Back in June I observed there had been a clear uptick in interest in land and rural property sales in western Loudoun County as a result of COVID-19. Now that we are a full six months into the pandemic, I decided to take a closer look at how the coronavirus has affected the broader Northern Virginia land market.
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And the winner is…
Based on the last six months of land sales data from Fairfax County, Fauquier County, Loudoun County, and Prince William County, Loudoun County emerges as the clear winner.
In fact, compared to the same six month period from last year (March 1st through August 31st), Loudoun County is the only county that experienced a net increase in the number of closed land sales (a 24% increase from 50 to 62 closed sales) and transactional volume (a 13% increase from $19,961,250 to $22,539,500 in total land sales volume).
Fairfax County, Fauquier County, and Prince William County all experienced a decline.
Consistent with the narrative that buyers are turning to land and rural properties to escape urban living, Fairfax County – the most densely populated and urbanized county I examined – experienced the sharpest drop in the number of closed land sales (a 22% decline).
Land sales transactional volume in Fairfax County decreased by 21%. This makes sense, given that Fairfax County’s population is more than twice that of Prince William (1.1 million versus 470,000), the next most populous county on the list.
Perhaps most surprising was the decidedly precipitous 46% decline in land sales volume in Fauquier County. In fact, as the least populous and most rural county on the list, one might have expected Fauquier County to benefit most from the urban exodus. That it did not suggests that there are other dynamics at play.
For one reason or another, buyers seem to consider Loudoun County a better “rural” alternative than Fauquier County. Perhaps it is because Loudoun County offers the best of both worlds—rural in the west and urban/suburban in the east.
Average & Median Land Sale Prices
Average and median sale prices tell another interesting story.
On average, compared to the same period last year, average land sale prices decreased 15% across the four counties, while median land sale prices increased 16% on average. This may suggest a decrease in sales and demand at the top end of the market and an increase in activity at lower price points.
Perhaps investors, developers, and other high price point buyers have been sitting out, while regular consumers are pushing up demand at lower price points as they buy smaller, more affordable parcels of land to build a single home.
With a median sale price of $572,500, land for sale in Fairfax County is roughly 2.3 times more expensive than land for sale in Loudoun County, 2.7 times more expensive than land for sale in Fauquier County, and 2.5 times more expensive than land for sale in Prince William County.
Another dynamic that may be pushing median prices up is an imbalance between supply and demand.
I have talked to a number of property owners who were considering putting their properties on the market at the beginning of year but decided against it after COVID-19 – or the response to it – came along. At the same time, buyer demand has remained strong. In other words, the rate at which sellers dropped out of the market exceeded the rate at which buyers dropped out of the market.
The result is more competition over less inventory. Trends in days on market and sale price to list price ratios appear to support this theory.
On average, land listings have been selling 27% faster during the past six months compared to the same six month period last year. In Fauquier County, median days on market has decreased 54% from 164 days to 77 days. Loudoun County has experienced a 42% decline, from 106 days to 62 days, and Prince William County has experienced a 33% decline, from 103 days to 73 days.
In other words, in each of these three jurisdictions, land listings are selling much faster today than this time last year. Fairfax County is the only county where median days on market has increased, from 41 to 48 days. Note, however, that Fairfax County still leads the pack with the lowest median days on market—that is, land generally sells faster in Fairfax County than elsewhere.
The change in sale price to list price ratios has been less dramatic but is nonetheless suggestive of decreasing inventory and increasing competition.
Across the four counties, the median sale price to list price ratio has increased from 91% to 94%, while the average has increased from 88% to 89%. Today’s sellers, therefore, are getting closer to asking price than last year’s sellers. The possible exception is for sellers in Fairfax County, where there is no clear trend (the average sale price to list price ratio has decreased 4% while the median has increased 4%).
Finally, there has been an appreciable change in the way buyers are financing their land purchases. In all but one jurisdiction – Fauquier County – the ratio of cash buyers has substantially decreased.
Between March 1st and August 31st, 2019, there were roughly 2.1 cash purchases for every one financed purchase. During the same period this year, there were roughly 1.3 cash purchases for every one financed purchase. In Fairfax County, the change has been particularly dramatic – the ratio has decreased 62.5% from 2.1 to 0.9 cash purchases for every one financed purchase.
The trend away from cash purchases is likely tied to the ultra-low interest rates we have been seeing during the past several months, even though lending requirements have been tightening up.
People shopping for land in Northern Virginia tend to be financially well-established and most are current homeowners. Therefore, they have no problem qualifying for loans in spite of more stringent lending requirements.