The DC Condo Market, Part 2: Rebounding from the Bottom

• September 23, 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 second 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 1: State of the Market
• 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 2 of the Condo Report

Even though new condo sales reached a record low earlier this year, sales picked up as the year progressed and experts are now saying that there are better days ahead for the condo market.

In the first half of 2009, there were 1,137 total gross condo sales in the DC area and 600 net sales, a 48 percent and 30 percent decrease, respectively, versus the same period last year. (Gross sales represent all condos that go under contract, while net sales are those that reach settlement without the purchaser canceling or defaulting on the contract.) Owing to the economic situation, cancellations and defaults for condos under contract were much higher in the last 12 to 18 months than in years past, hence the disparity between gross and net sales.

Mark Franceski, director of market research at real estate sales and marketing firm McWilliams|Ballard, indicated that this trend is mostly over and that going forward gross and net sales will align much more closely.

The new sales were largely concentrated inside the Beltway, with the District, Arlington, Alexandria and Montgomery County accounting for 78 percent of sales in the region. Following is a geographic breakdown of all the new condo sales activity for the first half of 2009:

Total new condo sales, January - June 2009

Gross sales in the second quarter of 2009 were 12 percent higher than in the last quarter of 2008 and 37 percent higher than in the first quarter of this year. This increase is a positive signal that the market started bouncing back after reaching its lowest point in early 2009.

New condo inventory in the DC Metro, 2006 - 2009

Here is one of the most illustrative statistics from the report: The inventory of new condo units in the DC metropolitan area currently stands at around 6,500, the first time inventory has been below 7,000 units in more than five years. (It peaked at nearly 19,000 units in mid-2006.) Franceski told UrbanTurf that if gross sales continue at the current pace of about 2,300 per year without new condo projects replenishing the supply, everything available will sell out in two and a half to three years.

“We consider right around two years of supply to be healthy,” Franceski said, adding that the current supply is being skewed higher because of a large number of foreclosures and slow sales outside the Beltway.

Sales of new condos in the District accounted for almost half of the region’s total gross sales in the first half of this year. Most of the sales activity was in Northwest quadrant neighborhoods such as Mount Vernon Triangle, Logan Circle, Columbia Heights and the U Street Corridor. Following is a breakdown by neighborhood:

Total new condo sales within DC, by neighborhood, January - June 2009

The current velocity of sales in the area is about 200 per month, a rate that Franceski says is unlikely to change before next spring. “Spring 2010 is when I think the sales pace is going to start to pick up because the selection on the market will be fairly limited and people will be looking to scoop up the last available units.”

6 Comments

1. Richko said at 5:04 pm on Wednesday September 23, 2009:

   Would the negative # for Penn Quarter/Mt. Vernon Triangle be due to the cancellation of all the DuMont contracts?

1. Brandon Green said at 5:45 pm on Wednesday September 23, 2009:

   I had the same question Richko.

1. Keith said at 11:00 am on Thursday September 24, 2009:

   What’s the data source for this analysis?

   My analysis of June condo sales in the District showed that 326 condos sold in that month alone. Typically the District records, on average, 300 condo sales per month so I’m hard pressed to understand how this analysis arrives at 376 condo sales for the first half of the year.

1. CondoAuthority.com said at 12:08 pm on Thursday September 24, 2009:

   Keith,

   The McWilliams|Ballard analysis is of net sales in the new condo market.  This does not include resales.

1. Keith said at 2:28 pm on Thursday September 24, 2009:

   Yep, next time I need to “read” instead of “scan”.

1. pqresident said at 10:18 pm on Thursday September 24, 2009:

   the lower end of the market (i.e. conforming loan funded purchases) is being propped up by a) the $8K tax credit and b) the Fed buying mortgage backed securities in the open market. the upper end (i.e. non-conforming loans) is much more “real” because it doesn’t have these market distortions in effect. where do the larger share of condos fall?