DC’s Housing Scarcity: Great for Sellers, Frustrating for Buyers

• January 22, 2010

by Janelle Nanos

After months of house hunting, Justin Markel and Holly Brunner finally finished packing their boxes last weekend and began making their move. The only problem was that they weren’t getting the house and backyard for which they’d been looking. Instead, their new place was just an elevator ride away, a larger rental apartment in the building Markel had been living in for the past three years.

Kurt Bersani’s old condo on 14th Street

“I have never saved as much money as when I was preparing to buy a house,” Markel told UrbanTurf. “I was so petrified of buying something that needed to be repaired that I saved every penny.”

Markel and Brunner had been under contract on a short sale in Petworth when they found a home being sold as part of an estate sale around the corner. So they jumped, only to be thwarted by FHA loans and left unable to cover construction costs. Now, between their mounting frustration and the shrinking housing inventory in the metro area, they’ve decided to put off their search.

“We make pretty good salaries, especially in a town that is dominated by federal employees,” says Markel, an attorney with the Department of Justice. “If we can’t afford to buy a house or a condo in a neighborhood we like, I don’t know who will.”

It’s a chorus being heard throughout the city in the past few months, as eager buyers looking to take advantage of the first-time homebuyer tax credit have come up against a drop-off in housing inventory and increased scrutiny from lenders.

“People are getting a little panicky,” says Carolyn Hurwitz, an agent with Keller Williams. “They want to take advantage of the credit, but they have to be under contract by April. There is less inventory now than we’ve seen for a while.”

The market’s inventory is at the lowest point it’s been in the past three years, down from a high of 31,018 homes in May of last year to 22,260 in January, according to HousingTrack.com. A recent report from the Greater Capital Area Association of Realtors noted a 28 percent drop in the number of single-family homes on the market compared with the year prior. Condo listings were down 22 percent.

“Six months of inventory in real estate is traditionally the breaking point between a buyers and a sellers market,” Lindsay Reishman, who heads the Reishman Group brokerage out of Dupont Circle, told UrbanTurf. “But right now, we’re down to 4.5 months. It’s obviously a positive sign for the DC real estate market, as we’ve absorbed the brunt of the bust. We’re also seeing more competition. When a house is priced right and it shows well, it sells very quickly.”

Such was the case for Kurt Bersani, a client of Reishman’s who sold his two-bedroom, two-bath condo in Logan Circle this past November for $580k, slightly less that its list price of $589k. After only 17 days, he had three offers, two bidding wars, and a contract.

“I knew the neighborhood was hot, and at the time there were only about four comparable units on the market,” Bersani said. (He looked at each of them and was unimpressed.) “I felt I blew away the competition.”

Reishman says he’s seeing an increase in multiple offers, with about 30 to 40 percent of the homes he represents having had competitive bids in the past few months. And Hurwitz has noted an uptick in escalation clauses.

“People are still thinking it’s a buyers market, so they’re not expecting to pay full price,” she said. “But now we’re seeing things getting a lot closer to full price or selling at full price. One of my listings recently went on the market and within four days we had seven offers, including a couple with escalation clauses. When I listed it I was preparing them for the fact that they might get lower offers. I was so happy to be wrong.”

Realtors aren’t certain that the current drop off in inventory will persist. “During the winter we typically have less inventory, and with the severe weather, I’m sure a lot of people who were going to list decided to postpone,” says Greg Scott, a broker and branch manager with Long & Foster in Capitol Hill. “Who wants to sell a property when there’s 20 inches of snow on the ground?”

Reishman thinks the current shortage of inventory may mean things have hit an equilibrium. “It’s a more healthy market,” he says. “People are buying and selling when they have needs.”

That’s the attitude taken by Jerry Sealy, an art director in DC who is looking to move from his current rental into a condo. Having just met with his realtor this week, he’s nonplussed by the current inventory drop-off.

