The DC Condo Market, Part 1: State of the Market

• September 22, 2009

by Stephanie Kanowitz

UrbanTurf and McWilliams|Ballard have partnered to produce a series of articles that look at the new condo market in the DC area over the last 18 months. Below is the first article of five in the series. The report upon which this article is based is available for free download here. Also be sure to read:

• The DC Condo Market, Part 2: Rebounding from the Bottom
• The DC Condo Market, Part 3: Where the New Condos Are
• The DC Condo Market, Part 4: The Coming Condo Shortage (Maybe)
• The DC Condo Market, Part 5: The Top 20 Fastest Selling Condos

Download Part 1 of the Condo Report

The perennial question in real estate is “Is now the time to buy?” For the DC-area new condo market the answer seems to be yes. After weathering one of the darkest periods in residential real estate that the DC area has ever experienced, the market here appears to have bottomed out and prices will probably not fall much further, according to Mark Franceski, director of market research at McWilliams|Ballard, the real estate sales and marketing firm in Alexandria.

“By now pretty much every new project that is selling has lowered their prices because they can’t hang on to their inventory any longer,” Franceski said recently. “Anyone who’s been interested in buying a new condominium for the last 12 to 18 months now realizes that this is probably the best time given the historically low interest rates, significant price reductions, and the first-time home buyer tax credit.”

Franceski is a co-author of McWilliams|Ballard’s Midyear 2009 Washington Metro Area Condominium Market Overview, a report the company puts out twice a year. McWilliams|Ballard has given UrbanTurf and its readers exclusive access to the latest findings. You can download Part 1 of the report here.

Overall, the condo market in the metro area has segmented into the close-in submarkets that include the District, Arlington, Alexandria and southern Montgomery County, and the farther-out markets such as Fairfax, northern Montgomery, Loudoun, Prince William, and Prince George’s counties. The close-in areas are driving the lion’s share of sales and most of the positive news in the region. There were 600 total sales of new condos in the DC metro area during the first two quarters of the year, and 376 of those were in the District. Here is the full geographic breakdown:

Total new condo sales, January - June 2009

Franceski believes that the beginning of this year marked the lowest point for both the condo and single-family home market. He explained that the only projects achieving a successful sales pace in the first quarter were those that recognized the need to offer significant discounts to year-ago pricing.

“I think people will identify early 2009 as the bottom of the market. It will likely never be that bad again.”

By the second quarter, most new condo projects had caught on to the idea of lowering prices to drive sales, and that helped the market reach “a positive plateau,” Franceski said. Statistics proved this to be true as the second quarter of this year outperformed the first by 37 percent on a gross sales basis, according to the McWilliams|Ballard research.

Franceski said it is doubtful that new condo prices will continue to drop as significantly as they did over the past two quarters, as they have now reached the point where a healthy sales pace can be maintained.

8 Comments

1. James said at 10:43 am on Wednesday September 23, 2009:

   I generally agree with most of the analysis. I started looking at condos about a year ago, and have noticed that as supply has dwindled, prices have come down markedly.

1. BahamaG said at 11:32 am on Wednesday September 23, 2009:

   I have been hearing about a market bottom from real estate brokers for the last 2 years. Why trust this analysis? I think we have another 10-15% to go…can McWillams Ballard tell us what the price rent ratios are?

1. c'mon guy said at 2:19 pm on Wednesday September 23, 2009:

   i just love how mcwill/b puts out reports again and again saying now’s the time to buy, when they are the one selling so many of the properties ..... can’t trust it.  esp when high-end rental complexes are begging for people to sign up ...

1. Sittin' tight said at 3:09 pm on Wednesday September 23, 2009:

   ditto c’mon guy.

   Just because people are still overpaying for condos does not mean it’s time to buy. And if you research all the “time to buy” analyzers, they’ve got something to gain from saying so.

1. Mike said at 2:59 am on Thursday September 24, 2009:

   Do you honestly believe home sales will continue to fall thus dragging prices with them?  $8K credit will probably be extended and with a slowly improving economy interest rates can’t stay low forever.  If one doesn’t buy you will kick yourself because at some point people are gonna start asking for more than they are today.  You can either be in already or kicking yourself.

1. Dru said at 8:51 am on Thursday September 24, 2009:

   Why do you think high end rental buildings are as you put it “Begging”...because people are realizing that now’s the time to buy. I just purchased in Penn Quarter and am PISSED I didn’t 4 months ago as I paid significantly more than I would have then.

1. Lauren said at 10:05 am on Thursday September 24, 2009:

   Dru, I’m curious - how do you figure you paid more than you would have 4 months ago? Do you mean you had a higher interest rate?

1. Dru said at 11:14 am on Thursday September 24, 2009:

   I kept visiting the City Vista sales office and every week watched the same unit I wanted get more and more expensive as the lower floors sold out.