Sunday, March 30, 2008
Sales slowed once again in the Washington area condominium market in 2007, with potential home buyers wary of buying as prices dip and investors all but gone from the purchasing arena.
Condominium sales fell in 2006, and they fell again by 25 percent in 2007, according to a Washington Post analysis of home-sales statistics. The median price region-wide rose by $2,000, to $289,900 from $287,900 a year earlier.
The District and close-in suburbs, particularly in Maryland, were the strongest performers, as buyers continue to seek homes that afford an easy commute. The median sales price in the District climbed 3 percent, to $365,000, and in Montgomery County, 2 percent, to $299,999.
"The District condominium market is still very healthy," said Jane Fairweather, a real estate agent with Coldwell Banker. "A lot of people want to live there -- young professional people and empty nesters who want a more cultivated lifestyle."
In Prince George's County, prices rose 4 percent in 2007. Much of the sales activity can be attributed to a single project, National Harbor, with sweeping views of the Potomac River and just across the Wilson Bridge from Alexandria.
Condominiums in Arlington remain popular, as well, with the median price jumping 10 percent, to $385,000. The number of units sold increased, too, as more projects came onto the market at the same time.
Virginia's outer suburbs, particularly Loudoun and Fairfax counties, took a much bigger hit. Condo prices in Fairfax dropped 4 percent, and in Loudoun, they dropped 7 percent, which meant that the median price declined to less than $300,000 in both markets.
"Virginia has always had way too many condos," Fairweather said.
The market for new condominiums, meanwhile, has "bifurcated" into two market segments, said Gregory Leisch, chief executive of Delta Associates, a real estate information firm in Alexandria. He said prices have been sharply cut in projects where the developers are large, publicly traded companies that have to show quarterly profits, which means they must make sales or explain to investors and Wall Street analysts why they have not.
"They are engaged in a real slash-and-burn mentality," Leisch said, referring to promotions that seem to him more like fire sales than orderly transactions.
In other projects, though, prices have held up because of the deep pockets of the region's privately held development firms, many of which have decided to wait out a turn in the market rather than drastically reduce prices. For that reason, Leisch said, condominium prices have remained surprisingly stable.
Two new luxury condominium projects in Bethesda are a case in point, Fairweather said. She said that the developers of the Adagio and Lionsgate projects are holding firm on their prices, confident of attracting affluent couples who are selling single-family houses.
"Those guys aren't negotiating," she said.
Investors, who once made up a third of all purchasers, were fading from the market two years ago and by the end of last year had almost entirely disappeared, Leisch said. He said the trend was particularly notable in Arlington and Alexandria, which experienced an odd phenomenon last year: More people canceled their sales contracts than closed sales. And he said that about 30 percent of cancellations of new-condominium sales in the two jurisdictions were by real estate investors. Generally, however, the condominium market is doing better than it did during the real estate slump of the early 1990s, he said.
But there is still a vast overhang of properties for sale, including more than 16,000 new units being marketed throughout the region. Leisch said that at this rate, it will take more than five years for all the available new condominiums to be sold. One-third of the unsold units are in Prince William and Loudoun counties, he said.
"We can't sugarcoat this -- sales are way down from last year," he said.
Fairweather said the best opportunities for good deals can be found where the sellers are both realistic about the market and have owned the properties long enough to have substantial equity. These sellers are able to cut the price or offer to pay a bigger part of the transaction costs than people who have owned their homes for only a short time.