The real estate market is curiously muddled for brokers operating in the District. While the values of individual properties continues to rise in most areas of the city, the number of sales opportunities has declined.
In effect, the economic pie is bigger but there are fewer slices.
With high interest rates reducing the pool of qualified purchasers and inflation forcing up cash prices for homes, many transaction are now requiring "creative" financing to close the sales.
In this approach to financing, the seller usually takes back a portion of the sales price as a loan, in the form of a second trust. But unlike suburban jurisdictions, the District has restrictive regulations concerning second trusts that make city properties difficult to market.
In the District, the maximum interest rate for a second trust is now 15 percent, a figure below many first trusts. Balloon payments are prohibited.
These restrictions mean that a sellermoving from the District and getting a second trust elsewhere cannot effectively create similar financing in the city and thereby pass through the costs of a new loan or, in turn, reduce the cash needs of a District buyer.
There is some possibility that the second trust situation may change.
James Banks, executive director of the Washington Board of Realtors, says there have been discussions with city officials about changing second trust regulations, particularly as they apply to individual sellers.
Superficially, it would seem that 1979 was a good year for District broker Combined sales of houses and condominiums totaled 8,879 units, up substantially from 8,139 sales in 1978. Yet, a closer look at the figures indicates a weakness in the marketplace.
To start, sales in the city actually declined. There were 6,319. Many of these sales, however, were condominium conversions that resulted in limited commission opportunities.
Although sales were down in 1979, individual resale prices were up. A survey by George B. Altoft, the District's senior residential assessor, shows that in all but seven of 52 neighborhoods, home prices rose between the fourth quarters of 1978 and 1979.
A major effect of the current economic situation is that District homes are on the market longer. The District multiple listing service reported that in 1978, its first year of operation, it recorded 875 resales and 205 condominium transactions. The average sale took 33 days.
In 1979, 1,018 houses and 224 condos were marketed through the system --but the typical sale required 43 days.
As homes are on the market longer, carrying costs for brokers of advertising, professional time and otherexpenses rise. Offsetting the rising cost of operations has been the increased value per sales. While sales of houses on the city's multiple listing service rose by 15 percent in 1979, the dollar value of the property sold increased by 32 percent.
Brokers in the city can expect operating costs to be disportionately higher through this year, because of the longerselling periods for homes. There should also be fewer sales by many firms, and intense competition for productive agents. Unless the District's second trust regulations are revised, a migration of active brokers and agents to the suburbs can also be expected.