Not only will climbing interest rates soften investor interest, Leisch predicted , but so will limits being put on investors in sales contracts. And the number of condo units in the development and construction pipeline has doubled in just a year, he said, "raising the question, 'Can the market absorb what's in the pipeline and continue to grow like it has?' "
Delta counts 29,700 condo units in the pipeline for the next 36 months, compared with 13,700 a year ago.
The Monroe at Virginia Square held a preview party for potential buyers.
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Leisch, however, said he sees no need to panic. His third-quarter report, to be released Monday, cites a finding by the George Mason University Center for Regional Analysis that "demand for housing units in the Washington area is expected to outstrip supply by 20,000 units through the end of the decade. "
George Mason's local economy expert Stephen S. Fuller has no doubt that demand will stay strong because of the region's unparalleled current and projected job growth and the area's land-use constraints. The center recently updated projections for how much more housing will be needed by 2025 than will be built. The housing deficit is expected to be 280,000 units by 2025.
"We will need at least 40,000 units of housing a year to accommodate the growth that we're seeing, and in our best year, we got only about 35,000 new units. We're doing about 27,000 [units] this year," Fuller said.
Fuller doesn't track condos, so he couldn't comment on how that market will grow. But "condos definitely have their own market now," he said. "Where it used to be the third choice, after single-family homes and townhouses, and where it used to pick up or slack off because of interest rates or the strength of the economy, that market now is being driven by other factors."
Downsizing baby boomers and their more financially secure children, the echo-boomers, are turning to the new vibrant life in urban centers, he said.
"They want to be where the action is, where the nightlife is," said Robb A. Cohen of Be Home Wise Inc. in McLean, a company that does research on home buyers for national and local builders.
"One group that's definitely not buying [condos] is families," said Coldwell Banker Residential Brokerage agent Rick Bosl, who runs a Web site for the condo set, Arlingtoncondo.com. "I get a mix of buyers -- some who are just out of college and get some money from their parents; others who want to move up, more established buyers. A big demographic change is that there's a lot of empty-nesters, whose kids are gone and they don't want the upkeep. They want to be close in, to just get up and go."
Both the investment potential and the lifestyle keep Ballston resident Schmitt in condos.
She says that at her building, the Berkeley, about 20 of the 80 units "flipped" within the first three months because prices jumped so much. She anticipates more flips at the end of the first year and again after the second year, when tax laws allow owner-residents to take their profit without paying capital gains tax.
Schmitt, who is now an expert at trading up, lives in her units for two years, "playing the tax game."
Schmitt's neighbor, Whitehead, was planning to join her in moving to her newest building. He said friends frequently go to preview parties together "and we tend to buy together." This condo culture, he said, has decided that the units "are not just good homes but good opportunities, good investment vehicles."
But Whitehead is souring a little on the new condo market as prices climb. Sometimes preview parties can turn into "feeding frenzies," he said.
"You may have seen the floor plans at the party, and that's it. So when you go to the appointment, it's only the second time you've seen the plans and you have to make a decision on the spot," he said. "It's kind of like eBay. . . . You get fixated on buying something and if you sat back and thought about it, you may not be so impulsive."
Whitehead said he has decided not to go through with a contract at the Clarendon1021 because "on reflection, I decided the price was just too high" and that in the future renting it out would be too hard.
Now, he said, he will expand his search to renovations or older buildings. New buildings, he said, "aren't being priced for single people anymore."
Schmitt, however, is rolling ahead.
Not even her boyfriend's recent purchase of a house could persuade her to switch, she said. When he asked her to settle down in a house in McLean, she told him, "if that's the case, then I'm not going to get married."
The boyfriend has come around, she said, as he's run into issues such as finding a landscaper and a company to maintain his pool. "He's started complaining" about how the house is taking time away from his career, she said.
"He's had it for five months and he hasn't even moved in yet."
