Little Kid on the Block
Saturday, July 28, 2007
Shauntise Harris expected competition when she put her one-bedroom condominium on the market in April.
But she didn't know how intense that competition would get. Not only was she up against some of her neighbors at 555 MassAve, a 246-unit luxury building in the District's Mount Vernon Triangle neighborhood, but she also was competing with the project's developer, the JBG Cos. Nineteen months after starting sales, JBG still had units to unload and was offering a year of no condo fees on one-bedroom units -- an incentive Harris could not match.
"I'm like, you guys are still here?" she said.
During the real estate frenzy that ended in 2005, the developer would have been gone within weeks or months of starting sales. But contract cancellations and excess inventory have kept developers tied to projects much longer, pitting them against owners reselling their units.
"It certainly makes for interesting competition," said Gregory H. Leisch, chief executive of Delta Associates, a real estate research firm based in Alexandria.
There are 20,217 new condos on the market in the Washington metro area, by Delta's count. Marketing on another 18,867 units is expected to begin in the next three years, Leisch said, citing his firm's midyear analysis of the condo market.
What's hurting new projects the most are contract cancellations -- when buyers back out of deals.
"A lot of times these projects were sold out. But people would put down deposits and wouldn't go through with the closing," said William Rich, vice president of Delta.
At the same time, the resale market is flooded with investors who thought they could flip properties, people who took out exotic mortgages that they can no longer afford or homeowners who need to sell because of life changes.
Individual sellers and developers both say they lose out in the competition.
For sellers, matching developers' incentives, such as closing cost subsidies, can be difficult.
"The developers have a lot deeper pockets than we do," said Jae Lee, whose condo at the Artisan, a 160-unit building in the District's Penn Quarter that was also developed by JBG, recently went under contract after months on the market. "If I try to match them or try to outdo them, I will be losing money."