Steadily increasing buyer interest, especially on the part of young persons wanting to become homeowners for the first time at the lowest possible price, has stimulated the market for condominium apartments here.
Although some luxury condo apartments and town houses in this area now cost more than $300,000, the lower prices for smaller condominium units enable buyers who cannot afford expensive condos or single-family houses to become homeowners.
In the past decade, many young buyers have made a one-bedroom apartment their first owned home. Also, some older couples living on fixed incomes have sold larger houses, kept some of the profits as nest eggs and invested in condo apartments.
One result: Owned homes in this area increased from 46 percent of occupied dwellings in 1970 to an estimated 53 percent in 1980. Much of the increase is attributable to more widespread condominium ownership of both new and converted apartments.
Statistics gathered by the Metropolitan Washington Council of Governments show that 84,270 condominium dwellings were counted last year in buildings that were already sold out, then being marketed or planned for sale. That figure is a 21.8 percent increase over the estimated 69,138 condo units counted a year earlier in mid-1979.
In one year, therefore, 15,102 condominium units were added to the housing inventory, with converted rental apartment accounting for 79 percent -- 11,911 units -- of that increase. rAdditionally, W. Bruce Steele, COG's chief of housing programs, said that rental units converted to condominium ownership now account for 57 percent of this area's total condominium inventory. New construction accounts for the other 43 percent.
In looking at these changes in percentage of homeownership and the trend to more condo ownership of rental apartments in the 1970s, it becomes apparent that the construction of increasing numbers of apartments for condominium sale and the widespread conversion of existing rental units to ownership has emerged to satisfy buyer demand for affordable housing.
Even the smallest, lowest-priced detached house is now likely to be priced over $60,000 and range to $150,000 for just a fairly large house in a new suburban location. Thus, the condominium apartment in a range of prices has become what project sales director David Mayhood of Shannon & Luchs calls the "price alternative."
Mayhood and other condominium-selling specialists see the ownership apartment -- whether it be new, a converted rental dwelling or a resale -- as offering a significant choice to buyers in terms of price and location.
"Today's buyer is willing to trade off what is considered a good urban location for less space. I'd say that the new, close-in, one-bedroom apartment with about 650 square feet of living area [with a bedroom 18 by 35 feet, for instance] is the most popular unit with most persons," said Mayhood.
With nine years of condominium selling experience, Mayhood recalled that three years ago a converted rental building with 260 efficiency units was regarded as difficult to market. "So most of those efficiencies were combined to provide large one-bedroom apartments. In today's market, as the result of rising prices and a high level of mortgage rates, efficiencies and small apartments sell well in good locations," he said.
Additional evidence of increased purchaser interest in condominium apartments comes from Housing Data Reports Inc., a Washington firm that gathers and disseminates new housing sale statistics to area builders and developers.
HDR statistics show that 20,311 newly marketed dwellings were sold in this area in 1980. Of that number, 12,336 were single-family houses and 7,975 were new or newly converted condo apartments. That indicates that condo sales accounted for 40 percent of new home sales last year. In 1978, when area new home sales totaled 21,392, there were 14,175 single-family home sales and 7,217 condominium sales. The percentage of condominium sales was 33 percent. The increase in the condominium percentage of the total market was 7 percent in just two years.
Debbie Rosenstein of HDR said that the condominium market is strongest in the District and nearby suburban areas such as Alexandria and Arlington.
Another evidence of the total impact of condominium ownership in this metropolitan area, which now has an estimated 1.1 million occupied dwellings, is that about 8 percent of them are condo units. Only a year ago, that figure was slightly less than 7 percent. In 1970, it was less than 1 percent.
The wave of condominium conversions of older rental dwellings really began in 1972, when the 3,000-unit Fairington complex in Arlington was rehabilitated and sold in seven "village" phases. Many of those dwellings are town houses. By the time the conversion process was completed in 1979, the prices were more than double the initial offering prices, some of which had been as low as $35,000. Since then resales have been strong on appreciation.
Nearby, the 1,800 Parkfairfax rental project was converted and sold out quickly in the late 1970s. Both Parkfairfax and Fairlington were low-rise housing projects built to take care of people who came here to work during World War II.
In the 1970s, when District rent controls and rising costs of operation and utilities caused owners to become disillusioned with their profit margins, large buildings on Connecticut Avenue in the District and in nearby Montgomery County, Arlington and Alexandria locations were sold to redevelopers who handled the conversion, often at a big profit margin.
Investors, who are generally affluent persons interested in tax deductions and long-term appreciation, also form a segment -- estimated to be between 15 and 25 percent of the total -- of condo ownership. In the first two or three years of ownership, most of these investment owners rent our their condo apartments for less than their monthly payments. Thus, they get a tax loss. But, with the average appreciation experienced in the 1970s, owners often found themselves with a profit approaching 100 percent of their original investment if they sold the unit or units after three or four years.
Like the new single-family housing market, the condo market is somewhat depressed by increasing costs and prices and high mortgage rates -- but not dormant. Some of the area's slowest-selling condominiums are those new or converted buildings with price scales that are considered to be too high for the potential market. Some new condo apartments now are being sold in the price range of $130 to $140 per square foot of living area. If the apartment is large (over 1,500 square feet), the price constricts the potential market to a precious few.
"There's no real measure of the untapped demand for condominium housing because its principal obstacle is simply the ability to afford. Today's buyers usually must make that compromise on space to obtain desired location and the individual decision process takes longer," commented David Mayhood.
What's in the future for condominium sales? Even with tenant interest and demonstrated ability in being -- with some professional assistance -- their own redevelopers in conversions to condo or cooperative ownership, it is likely there will continue to be more aging buildings and garden apartment complexes sold and converted to individual ownership. That's because the small apartment will continue to be the least expensive ownership housing available to young, first-time buyers.
Also, more housing developers are likely to build new combinations or garden apartments and town houses on sites where suitable high-density zoning is available.
And what about rental housing? Many potential tenants already have bought condo apartments and more will buy them in the 1980s as they opt for ownership in order to have deductions to lessen their individual income tax liability.
Some older rental housing will be rehabilitated under federal and state financing programs, as is the case with the large Foxchase (formerly the Shirley-Duke) apartments in Alexandria. New rental apartments will be built for moderate-income tenants only if favorable federal financing programs are available. Some of these will have two master bedrooms so the unattached owners can share kitchen, dining and living rooms.