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Report: New Condo Supply in DC Area At Lowest Level Since 2003

by UrbanTurf Staff

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Courtesy of Delta Associates. Click to enlarge.

Real estate research firm Delta Associates released its second quarter report on the DC metro area condo market on Tuesday, which revealed that the inventory of new condos in the region is at its lowest point in a decade.

Following are a few of the key findings from the report:

  • In the DC region, there are currently 2,457 new condo units under construction or being marketed, down from 2,849 in the first quarter. 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 notably depending on the sub-market. For example, in DC proper there is less than six months of inventory (and far less in certain neighborhoods), but in Montgomery County there is 1.2 years of supply.
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  • Sales volume for new condos in the second quarter of 2013 dropped 25 percent versus a year ago. The drop is being attributed to the lack of supply which is giving buyers fewer options.
  • Delta Associates has identified 13 Class A 80-150-unit apartment projects that are under construction (a total of 1,549 units) that could convert to condos.

The rendering of the condo project pictured in the thumbnail image is The Edmonds School. More details here.

This article originally published at http://dc.urbanturf.com/articles/blog/report_new_condo_supply_at_lowest_level_since_2003/7278

11 Comments

  1. Phil said at 10:25 am on Wednesday July 3, 2013:

    If there are any realtors on this site (there usually are!) i’m looking to sell my place at 14th and Belmont (Solea Building). If I could get $790 a sq ft as this chart suggests, that would be amazing! Let me know if you think this is possible.

  1. 11luke said at 10:35 am on Wednesday July 3, 2013:

    It would be great if the author of this study weighed in on why there is such a discrepancy between apt/ condo availability.  It seems obvious- build more condos or convert apt’s under construction to condos.  Yet my sense is that isn’t happening and developers don’t really care.  What gives?

  1. The Editors said at 10:44 am on Wednesday July 3, 2013:

    11luke,

    We have reached out to the author of the report for a comprehensive answer to your question. In short, it boils down to the fact that getting financing for large condo projects has become quite difficult since the end of 2008. We hope to have a longer explanation for you soon.

    The Editors

  1. Delta Associates said at 11:06 am on Wednesday July 3, 2013:

    It’s easier to get financing these days to build apartments and most of the apartments under construction are too large to switch to condos under current circumstances. Settlements can’t begin in most cases until 50% of the units are under contract, which means a developer of a newly delivered larger apartment project, say a 300-unit building, would have an empty building until 150 units are sold.  Carrying costs for a 300-unit building are significant and since the average monthly sales pace for a new condo project is currently about 6 units per month, it would take about 2 years to sell 150 units.  The financing rules were more lax back in 2004-05 when a lot of larger apartment buildings switched or converted to condos.

    More condo product is on the way - about 2,300 units are supposed to start construction this year in the metro area, more than double the amount from last year and the most starts in a year since 2006.  Almost all of these projects are less than 100 units in size.

  1. E. said at 11:12 am on Wednesday July 3, 2013:

    Speaking as a frustrated would-be buyer to sellers ... please consider listing your unit while the market is still in your favor! I can’t wait to buy but there is just nothing out there.

  1. 11luke said at 12:11 pm on Wednesday July 3, 2013:

    @TheEditors and @DeltaAssociates:

    Thanks so much for your responses.  Very informative.

    My view is that perhaps we should revisit some of the rules re: condo conversion and financing.  I feel like a big cause of the sky-high DC real estate prices are because the condo spigot got turned off.  A market failure of that scale seems ripe for government intervention.  As DC looks to keep all the young people its attracted in the past decade as they put down roots and start families, it would be wise to consider ways to facilitate 2 and 3 bedroom condos.  We can’t all be millionaires buying rowhouses and not everyone wants to move to the exurbs.  Other cities have tons of condos for families but in DC its a non-existent asset class.

  1. adam said at 1:01 pm on Wednesday July 3, 2013:

    “A market failure of that scale seems ripe for government intervention.”

    Umm, this isn’t a market failure, it’s a government intervention problem.  The financing and conversion rules that have caused this problem were written by the government.

  1. HappyRicardian said at 1:34 pm on Wednesday July 3, 2013:

    while the above makes sense as to why new condos arent being built or converted, it does not explain why condos being rented out by individual owners remaining as rental units (rather than be sold to occupiers).  I can only guess that its because the rental market is still so strong - which suggests the issue is the tight market in general, as much as legal or financial issues.

  1. corcoran said at 1:37 pm on Wednesday July 3, 2013:

    And the financing and conversion rules are a product of a pre-regulation free for all that nearly put our country into a Depression.

  1. mona said at 1:39 pm on Wednesday July 3, 2013:

    E….there is a really nice condo for sale in Bloomingdale right on 1st st NW. Bloomingdale is a great neighborhood. I am not a realtor but I feel your pain on trying to purchase even thought I am not in the market myself to sell or buy

  1. swester said at 7:39 pm on Saturday July 6, 2013:

    In 2-3 years time, you can bet we’ll be back on the other side of the equation - WAY too much inventory. And everyone buying these absurdly overpriced units today will feel as ridiculous as the people who bought in 2006 and watched their values drop as much as 20% in the following years (and are only now starting to really reach a break-even).

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