 2020 when compared to that same week in 2019 due to 25 sales over $1M in the final week of sales.

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Q 1 YOY M AR K ET REPORT MD - YOY AVG SALES PRICING $550,000

2019 2020

$525,000

AVG SALES PRICE

$500,000 $475,000 $450,000 $425,000 $400,000 $375,000 $350,000

WEEK 1

WEEK 2

WEEK 3

WEEK 4

WEEK 5

WEEK 6

WEEK 7

WEEK 8

WEEK 9

WEEK 10

WEEK 11

WEEK 12

WEEK 13

WEEK SOLD (JANUARY - MARCH)

Q1 WEEK

2019

2020

YoY % Change

Weekly % Change

WEEK 1

$427,378

$460,641

7.78%

WEEK 2

$422,776

$406,797

-3.78%

-11.69%

WEEK 3

$431,068

$437,174

1.42%

7.47%

WEEK 4

$405,906

$457,075

12.61%

4.55%

WEEK 5

$435,801

$485,948

11.51%

6.32%

WEEK 6

$465,474

$503,788

8.23%

3.67%

WEEK 7

$441,828

$464,528

5.14%

-7.79%

WEEK 8

$413,288

$438,887

6.19%

-5.52%

WEEK 9

$459,997

$496,000

7.83%

13.01%

WEEK 10

$442,852

$491,038

10.88%

-1.00%

WEEK 11

$449,705

$494,461

9.95%

0.70%

WEEK 12

$456,166

$455,749

-0.09%

-7.83%

WEEK 13

$465,282

$448,889

-3.52%

-1.51%

TOTALS

$442,214

$466,911

5.58%

Average sales prices in Maryland have also remained stable with the COVID-19 outbreak in the market. Average pricing is up almost 5.6% year-over-year for Q1 2020, with only a slight decrease shown in the final week of the quarter from potential pandemic uncertainty for buyers.

8

VA - YOY AVG SALES PRICING $700,000

AVG SALES PRICE

$675,000

2019 2020

$650,000 $625,000 $600,000 $575,000 $550,000 $525,000 $500,000

WEEK 1

WEEK 2

WEEK 3

WEEK 4

WEEK 5

WEEK 6

WEEK 7

WEEK 8

WEEK 9

WEEK 10

WEEK 11

WEEK 12

WEEK 13

WEEK SOLD (JANUARY - MARCH)

Q1 WEEK

2019

2020

YoY % Change

Weekly % Change

WEEK 1

$585,338

$574,355

-1.88%

WEEK 2

$581,538

$613,743

5.54%

6.86%

WEEK 3

$537,477

$673,274

25.27%

9.70%

WEEK 4

$567,517

$658,942

16.11%

-2.13%

WEEK 5

$603,809

$662,592

9.74%

0.55%

WEEK 6

$582,092

$644,321

10.69%

-2.76%

WEEK 7

$584,108

$647,266

10.81%

0.46%

WEEK 8

$609,584

$666,026

9.26%

2.90%

WEEK 9

$598,157

$620,094

3.67%

-6.90%

WEEK 10

$603,356

$648,044

7.41%

4.51%

WEEK 11

$608,534

$629,004

3.36%

-2.94%

WEEK 12

$615,932

$598,255

-2.87%

-4.89%

WEEK 13

$617,740

$604,998

-2.06%

1.13%

TOTALS

$596,298

$634,624

6.43%

Average sales prices in Virginia have remained stable with the COVID-19 outbreak in the market. Average pricing is up almost 6.5% year-overyear for Q1 2020, with only a slight decrease shown in the final two weeks of the quarter of 2.9% and 2.1% respectively.

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Q 1 YOY M AR K ET REPORT TOTAL SALES REVENUE BY COUNTY

TOTAL SALES REVENUE

$2 ,5 00,000,000

2019 2020

$2 , 000,000,000 $1,5 00,000,000 $1, 000,000,000 $ 500,000,000 $0

MONTGOMERY

FAIRFAX

PRINCE GEORGE'S

DC

ALEXANDRIA

ARLINGTON

LOUDOUN

COUNTY

Q1 total sales revenue is up in every county except Arlington, where it is down 7%. For the overall DMV area, total sales revenue is up 6%.

