The Washington area housing market seems to be making great strides this Spring as buyers without a home to sell are taking advantage of low interest rates, an $8,000 1st time buyer tax credit, a ready supply of newly constructed new condos.  The market is improving from the bottom up in terms of price, a trend that is benefitting the condominium segment of the market as condos tend to be less expensive than single family homes in similar locations.

This trend is highlighted in two recent articles.  One from the Washington Business Journal below notes that the supply of new condos continues to diminish rapidly.  Due to the lengthy construction process for multi-family buildings, prices are expected to beginning rising in 2010 - 2011 inside the beltway.

Another recent Washington Post article notes that the market for luxury homes is very slow right now as financing is difficult to find and new buyers entering the market are often purchasing new or vacant homes.  As a result few buyers are able to move up to the larger and more expensive homes that a languishing on the market.

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From The Washington Business Journal | Friday, June 26th, 2009

Report: New condo prices are down, sales shoot up

New condo prices in the Washington area were down almost 4 percent in the second quarter from a year ago, with sales volume exceeding 600 units for the first time since fall 2007, according to a report from Delta Associates to be released June 29.

Prices for new and converted condos fell the most in suburban Maryland, down 7.6 percent. The drops in Northern Virginia and D.C. were lower, at 2.9 and 2.6 percent.

Delta, an Alexandria research firm, said two factors contributed to the increased sales volume: historically low interest rates and the busy homebuying season. A total of 618 units went under contract during the quarter. For the first half of the year, 928 units went under contract, with Arlington County and Alexandria leading the area with 242 units sold.

There are 8,480 units in projects now being marketed for sale, and the number of cancelled units, 694, in the quarter was the lowest since early 2006. The Morris and Gwendolyn Cafritz Foundation changed its Art Place at Fort Totten from condos to apartments and will go before the planning board July 2 to seek approval for 529 apartments as part of the first of three phases. Donatelli Development Inc. decided to rework its 80 units at 1444 Irving St. in Montgomery County, KB Home and Centex Homes cancelled their Aventiene-Phase I, which would have delivered 30 residential units.

Delta CEO Greg Leisch said the dwindling pipeline — now at its lowest in five years — will likely result in a shortage by 2010, causing effective prices to rise. Prices tend to rise when there inventory-to-sales ratio is at three years or less. It is currently at 1.7 years in Arlington and Alexandria and 2.8 years in D.C. For the region, it is 5.1 years.

Because the number of projects set to deliver inside the Beltway will drop to near zero, Leisch said prices will rise sharply between 2010 and 2011. This is good news for projects like the Lionsgate, which is among the last high-end condominium projects to deliver in Bethesda.

“There are really very few upscale condo projects standing, and clearly none are going to start any time soon,” said Marc Dubick, president of Duball LLC, which developed Lionsgate.

“So when you look at ours with 30 units left to sell, that’s only about a nine- to 18-month supply at most. Then there is Park Potomac with 40 left and the Adaggio with 30 left. That is only 100 units in Montgomery County. Upscale buyers are going to be hard pressed to find high-end units in the area,” he said.

Source: Washington Business Journal. View Article.

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