Reports Indicate Glut of Condos in D.C. Area
Tuesday, January 31, 2006
The Washington area housing market has softened but is still in relatively decent shape except for what appears to be a glut of condos, according to two studies released yesterday. But the researchers came to different conclusions about the potential for problems stemming from condo overbuilding.
Both MetroStudy, a Houston-based market research firm, and Delta Associates, an Alexandria-based affiliate of Transwestern Co., found that condo activity was red-hot here but now is cooling.
MetroStudy's Kenneth Wenhold, director of the company's Virginia-Maryland division, predicted in an interview that so many condos are under construction or planned, particularly in Arlington and Fairfax counties, that "there is a very significant problem" of overbuilding and the potential for projects to go bust.
Arlington and Fairfax have 14,156 units under construction and almost 28,000 planned or proposed, Wenhold said. "But in the same area, last year we only sold 4,001 condos." In 14 counties in Maryland, including those around the District and Baltimore, Wenhold said, 3,901 condo units are under construction.
The Delta report said the nation's condo conversion market, in which developers have furiously changed rental units into condos, is "largely played out for this cycle."
But the report concludes that the expectations of continued strong job growth, strong housing demand and low interest rates, plus the relative lack of affordability of other kinds of housing, will keep condo sales from crashing in most markets, including in the Washington area.
"We are likely to experience a soft landing in most major metro markets, but less gentle in others," the Delta report found. Cities with the greatest risk of a hard landing -- those with a lot of condo production and conversion, high levels of speculator activity and modest levels of job growth -- are Las Vegas, Miami and Phoenix, the report said.
"On the other hand, we would be more confident of a soft landing" in Washington, Boston and Los Angeles, it said.
MetroStudy's fourth-quarter analysis of the area said listings of all types of housing for sale have doubled since July and new-home inventory for sale has jumped from 6.6 months of supply to 12.2 months. But much of that jump is due to the flood of condos. "If you remove the thousands of condominium units that are being built in Arlington County, Va., housing inventories drop to a much more reasonable 7.6 month supply," according to the report.