9.6 Months: New Condo Supply in DC Area Hits Record Low

by UrbanTurf Staff

image
Courtesy of Delta Associates.

The inventory of new condos on the market in the DC area just keeps getting smaller.

Real estate research firm Delta Associates released its first quarter 2013 report on the DC metro area condo market on Tuesday, which revealed that the inventory of new condos in the region has reached a new record low. Readers may remember that in January, Delta reported that there was just a 12-month supply of new condos on the market; that level has now fallen to 9.6 months. Following are a few of the key findings from the report:

  • In the DC region, there are currently 2,849 new condo units under construction or being marketed. What that translates to is just 9.6 months of new condo inventory, based on the current sales pace. To give this number some historical perspective, last July inventory stood at 3,629 units. In 2007, there were nearly 20,000 new condos on the market.
  • Inventory varies by sub-market. From the report: “In most of the District and Prince George’s County, there is less than six months of inventory available, but in Loudoun/Prince William, there is 1.4 years of inventory.”
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  • A torrid sales pace at new projects and a relatively small number of units in the pipeline are the main reasons that inventory is so low. Projects that have been introduced to the market in the prior 12 months have sold at a pace of 8.3 units per month; in contrast, projects that have sold out since 2012 averaged 2.6 sales per month. (It is important to note when looking at this differential that the final units to sell in a project are usually the least desirable. Still, the increased sales pace is noteworthy.)

As for inventory coming on the market, here is what Delta’s Condominium Practice Director William Rich told UrbanTurf: “1,000 units are in the works that are expected to deliver or start selling by later this year or 2014, but many more are needed to help return the area to healthy supply levels, given the current sales pace.”

The rendering of the condo project pictured in the thumbnail image will be located at 11th and M Street NW. More details here.

This article originally published at http://dc.urbanturf.com/articles/blog/9.6_months_new_condo_supply_in_dc_area_hits_record_low/6873

9 Comments

  1. Jeffrey said at 3:44 pm on Tuesday April 2, 2013:

    Probably has something also to do with the fact that condos have become a very high risk proposition for developers. Between having to pay ordinary income tax on sales, posting a 10% bond for 2 years with DC + DC’s 5% condo tax. Where is the incentive?! Keep on renting because rentals are considerably lower risk for less effort.

  1. Caleb said at 4:05 pm on Tuesday April 2, 2013:

    Well, this won’t do much to help that bubble people keep waiting to burst in the district.

    @Jeffrey, I think developers know that there is a substantially low vacancy rate for rentals in this town and they can capitalize on charging high rates and fees for new fancy buildings with doormen and rooftop pools. Unfortunately, in the long run, due to the lack of available homes and condos for sale this will creating an environment where home ownership in Washington will be for the very wealthy and all else will rent for a lifetime.

    *see Manhattan, Boston and San Fransisco for cities who paved the way of this model.

  1. Juanita de Talmas said at 9:39 am on Wednesday April 3, 2013:

    How many existing condo units are for sale?

  1. Mark Wellborn said at 10:27 am on Wednesday April 3, 2013:

    Juanita,

    There are 672 existing new units and 1,710 active resale units on the market in the DC area right now, according to Delta Associates’ William Rich.

    Mark Wellborn
    Editor

  1. Juanita de Talmas said at 11:07 am on Wednesday April 3, 2013:

    They’re telling me on GGW that that equals 1.7 months of supply.  Pretty tight market.

    Thanks.

  1. bjk said at 1:04 pm on Wednesday April 3, 2013:

    How to reconcile that with this:


    http://online.wsj.com/article/SB10001424127887324392804578362722741053596.html

    This year alone, developers are expected to deliver more than 15,000 new apartment units in the greater metro area, with 11,000 more expected in 2014. That is well above the more than 6,000 units delivered, on average, each year during the prior decade, according to research firm Delta Associates.

    . . .

    While landlords managed a 1.9% increase in rent prices last year—down from 2010’s 7.8% incline—this year could show the first drop since 2009, Delta reports. The vacancy rate for these high-end apartments could jump from the current 4.2% to 5.9% in 2014, according to Delta.

  1. bjk said at 1:11 pm on Wednesday April 3, 2013:

    I’ll answer my own question. It looks like the supply is mostly rentals, not for sale units, suggesting that developers think rental offers a better return. Maybe some of those will switch to condo sales.

  1. Janson said at 1:17 pm on Wednesday April 3, 2013:

    BJK: Those numbers are for rentals and condos. The numbers in this article are for just condos. Clearly, renting out is disproportionately appealing to developers right now, though I have to imagine some substantial number of those will be converted if prices for condos continue to rise.

  1. ABD said at 2:37 pm on Wednesday April 3, 2013:

    BJK, thanks for the helpful statistic. I think a lot of the increase in sales pace has had to do with the abnormally high rental rates throughout the region over the past couple of years. High rents have lead to an increase in the number of first time home buyers.  Developers have been building into the rental unit hole that Delta Associates predicted for 2013 since about 4Q2010. As supply of rentals increases and rents go down, yes, developers may switch their buildings to condos. And also, the math for renters who are currently shopping for a unit to buy due to rising rents, may change. Finally, as job growth expands in the rest of the country, we may see the DC real estate market cool down a bit.

    That’s my theory at least.

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