Real estate sales and marketing firm McWilliams|Ballard has released a report on the state of the condo market in the DC metropolitan area. Entitled 2009 Washington Metro Area Condominium Market Overview, the 34-page report includes tons of data and analysis about the current condo market. McWilliams|Ballard provided UrbanTurf an advance copy of the report, and below we have pulled out what we believe are the key findings:
- The number of new condos for sale across the DC metro stands at just under 5,400, making this the first time since 2003 that new condo inventory has been below 6,000. At right is the breakdown of where those new condos are found.
- Given the low (and diminishing) supply, there is likely to be a shortage of new condos starting sometime later this year. You may have already heard of the “condo shortage”; DC real estate watchers first started talking about it halfway through 2009. Fast forward six months, and the trends leading to a shortage have only continued: the condo projects that delivered over the last few years are selling out, while no new projects are breaking ground.
- As a result of the shortage, some rental projects may find it advantageous to “go condo.” That includes already-delivered buildings converting back to condo, as well as under-construction buildings switching to condo just before they deliver. Currently, 99 percent of all under-construction residential development in the DC area is planned as rental. That’s 4,400 units in total.
- The shortage could be a good thing for individual condo owners looking to sell. The lack of new projects will force condo buyers to look at resale properties, which could boost demand and, in turn, prices. Price appreciation would likely be modest, but any appreciation at all would be welcome given the declines of the last few years.
- Of the units that remain, a larger-than-usual percentage are two-bedrooms or larger. Studios and one-bedrooms are the most popular, and therefore sell out first. The result is that the remaining inventory will be harder to sell than what has already sold.
- The new FHA guidelines are bad news for the condo market. The increased down payment requirement (from 3.5 to 10 percent for buyers with a credit score below 580) and reduction in permissible seller concessions (from 6 to 3 percent) dramatically change the economics of FHA loans, which are a very popular source of financing for new condo buyers. Combine this with the expiration of the first-time homebuyer tax credit in April, and new condo sales could suffer a double whammy this spring.
The Rosslyn-Ballston Corridor
- The Rosslyn-Ballston Corridor, Logan Circle/U Street, and Mount Vernon Triangle are the most robust markets in the whole metropolitan area. There is already a condo shortage in the RB Corridor, and McWilliams|Ballard predicts that “it is only a matter of time” before new condos are introduced to the market, either in the form of under-construction rentals ultimately delivering as condos, or existing apartment buildings converting to condos.
- The difference between the new condo markets of “close-in” versus “farther-out” areas is stark. For the entire region, DC and Arlington accounted for 62 percent of gross sales of new condos in 2009. Meanwhile, the new condo markets in Prince William and Loudoun Counties in Virginia and Prince George’s County in Maryland continue to suffer very slow absorption and high rates of foreclosures and short sales.
- There were a total of 2,483 gross sales of new condos in 2009. Net sales were 1,776. The table below shows the breakdown of sales by city and county.
|County/City||Gross Sales||Net Sales|
This article originally published at https://dc.urbanturf.com/articles/blog/mb_report/1741.
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