Washington, DC Condo Market is HOT
April 21, 2012
Ask agents in Washington, DC about the market for condos and co-ops right now and they will respond that the market is hotter now than it has been in many years and that multiple offers and pricing strength are common. While that might seem like hyperbole or wishful thinking, it’s not. The numbers bear out the perception. The Greater Capital Area Association of Realtors have released the March 2012 condo and co-ops statistics, here's a link to them: http://bit.ly/IpGjY6
Like all markets, the real estate market is driven by supply and demand. This spring supply is far down and demand is up.
The market for condos is the lowest it has been since 2005. As of the end of March there was a 27.9% drop in available homes on the market from a year ago (833 vs. 1,156). Interestingly, the inventory is down 50.5% from the peak of inventory in June of 2006 (833 vs. 1684).
Perhaps more important than the percentages is that this low level of inventory indicates that inventory is likely to remain tight for the rest of 2012. That’s because in Washington, inventory of available homes increases to the highest level in the spring and declines throughout the year to a low level in December. This year the increase in inventory is 43% of what it has been for the last six years. (Typically, inventory rises 23% between December and March, this year the increase has only been 10%.)
As one other point of reference, the last time inventory was this low in the spring was in 2005, which was the peak of the market in Washington, DC.
The demand side is a little more nuanced than the supply side, but the news is good here too. Contracts were up 18.2% compared to last year for the same month (358 vs. 303). This is the first time since June 2008 that we’ve had this level of contracts (without government intervention).
The government intervention I’m referring to is the $7,500 federal tax credit for buyers of homes that ended in April of 2010. In March and April of 2010 contracts exceeded 350 as buyers rushed to close before the end of the credit.
So with supply down and demand up, what does this mean? It means that we’re seeing the market price for properties firming up, but not great price appreciation. The reason the properties are clearing quickly and demand is up is because sellers have finally capitulated and are pricing their homes where buyers want them.