AVERAGE SALES PRICE BY COUNTY $ 8 0 0 ,0 0 0

2019 2020

AVG SALES PRICE

$ 70 0 ,0 0 0 $ 6 0 0 ,0 0 0 $ 5 0 0 ,0 0 0 $ 4 0 0 ,0 0 0 $ 30 0 ,0 0 0 $ 2 0 0 ,0 0 0 $ 1 0 0 ,0 0 0 $0 MONTGOMERY

FAIRFAX

PRINCE GEORGE'S

DC

ALEXANDRIA

ARLINGTON

LOUDOUN

COUNTY

Average sales prices are significantly higher in every county and 5% higher in the region overall.

COUNTY

10

2019

2020

% CHANGE

Montgomery

$553,288

$574,992

4%

Fairfax

$595,766

$640,389

7%

Prince George's

$322,757

$337,508

5%

DC

$702,925

$728,988

4%

Alexandria

$590,000

$634,934

8%

Arlington

$729,506

$746,794

2%

Loudoun

$544,367

$578,126

6%

TOTALS

$557,175

$586,229

5%

Through Week 10 of 2020, weekly sales of condominiums and single family homes were consistently higher in 2020 than in 2019, while townhome sales were roughly the same. Weekly sales totals of all categories recently dipped below their 2019 totals, with condos beginning in Week 11, townhomes beginning in Week 12, and single family homes beginning in Week 13.

2019 - CONDOMINIUM 2019 - SFH 2019 - TH/ROW HOME

AVERAGE SALES PRICE BY HOME TYPE $800,000

2020 - CONDOMINIUM 2020 - SFH 2020 - TH/ROW HOME

AVG SALES PRICE

$700,000 $600,000 $500,000 $400,000 $300,000 $200,000

WEEK 1

WEEK 2

WEEK 3

WEEK 4

WEEK 5

WEEK 6

WEEK 7

WEEK 8

WEEK 9

WEEK 10

WEEK 11

WEEK 12

WEEK 13

WEEK SOLD (JANUARY - MARCH)

2019

2020

% CHANGE

WEEK

CONDO

SFH

TH/ROW HOME

CONDO

SFH

TH/ROW HOME

CONDO

SFH

TH/ROW HOME

WEEK 1

$370,779

$651,095

$467,364

$333,113

$670,548

$507,147

-10%

3%

9%

WEEK 2

$351,791

$644,112

$507,494

$391,574

$643,371

$549,355

11%

0%

8%

WEEK 3

$345,397

$661,339

$511,255

$436,488

$750,184

$519,142

26%

13%

2%

WEEK 4

$368,285

$654,144

$500,656

$386,835

$737,174

$536,391

5%

13%

7%

WEEK 5

$373,378

$688,336

$507,575

$422,453

$741,080

$571,150

13%

8%

13%

WEEK 6

$387,168

$688,181

$517,438

$411,765

$759,499

$525,376

6%

10%

2%

WEEK 7

$405,514

$671,017

$503,171

$419,689

$740,045

$529,198

3%

10%

5%

WEEK 8

$363,290

$665,175

$509,619

$422,494

$685,033

$523,032

16%

3%

3%

WEEK 9

$389,278

$694,096

$520,637

$413,751

$729,401

$526,184

6%

5%

1%

WEEK 10

$402,010

$664,710

$500,740

$405,594

$742,436

$539,572

1%

12%

8%

WEEK 11

$395,199

$706,908

$497,869

$384,100

$728,469

$543,277

-3%

3%

9%

WEEK 12

$397,165

$702,282

$511,899

$364,626

$658,391

$496,310

-8%

-6%

-3%

WEEK 13

$360,434

$694,522

$504,561

$347,271

$664,959

$493,660

-4%

-4%

-2%

TOTALS

$379,767

$679,710

$505,768

$399,476

$713,024

$527,261

5%

5%

4%

The weekly average sales prices of condos, single family homes, and townhomes were consistently higher in 2020 than in 2019 until Week 11. Condominium prices had been trending down slightly before that, but at that point prices of all home types decreased significantly and fell below 2019 averages.