“I’ve owned three different properties in DC, so I know who I am and what my needs are,” he said. “I’ve been in other markets when it was hot, and it’s a different kind of stress — you have to overbid and practically give them your first child. The lending process is a lot more complicated now, but things in general seem so much more sane. And I’m patient and am not going to settle.”

11 Comments

1. marie said at 6:54 pm on Friday January 22, 2010:

   Great article and so true! I have been looking for about six weeks and have been pretty bummed by the quality of homes on the market. I think it will change in the coming months, but at the moment pickings are pretty slim.

1. name said at 12:14 pm on Saturday January 23, 2010:

   If housing is so scarce, why are there still half-finished condo buildings around town? There’s an enormous half-finished one on Mass Ave, near Union Station, for example, that looks like no one has touched it in a year. If this is such a sellers market, then why haven’t they begun working again?

1. benji said at 2:08 pm on Saturday January 23, 2010:

   name,

   do your homework, or read a newspaper. those projects can’t get financing.

1. Anon said at 11:56 am on Monday January 25, 2010:

   Definitely true.  I have been looking for nearly 3+ months.

1. Keith said at 11:59 am on Monday January 25, 2010:

   The initial anecdote isn’t directly tied to an inventory shortage. Seems to be more of a price point and income issue. If they could only afford a short sale, then they were already at a disadvantage in the market.

   “If we can’t afford to buy a house or a condo in a neighborhood we like, I don’t know who will.” Welcome to the real world. I’d love to live in Spring Valley, but I can’t.

   Also, this article would be stronger if it’d done a better job in its data analysis.

   “The market’s inventory is at the lowest point it’s been in the past three years, down from a high of 31,018 homes in May of last year to 22,260 in January, according to HousingTrack.com.”

   That’s for the entire DC metro area. What are the stats for DC proper? That data would be more compelling. In other words, what is the DC inventory now?

   Also, comparing May’s inventory to January’s inventory is comparing apples/oranges. You’re comparing Spring 2009 inventory, when more properties are usually for sale, to Winter 2010, a season when usually fewer homes are for sale. A better measure would be to compare January 2010 to the same month in 2009, 2008, 2007, etc.

   The GCAAR data was not qualified so I don’t know whether that’s for DC proper or, again, the DC metro area.

   Aside from the anecdotal evidence, I’m not convinced.

1. Jeremy said at 12:09 pm on Monday January 25, 2010:

   Good piece. Looking at Redfin and Realtor.com is pretty depressing these days. While there are good units on the market, they never last very long. I have been looking for 2.5 months and have placed multiple offers that have been outbid because the unit is one of a handful of attractive places in a popular area.

1. Neil said at 3:40 pm on Monday January 25, 2010:

   Psst… “Nonplussed” does not mean “calm, complacent or not alarmed”; in fact, it means almost exactly the opposite, “surprised, confused, at a loss, perplexed.”

1. hoos30 said at 5:00 pm on Monday January 25, 2010:

   As someone who just closed on a fixer-upper in Shepherd Park after a four month search, let me tell you the DC Market is BONE DRY. If you want something in a nice area that is move-in ready, be prepared to pay for the priviledge. In theory it should be a buyers market, but most of what is out there is seriously flawed in some way, with DOMs in the triple digits. Even my appraiser listed our market as “increasing”.

1. Joe Esq 74 said at 9:14 pm on Thursday January 28, 2010:

   hoos30 - I have been trying to move from Michigan Park to Shepherd Park. The listing in 20012 are few and lacking. (One house had serious mold issues) Trying to move up for more space is tough right now.

1. CAHBF said at 12:09 am on Friday April 2, 2010:

   I was looking for comparisons for my rowhouse in Shaw/20001 , which I’m selling in May, and was shocked that there are EIGHT houses total in the entire zipcode on the market.  Lots of condos, no houses.

1. Ghostman said at 6:55 pm on Tuesday June 8, 2010:

   I’m looking for a home between 2000-3000 sq. ft. in Northern Virginia that ISN’T a short sell or a foreclosure that is priced between $350k and $450k. There are a whopping total of FIVE.