The question pops up all the time, just like the high-end condos that keep popping up near Metro stations across the Washington area: Who's buying all these expensive apartments?
Ballston resident Sonia Schmitt thinks she knows. A World Bank employee who has moved up to ever-bigger condos five times in the past nine years, Schmitt says it's a combination of buyer types.
She sees mid-thirties singles trading up from smaller condos and empty-nesters downsizing from bigger homes -- or even smallish homes that have appreciated so much that they can afford a $400,000-plus condo. More frequently, as prices jump ever higher, she sees buyer couples -- either married, cohabitating, same-sex or just acquaintances who are partnering simply to "get in the home-buying game." Most of them, she says, already live in the Washington area.
What they share, though, she says, is a desire to live where you can get it all -- fun restaurants, fun shopping, cool movies and other entertainment -- and where you can get it right next to a subway stop, connecting you to everything else.
"They just like the lifestyle of a condo. They're not interested in maintaining a house or mowing a lawn," said Schmitt, an animated 37-year-old. "I grew up living in houses and townhouses and I couldn't wait until I didn't have to."
Schmitt substantiates her theory simply by looking at her neighbors at the Berkeley at Ballston, an upscale building that opened this spring near the Ballston Metro stop. She moved there in June, two years after signing a contract. Across the hall is an older power couple with another home in New York. A few doors down is 26-year-old Suriyun Whitehead, a Boeing software engineer who bought two condos in 2002 -- an existing one he decided he could rent out to cover that mortgage and the $330,000 Berkeley unit he bought during preconstruction and moved into in June. He got down payment help from his parents. Elsewhere in the 80-unit building, Schmitt can count at least three mid-thirties executives, all single.
Schmitt also goes to every preview party and building opening she can find, giving her more perspective.
The most recent condo preview Schmitt attended, which the developer said drew almost 4,000 people in the pouring rain, convinced her she should jump into the market again. You could get an appointment to buy only if you attended the party, she said.
She put in a contract on a $600,000 unit at the Clarendon1021, a planned building near the Clarendon Metro station.
That's really just anecdotal data. But builders and developers say Schmitt has nailed the demographics.
Andrew A. Viola, vice president and Washington area regional manager of the Bush Cos., said soaring prices have changed the area's urban condo-buyer profile in only a few years.
Buyers generally stopped thinking of condos as homely animals at some point in the late 1990s, but over the past few years, as single-family and townhouse prices have soared, condo prices have reached a new plateau, Viola said. Luxury units with luxury prices have abounded, meaning buyers need more income or more creative financing. And as the overall housing market has tightened, reports of potential buyers lining up or camping out for any kind of housing have raised shoppers' willingness to pay more. When Bush Cos. opened its first area condo project in Ballston, the Windsor Plaza, in 1994 and 1995, the response was "90 percent singles," Viola said. Most were 35 to 45 years old, and earned from $35,000 to $90,000 a year.
At the company's newest projects, such as the Residences at Station Square in Clarendon and the 2020 Lofts at 12th and U streets in the District, buyers are "65 percent singles, and now 80 percent of them earn in excess of $80,000 a year," Viola said.
"A lot earn over a hundred thousand, and the age is a little younger than before, between 28 and 35," he added.
Clarendon1021's reservation list is drawing similar people, said David W. Faeder, managing partner of Fountain Square Properties, which is developing that project along with the Carlyle Group and Walnut Street Development.
About a quarter of those expressing interest in Clarendon1021 already own townhouses or single-family homes, another quarter are first-time home buyers and about 15 to 20 percent are renters, Faeder said. The rest either own a condo elsewhere or did not disclose information. Two hundred of the building's 415 units have sold since Sept. 17.
There is another big group that sometimes gets overlooked -- investors. According to a recent study by research firm Delta Associates, "investors represent 30 to 35 percent of the condo market" in the Washington area, chief executive Gregory H. Leisch said. That's higher than in all other condo markets in the nation except South Florida, Leisch said.
Investors represent about 25 percent of condo sales in San Francisco and New York and about 20 percent in Chicago, he said.
Leisch said two-thirds of Washington investors are in it for "the short term," to "flip" or assign the contract to another buyer before they sign, or to resell the unit soon after settlement, which is about 18 months after the original contract. Both maneuvers would let the original buyer get in on the huge price gains condos are showing, gains that can start when the building has been on the market for only a few weeks.
The other third of Washington investors, Leisch said, are in it for the longer term, "they're buying it for rental income . . . and may actually intend to move into the unit someday."
The potential for profit is what drew real estate agent Steve So of New Star Realty & Investment and his client to a three-day open house last week for the Monroe at Virginia Square Metro.
The nine-story, 79-unit building is selling from the $500,000s to $1.2 million for units ranging from 785 square feet to 1,890 square feet. It won't open until early 2006, so the preview event was held in a sales office down the street. The office has a luxe model kitchen and bath to entice potential buyers.
