Still Priced Out of DC's Tonier Neighborhoods, Buyers Head East

• November 9th 2009

by Theresa Walker

There is no question that it is a buyer’s market out there, particularly for first-timers. The $8,000 federal tax credit was just extended through April, mortgage rates are hovering around historic lows and the FHA loan program has expanded. However, with all these indicators and incentives, can buyers afford a property in a District neighborhood that a couple of years ago would’ve been out of reach?

The answer: Not really. While the prices in the DC market have dropped along with the rest of the country, the cost curve has returned to about where it was in August 2007, according to the latest S&P/Case-Shiller home price index. Prices never dipped low enough to allow a first-time buyer to leapfrog into a tony area like Dupont Circle, and properties along northwest D.C.’s Wisconsin Avenue and Connecticut Avenue corridors are priced about where they were four years ago, according to Edward Carp, an agent with Continental Properties.

However, these days, buyers have a wider variety of revitalized neighborhoods from which to choose because of the millions of investment dollars that poured into the District during the residential boom. It is now common for buyers to include areas like Mount Vernon Square and Columbia Heights during their search, neighborhoods that would not have even been on their radar in the past.

“A few years ago, people just wanted to look in Dupont and up and down the Red Line,” said Rachel Valentino, a real estate agent with Long & Foster. “Now buyers are going much farther east.”

And condos are not the only property type luring buyers to new zip codes. Those looking for a little more space have been checking out single-family homes in Petworth, Bloomingdale, Eckington and LeDroit Park — neighborhoods where the price of a renovated row house can range from $350,000 to $550,000.

Suzanne Des Marais, an associate broker for Urban Pace Fine Homes and a Bloomingdale resident, has seen many new buyers come into the neighborhood in recent years.

“People have become interested in areas like this because there are places to go and things to do now,” said Des Marais. “Buyers are specifically seeking out these neighborhoods rather than ending up there because it’s a second choice.”

Not everything is leaning in a buyer’s favor, though. Strict lending rules mean that buyers are having a tougher time getting financing. Edward Carp says that fewer banks can afford to do a loan for 10 percent down and most want to see at least 20 percent. FHA loans, which require at least a 3.5 percent down payment, are taking up some of the slack, says Dale Mattison of the Long & Foster-affiliated Mattison Group. Four years ago, about 5 percent of Mattison’s clients used FHA loans; 50 to 60 percent are using them now.

Despite the lending troubles, the market for attractive listings is getting quite competitive across the DC area, says Sheila Simkins, chief operating officer at DCRealEstate.com, who is now seeing multiple offers on newly listed properties. Simkins also notes that as condo inventory starts to tighten, there are concerns about a shortage in 2011. In the lead-up to that potential scenario, buying in a revitalized neighborhood could start to resemble a game of musical chairs.

This article originally published at https://dc.urbanturf.com/articles/blog/still_priced_out_of_dcs_tonier_neighborhoods_buyers_head_east/1494.