DC Condo Prices Will Hit Bottom in Late 2009

by Mark Wellborn

DC Condo Prices Will Hit Bottom in Late-2009
The Floridian (Under Construction) by otaviodc

Condo prices will bottom out in DC proper and the inner suburbs in late 2009, according to a report released by Alexandria-based Delta Associates. Delta attributed next year’s cellar-dwelling prices to the condo market finally achieving an equilibrium between supply and demand.

The report concluded that this market equilibrium will come as a result of the condo pipeline being “driven to its lowest point since 2004” by continued sales and a number of new condo projects converting to rentals. William Rich, one of the report’s authors, explained to UrbanTurf that after the remaining new condo projects are finished later this year and in the early part of 2009, no new projects will come online for the rest of the year. That means buyers will be snapping up units from a pool of inventory that is no longer increasing.

“A lot of buyers that went to contract on condos back in 2006 and 2007 have backed out of projects that have yet to deliver meaning that the supply is still on the market,” Rich told UrbanTurf. That will cease to be the case going forward because there won’t be the long lag time between when buyers sign contracts and when they can actually close and move in. “In 2009, those buyers will be buying at projects that have already delivered, so they won’t have a year and a half to back out.”

All the news from the report was not good, however. During the 12-month period from August 2007 to August 2008, condo resale prices went down about 8.1 percent compared to single-family homes in that same period that plunged 19.2 percent.

“What is interesting is that in prior cycles when the market hasn’t done so well, the condo market has faired poorly compared to the single-family home market,” Rich said. “One reason for the change in this cycle is that condos are being built closer in to where people work. Single-family homes, on the other hand, are being built way out where there is an hour-long commute to get to the city.”

The report’s assessment of condo sales in the DC metro area was both good and bad. According to calculations by the team that wrote the report, it would take about eight years for the current condo inventory to be absorbed based on the rate of sales over the last 12 months. This is the slowest pace that Delta has seen since prior to 2000.

However, that rate is already speeding up. Sales in DC have steadily increased since the beginning of 2008 with 126 sales in the second quarter and 174 in the third. The condo pipeline has also been decreasing for ten straight quarters, from 25,000 units across the metropolitan area in 2006 to 12,000 in 2008, which means that supply is getting more in line with demand.

That does not mean that new condo projects will be halted indefinitely. It just raises the question as to when they might come online.

“There are 19,000 units under construction in the DC area, and quite a few developers have their projects lined up and ready to go,” Rich told UrbanTurf. “Things will start moving again once the credit markets get worked out, but it is very difficult to predict when that is going to happen.”

However, next year’s balancing act will be a good time for those who want to buy a condo in DC and plan on staying put for awhile.

“For owner occupants that want to live somewhere for at least a few years, it will be a good time to buy,” Rich said. “For those looking to buy and then flip the property, it will not be a good time. The days of flipping a home quickly for double digit percentage profit are not coming back for awhile.”


  1. CondoAuthority.com said at 9:50 am on Friday October 17, 2008:

    Good article.  Delta Associates is definitely the top source for 3rd party real estate research and information.  CondoAuthority.com recently posted their 3rd quarter market update for the Washington, DC area based on MRIS data and saw similar overall price changes for the Metro Area.  However, prices in The District were actually UP for condos/coops in the 3rd quarter compared to Q3 2007 and smaller units (studios and one-bedrooms) have seen firmer prices than two-bedroom and three-bedroom units.  Also, so much of that 8% decline is due to Loudoun and Prince William counties, two jurisdictions heavily impacted by banks unloading foreclosed homes at rock bottom prices.

  1. Keith said at 10:36 am on Friday October 17, 2008:

    If they know this, can they tell us when the stock market will recover?

    Personal income is a key driver for purchasing real estate, I have to believe income stability/growth will be a factor in determining when buyers will/will be able to enter the market to soak up excess supply. Given the general economic uncertainty plus the unknown impact of the financial crisis and the new administration’s budget priorities on federal expenditures in FY09 [an income driver for the DC area] and beyond, any analysis that ignores this is suspect.

  1. Bluedog said at 11:54 pm on Friday October 17, 2008:

    Another fantastic article by UrbanTurf.  Delta Assoc is the premiere research group in the DC area on real estate demographics.  How is it that you guys have scooped the WashPost?

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