Demand driven in part by young buyers who want to be close to D.C. The end of federal tax credits may have cooled real estate sales in cities across the nation -- but not in the District, at least not when it comes to condos.
The condo market is thriving in response to demand from young urban professionals looking for urban excitement, baby boomers embracing city living and a shrinking supply of units.
Though there was a sales shortfall in May after the tax credit expired, condo sales continue to be brisk.
Prices are up slightly across most of the metro area, in part because the inventory of new condos dropped at the end of the first quarter of 2010 to its lowest level since 2003, according to the latest quarterly housing report from Metropolitan Regional Information Systems. On the whole, inventory is below the previous metro average, and the District is experiencing a shortage.
"There really aren't a lot of new condos on the market in Montgomery County," said Lise Howe, a Realtor with Coldwell Banker and a lawyer. "The economy shut down projects, but everyone loves new construction. It's like a new car, that wonderful smell -- but will the builder finish the project?"
To satisfy demand, some developers are buying apartment complexes and converting them to condos.
"The demand is just too high and the supply too low." said Mark Wellborn, editor-in-chief of Urban Turf, an online guide to purchasing homes and condos in the D.C. area. "Developers are pursuing deals for conversion."
The demand for condos is being driven in part by younger buyers craving easy access to work, play and nightlife in Arlington, Alexandria, Bethesda and the District.
"We are seeing a lot of young urban professionals being attracted to condominiums close to the city. They want to be close to the action," said Adam Gallegos of Arbour Realty. "How nice is it to walk out your door and stroll down the street to your favorite restaurants, bars and coffee shops?"
The boomers are close behind.
"There is a whole demographic in Montgomery County that is reaching empty-nester status. They are the ones selling the family house and they are finding the idea of moving to a condo really appealing," Howe said.
Boomers are not wowed by high-end features or new construction, which tend to be small and expensive. Space is a concern and they are fine with older, established developments.
"Most of my clients, who are thinking of downsizing, really just want to stop doing yard work and not worry about shoveling," said Howe. They need a place for their books, wine collections, CDs, et cetera, and their families for holiday dinners."
There are many sought-after condo neighborhoods in the area, including the Rosslyn-Ballston corridor, the Mount Vernon triangle in the District, Old Town Alexandria and Bethesda. Historic Anacostia, Trinidad and Brookland are up and coming.
"Buyers are prone to think that regardless of how good something is, something better is just around the corner," said Mark Wellborn. "In the D.C. market, if something good comes along, and you don't jump on it, it will be gone before you have the chance to reconsider."
Prices increase in D.C.
Based on the May MRIS reports, District condo sales were brisk from January through April as first-time buyers took advantage of the federal tax credit, but took a significant hit in May with only 201 contracts ratified -- a 38 percent drop compared to May 2009 and a 54 percent fall from April of this year, when 434 condos sold. Overall, however, condo sales in the District are up by 22 percent in 2010 at an average price of $416,000, an increase of 1.7 percent over 2009.
"The D.C. area is one of the healthier markets in the country," said Mark Wellborn. "Price points for condos vary widely. For $250,000, you can find a decent one-to-two-bedroom in Eckington or a studio or junior one-bedroom in Adams Morgan or Dupont. Luxury two-bedroom units can be listed for as high as $800,000 to $900,000 in Dupont Circle and Georgetown."
Arlington and Alexandria see increase in May sales
Buyers in Arlington and Alexandria are driving an overall increase in Northern Virginia condo sales with a more than 11 percent jump in deals in May over April. Statistics show 542 units sold in May compared to 486 the month before.
"The Ballston to Rosslyn corridor remains a hot spot for condo sales," Gallegos said. "In the last 90 days, 290 condominiums have sold or gone under contract along the Orange Line from Ballston to Rosslyn. People are willing to pay a premium to live here."
Prices are rising accordingly, with the average price in May over April increasing 3 percent from $350,000 to $361,000.
Condo prices in Alexandria can range as high as $2 million for a penthouse overlooking the Potomac River down to $125,000 for a modest one-bedroom unit. Though condo prices in both Alexandria and Arlington rose 1 percent over May 2009, the average price in Alexandria has taken a tumble recently -- dropping nearly 10 percent from $300,00 in April of this year to $271,000 in May.
"Old Town has held up much better than the West End," said Bryan Page, deputy director of Real Estate Assessment for Alexandria. "Positive job growth has had a stabilizing effect."
Montgomery County condo sales strong in 2010 despite May decrease
Montgomery County condo sales have increased 46 percent so far this year, from 869 units sold in 2009 to 1,285 in 2010. May condo sales of 411 units were 50 percent lower than sales in April and down 12.3 percent over May 2009. The average price of a Montgomery County condo in 2010 declined 4 percent to $244,000.
"I think the hottest neighborhood is Bethesda because of the restaurants, shopping and Metro," said Howe of Coldwell Banker.