Real estate agent So works in the Fairfax office of New Star, which calls itself the biggest Korean American real estate company in the United States. He said his client was looking to buy both as a homeowner and as an investor, planning to stay nine months to a year. The reason for the short stay, he said, was obvious: the expected return.
Most people looking these days, he said, are investors.
Leisch's most recent data show condo prices areawide rising 23 percent during the first nine months of 2004, compared with a 21 percent increase posted for all of 2003. Prices of single-family houses were up 19 percent in the first nine months of 2004, compared with 13.6 percent over the same period in 2003.
Condo units in the close-in suburbs are showing the biggest growth, said Leisch, with median prices up 24 percent so far this year. Prices of D.C. condos are up 21 percent.
Nationally, sales of existing condos and co-ops set a record in the second quarter of 2004, according to the National Association of Realtors. And median prices nationally were 12 percent higher than the same quarter the year before.
The expectation that condos will keep jumping by astounding numbers has driven the market here to an unheard-of pace, said the experts, but Leisch and others caution that the future can't sustain such numbers.
Not only will climbing interest rates soften investor interest, Leisch predicted , but so will limits being put on investors in sales contracts. And the number of condo units in the development and construction pipeline has doubled in just a year, he said, "raising the question, 'Can the market absorb what's in the pipeline and continue to grow like it has?' "
Delta counts 29,700 condo units in the pipeline for the next 36 months, compared with 13,700 a year ago.
Leisch, however, said he sees no need to panic. His third-quarter report, to be released Monday, cites a finding by the George Mason University Center for Regional Analysis that "demand for housing units in the Washington area is expected to outstrip supply by 20,000 units through the end of the decade. "
George Mason's local economy expert Stephen S. Fuller has no doubt that demand will stay strong because of the region's unparalleled current and projected job growth and the area's land-use constraints. The center recently updated projections for how much more housing will be needed by 2025 than will be built. The housing deficit is expected to be 280,000 units by 2025.
"We will need at least 40,000 units of housing a year to accommodate the growth that we're seeing, and in our best year, we got only about 35,000 new units. We're doing about 27,000 [units] this year," Fuller said.
Fuller doesn't track condos, so he couldn't comment on how that market will grow. But "condos definitely have their own market now," he said. "Where it used to be the third choice, after single-family homes and townhouses, and where it used to pick up or slack off because of interest rates or the strength of the economy, that market now is being driven by other factors."
Downsizing baby boomers and their more financially secure children, the echo-boomers, are turning to the new vibrant life in urban centers, he said.
"They want to be where the action is, where the nightlife is," said Robb A. Cohen of Be Home Wise Inc. in McLean, a company that does research on home buyers for national and local builders.
"One group that's definitely not buying [condos] is families," said Coldwell Banker Residential Brokerage agent Rick Bosl, who runs a Web site for the condo set, Arlingtoncondo.com. "I get a mix of buyers -- some who are just out of college and get some money from their parents; others who want to move up, more established buyers. A big demographic change is that there's a lot of empty-nesters, whose kids are gone and they don't want the upkeep. They want to be close in, to just get up and go."
Both the investment potential and the lifestyle keep Ballston resident Schmitt in condos.
She says that at her building, the Berkeley, about 20 of the 80 units "flipped" within the first three months because prices jumped so much. She anticipates more flips at the end of the first year and again after the second year, when tax laws allow owner-residents to take their profit without paying capital gains tax.
Schmitt, who is now an expert at trading up, lives in her units for two years, "playing the tax game."
Schmitt's neighbor, Whitehead, was planning to join her in moving to her newest building. He said friends frequently go to preview parties together "and we tend to buy together." This condo culture, he said, has decided that the units "are not just good homes but good opportunities, good investment vehicles."
But Whitehead is souring a little on the new condo market as prices climb. Sometimes preview parties can turn into "feeding frenzies," he said.
"You may have seen the floor plans at the party, and that's it. So when you go to the appointment, it's only the second time you've seen the plans and you have to make a decision on the spot," he said. "It's kind of like eBay. . . . You get fixated on buying something and if you sat back and thought about it, you may not be so impulsive."
Whitehead said he has decided not to go through with a contract at the Clarendon1021 because "on reflection, I decided the price was just too high" and that in the future renting it out would be too hard.
Now, he said, he will expand his search to renovations or older buildings. New buildings, he said, "aren't being priced for single people anymore."
Schmitt, however, is rolling ahead.
Not even her boyfriend's recent purchase of a house could persuade her to switch, she said. When he asked her to settle down in a house in McLean, she told him, "if that's the case, then I'm not going to get married."
The boyfriend has come around, she said, as he's run into issues such as finding a landscaper and a company to maintain his pool. "He's started complaining" about how the house is taking time away from his career, she said.
"He's had it for five months and he hasn't even moved in yet."