Report: New Condo Inventory at Lowest Level Since Before the Boom

by Will Smith

The shortage of new condos across the DC metro area has been a theme since last spring, when condo projects started selling out and no new developments were breaking ground to replace them. In its semi-annual report on the DC-area condo market, real estate sales and marketing firm McWilliams|Ballard published some hard numbers that clearly illustrate the severity of the new condo shortage.

New Condo Inventory in the DC Metro, Midyear 2005 – Midyear 2010

As of mid-2010, there were just over 4,000 unsold new condos across the area, the lowest number since before 2005. At the current sales pace, it would take a year and a half to sell those remaining units. In certain areas, the shortage is even more acute: McWilliams|Ballard reports that there is only a 1.3-year supply remaining in the Rosslyn-Ballston Corridor, a 2.6-month supply in Logan Circle/U Street, and a 2.1-month supply in Mount Vernon Triangle/Penn Quarter. At right are the exact inventory numbers for each city or county as they stood at midyear.


Exacerbating the situation is the fact that most of the remaining condos are concentrated in just a handful of projects, meaning that the lack of options is even worse than the inventory numbers suggest. In Alexandria, for example, the top five selling projects accounted for 100 percent of new condo sales so far this year. In Arlington, the top five selling projects accounted for almost 70 percent. Not only do new condo buyers not have many units to choose from, they don’t have many buildings to choose from either.

A final frustration is that the few units that do remain are typically the buildings’ less desirable units, either because they are big (studios and one-bedrooms are generally the most popular, while two-bedrooms and three-bedrooms take longer to sell) or they have unappealing floor plans, views, etc.

This article originally published at http://dc.urbanturf.com/articles/blog/report_new_condo_inventory_at_lowest_level_since_before_the_boom/2540


  1. swested said at 10:58 am on Tuesday October 5, 2010:

    This is truly the apocalypse at hand - limited new condo availability? How will people survive? Why won’t anybody think of the children?!

  1. Mike said at 12:42 pm on Tuesday October 5, 2010:

    Am I missing something?  Having >1 year inventory supply seems still too high.  Those figures for Logan and Mt Vernon are more indicative of a shortage, but the other areas seem like there are still too many condos on the market and prices should come down.  Am I wrong on this?

  1. SL said at 1:02 pm on Tuesday October 5, 2010:

    Certainly there have been many many years in the DC market with few if any new condos. I’m not sure who the victim of this tragedy is - most people are looking for a home and will buy a resale condo if not a new one. And some upward pressure on prices in DC would be welcome (no more bubbles, please, but would like to one day sell the house I bought in 2005).

  1. Mark @ McWillams|Ballard said at 9:21 am on Wednesday October 6, 2010:

    We are hardly claiming that this is a tragedy for anyone, but SL makes a valid point - buyers are indeed migrating to resale units as we are seeing volume and prices increase for resales, especially in submarkets where new condo inventory is the lowest.

    However, new condominiums are always the leading edge and 99% of the remaining new inventory is at least 2-3 years old by now. The market, at least close in, is ready for a new wave of better design. That is part of the reason why the 1+ year of inventory represents a shortage.

    +/- one year of supply represents a shortage mostly for statistical reasons. Yes, being able to sell new condos for one more year technically means there is supply, but when it comes to new condos, especially currently, that much supply represents a shortage. Specifically in the RB Corridor, the overwhelming majority of supply is in just two buildings. For such a desirable area, that is certainly a shortage.

  1. ryan said at 10:32 am on Wednesday October 6, 2010:

    I have two condos i’m renting out that i’d like to sell, but the building is no longer able to qualify for FHA loans—which means it’s almost impossible to sell them.  I wonder how many other condos/buildings in the city are facing the same problem.  may in part answer the shortage of units available for sale.

  1. Not getting it said at 11:42 am on Wednesday October 6, 2010:

    In terms of demand, shouldn’t your talk of “inventory” of new condo units in the area also include “non-new” units? Does the report cover that? I think the “inventory” picture is incomplete without also including an analysis of existing condo units for sale by owners on the market. If there are an abundance of non-new/existing units on the market, wouldn’t it dampen prices and demand for new units? If so, it would make sense that the inventory of “new” units would be declining in response be at or near a historic “low”. Also, how many projects in the pipeline are on hold, meaning property is owned by a condo developer waiting for the availability of financing and/or the market to recover. I don’t see how “new” can be used as a proxy for the market in this sense, so perhaps the new condo builders supply market would find this alarming, but not necessarily the condo buyer/seller market.

  1. Mark @ McWillams|Ballard said at 3:12 pm on Thursday October 7, 2010:

    We certainly could include resale/existing condominium units in the inventory figures and that could give some insight into the ‘overall’ condo market for the metro area. However, we use new vs resale as a very important dividing line. While some buyers look at both new and resale, and some don’t necessarily see much of a real difference, there is a large share of the market that would prefer a newly built, never been lived in condominium.

    As of midyear, there were nearly 3,600 active resale units on the market, 20% of which were built in the last 10 years and could be classified ‘new.’ So yes, more resale units definitely detracts from the new market, especially now because what is left of the new supply is not of very high quality (bad buildings, bad locations, or bad units in good buildings). However, new condos definitely set the market because they are newer, fresher and often in desirable locations.

    The pipeline is very difficult to estimate at this point because the condo pipeline is effectively zero. Financing for condo projects is still very elusive so it is hard to predict when it will come back. Also, many projects will likely begin construction as apartments with hope of turning to condo before they finish. This is because apartment buildings are much more attractive to lenders.

    At this point in the cycle, I think the resale market is much more interesting than the new market when looking at trends because the new condo market is winding down. However, four years ago, new condos were all the rage and there were nearly 19,000 of available for sale (and not built, mind you, that’s where most of today’s rentals come from) so it is just interesting to see what’s happened to that market since then.

  1. Calling Mr. Galt said at 11:38 am on Friday October 8, 2010:

    I hate taking this conversation to politics but Ryan brings up a very important point.  I think developers would love to build right now and some have the money to do so.  I also know many owners, like Ryan, who would like to resell their homes in some great buildings.  One huge challenge which is not getting any coverage in the media is buyer financing.  During the bubble years financing was very easy to get for buyers because of relaxed lending guidelines (think CRA).  In its haste and panic, the government has swung the pendulum in completely the opposite direction and have made it almost impossible for buyers to buy new construction and therefor shutting down developers of high density projects throughout the country.  At the same time they have put crazy guidelines on existing buildings making it an extreme challenge for owners to resell their homes.  This is what happens when government intervenes in the markets on both sides and what happens when you have a totally inept administration.

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