Washington area condominium sales in 2012 improved markedly from 2011, despite remaining lower than 2009 and 2010 levels. Record low interest rates contributed to a rebound in sales, and even more homes may have sold if there were more on the market. Overall, the region saw greater price increases for condos during 2012 than any year since 2005.
Sales of new units increased 27 percent in 2012 as compared with 2011, with 2,046 selling in 2012 after 1,617 sold in 2011. Loudoun and Prince William counties continue to lead the metropolitan area in new condo sales activity, followed closely by Arlington and Alexandria. Montgomery County topped sales activity in suburban Maryland while in the District, the Shaw and Columbia Heights neighborhoods led the way.
The average effective price per square foot for comparable new condos sold in the region rose by 3.7 percent during 2012, compared with the year prior. The increases were not across the board. Prices increased by double digits in the Arlington-Alexandria area, but in Capitol Hill, NoMa, Southwest, Capitol Riverfront and communities east of the Anacostia River, prices fell by 3.2 percent. Resale prices, meanwhile, picked up. As of November, condo resale prices were up 7.9 percent from a year earlier, while single-family resale home prices rose by 9.6 percent during the same time period.
The number of unsold units in projects that are currently being marketed to buyers or under construction (and not yet being marketed) was 2,577 in December, the lowest since at least 2003, when a shortage of units caused the market to heat up. In addition, there are 2,677 units that may go on sale within the next 36 months and about 9,100 units that are in the longer-term pipeline.
About two-thirds of the condos on the market are less than two years old, a stunning turn-around from 2009 when less than 10 percent of the pipeline was comprised of newer units. Approximately 1,148 new units began selling in 2012, an increase of 62 percent from 2011. Out of the total new units entering the market, more than 43 percent have sold, which compares favorably to the 19 percent of new market entrants that sold during 2011.
Construction began on at least 24 condominium projects in 2012 for a total of nearly 800 units, a drop of more than 40 percent from 2011. The reduction was because of several projects that were either delayed or which are slated to be put on the market as apartments. For 2013 we estimate about 1,900 condo units will begin construction, not including conversions. If all of these units actually begin construction, 2013 would be the most active since the boom years of 2005-06. Even at 1,900 starts, the number of units coming on line will probably be insufficient to keep pace with sales, which are expected to be higher in 2013 than they were in 2011-12.
We project prices to continue to increase in the Washington area over the next 18 to 24 months because of the relative lack of units on the market. Sales for 2013 should be in the 2,000-to-2,500-unit range, as long as interest rates remain low and the federal government avoids major cuts in spending.
William Rich is senior vice president at Delta Associates. Staff at Delta Associates contributed to this article. For more information, please visit www.deltaassociates.com.