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Q 1 YOY M AR K ET REPORT

NUMBER OF SALES

TOTAL DC/MD/VA SALES AND AVG INTEREST RATE - Q1 2020 1,600

3.80%

1,400

3.70%

1,200

3.60%

1,000

3.50%

800

3.40%

600

3.30%

400

3.20%

2020 - NUMBER OF SALES 2020 - AVG INTEREST RATE

200 0

3.10% 3.00%

WEEK 1

WEEK 2

WEEK 3

WEEK 4

WEEK 5

WEEK 6

WEEK 7

WEEK 8

WEEK 9

WEEK 10

WEEK 11

WEEK 12

WEEK 13

WEEK SOLD (JANUARY - MARCH)

Interest rates have been significantly lower in 2020 than in 2019. However, as fears of economic fallout from the COVID-19 pandemic increased in early March, rates were cut even lower, falling below 3.3% in Week 10. This rate cut increased sales activity in all jurisdictions. Lenders were overwhelmed with the volume of new loans and refinances. As a result, rates spiked to dampen demand. As the market settled, rates again came down to 3.5% in Week 13.

10 BIGGEST ONE-DAY POINT LOSSES IN DOW JONES HISTORY

Source: Standard and Poors

Eight of the top 10 biggest one-day point losses in Dow Jones history occurred in the first quarter of 2020, compared to only two occurring in 2008. This volatility in the stock market added to concerns of a looming recession and had a negative impact on consumer confidence.

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URBAN PACE OUTLOOK While the course of the COVID-19 outbreak is unclear, it will not last forever. The fundamentals of our region’s real estate market are very strong. Low interest rates and low inventory levels resulted in high demand for real estate at the beginning of 2020. Buyers were willing to transact quickly and at higher prices when compared to 2019. In 2020, the DMV market was on track to surpass all metrics of 2019, and we were just beginning to enter the strongest season of the market—spring. This means many homebuyers in the DMV had not yet entered the market. One unknown variable that will have a direct impact on sales will be the state of the mortgage market when the COVID-19 crisis ends. While we expect interest rates to remain low, credit scores and down payment requirements are changing every day and will have an impact on sales during the 2nd Half of 2020.

Prospective Buyers are Looking at Real Estate While we have still seen activity across all of our new construction projects and price points, there is no denying that physical tours of the properties have decreased as the government has restricted our movement. Despite lower traffic, we continue to write contracts which speaks to remaining consumer confidence in the real estate market. In addition, we have seen record levels of web traffic over the past two weeks. This suggests that consumers are still planning to buy and they are using this time to research properties and prepare for their purchase once restrictions are lifted. It’s our opinion that the spring market will be delayed which will result in pent-up demand as we recover from the pandemic and our lives return to normal.

Pent-Up Demand Expected Once Crisis Abates The fundamental reasons that consumers had to make a home buying decision will still be there when our current crisis is over. If they needed to downsize before, they likely still will. If they needed fewer stairs, that will not change. If their family is growing and they needed more space before, one can only imagine how they will feel after this time of self-quarantine. And for those first-time homebuyers who were delaying their decision to purchase, it is possible that spending all of this time in their current living circumstances will prompt them to take action later this year.

Crisis May Spur Increased Home Purchases from Millennial Renters Down the Road For nearly 10 years we have been talking about millennials delaying their decision to enter the home buying market for a variety of reasons. It is Urban Pace’s belief that recent conditions, causing renters to shelter in place for an extended period of time, will provide them with a newfound appreciation for the home they keep. Beyond that, recent volatility in the stock market during periods where real estate prices not only stayed strong but saw year-over-year increases may encourage renters to rethink their financial planning. It is possible that this pandemic may lead a disproportionate number of millennials to finally buy a home in the year ahead.

Unknown Variables One unknown variable that will have a direct impact on sales will be the state of the mortgage market when the COVID-19 crisis ends. While we expect interest rates to remain low, credit scores and down payment requirements are changing every day and will have an impact on sales during the second half of 2020. Looming unemployment and overall economic recovery will also factor into housing demand. The depth and length of the overall impact to the economy is still unclear, but we believe recovery will be steady.

Urban Pace Remains Cautiously Optimistic As we all continue to navigate this unprecedented situation, we are still feeling confident that we will get through this challenging time and are looking toward the future. For all these reasons, Urban Pace remains cautiously optimistic for the year ahead. Once things are back to normal, we expect the strong spring market will continue even if it is delayed and happens over the summer or fall.

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Q1 YOY MAR K ET REPORT WAS H I N GTON , D C REGI ON AC TI VI TY AMI D S T C OVI D - 1 9

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