Perfect Storm: DC Home Prices Heading for a Surge?

The secret is out. Washington, DC is a great city. Great history, great jobs, great communities, and great nightlife. It is also known that all of those great things come at a cost, which means gaining ready access and having D.C. at your doorstep takes more than a bit of financial sacrifice.

Well, there could be a perfect storm brewing that may take the already (seemingly) outlandish cost of homes and rent to new heights. We are on the cusp of one of the most significant demographic shifts our country has ever seen. Baby Boomers, all 77 million of them, will be retiring/becoming empty nesters over the course of the next 20 years. And according to the Brookings Institute, the majority of these 77 million strong want to leave the suburban outskirts for a life of greater walkability and urban access. This is putting increasing pressure on the housing inventory of places like,  you guessed it, our beloved Washington, DC.

Walkable City - Jeff SpeckBut that is not the perfect storm. Yet another generation also has simplicity and walkability as a high priority. Millennials, “the biggest population bubble in 50 years.” (Jeff Speck: Walkable City: How Downtown Can Save America One Step at a Time). Millennials are becoming a more and more substantial presence in the workforce, and as the above referenced Jeff Speck writes in his book, Walkable City, this generation has grown up in an era where the small screen has left the suburbs and most of what we watch is based in the city. And these are not the crime ridden representations of a couple decades ago, but socially rich, coffee shop laden cities where there is always something to do and someone to see.

There is much more to why boomers and millennials are descending on our nations cities in droves, but my point here is less about the motive, and more about the impact. You have the two largest population sets in the country, and they have the same goal, city life. Or better put, urban life, and Washington, DC is on their list of desirable locations. So, people ask me how it is that housing prices in D.C. can still be going up so fast, and whether this is all sustainable.

The short answer is that, if this data is correct it is possible we are only seeing the tip of the iceburg in the cost of housing, and that this trend could well be sustainable for the next 20 years or more. If you look at the numbers the only way to ease the tension is build more product. With the pullback in new construction after the “great recession” developers are behind the curve on that front. It only takes a little driving around D.C. to see that development is back, and seems to be at a fever pitch. However, delivering new units takes time, and demand is proving to be so high (and growing) that there is little chance developers will keep up. Nor do they likely want to.

It is likely that no mater how many new units come to market, there will be thousands of would be buyers who would love to live in D.C. if only they could afford it. This number is going to be constantly fed over the coming decades. So, it is supply and demand and demand is going to have the heavy hand.

What if interest rates skyrocket you say? What do people do if they can’t (or don’t want to) buy a home? They rent. What do investors do if there are a lot of people who need to rent? Buy. If interest rates are high for those investors they will just charge a higher rent. So, no matter how you look at if, if supply cannot keep up with demand, cost of housing is going to rise.

NOTE: Jeff Speck is an city planner and architectural designer who lives in Washington, DC, so his book, Walkable City makes several D.C. specific illustrations to make his points. A great read for any D.C. resident.

Georgetown Real Estate Mixed Through The Spring – 2012

The Georgetown real estate market is looking relatively steady through the spring of 2012, but there may be some downward undertones.

Average prices for all home categories have been consistent for the last 2 years, the occasional spike in single family detached home prices not withstanding. The last few months do seem to show a slight downward trend, and all categories are down substantially from April of 2011. However, the ebb and flow of the last 2 years tells me there is little justification for alarm bells.

Overall market activity is stable, with consistent spread between the number of active listings and the number of listings under contract. Though there is some increased separation in April, there is nothing dramatic to note.

Of the 3 charts in this post this is the only one that might be somewhat alarming, especially if we look at just the single family detached homes. Days on market for detached, single family homes in Georgetown and Burleith (ie. 20007) are up nearly 400% since January. Contrary to the previous, stable charts, this is a dramatic change indeed. With 38 single family homes on the market as of the end of April this is a stat that could drive down prices, which might have a ripple effect down through row-homes and condos as well.

To be clear, this is not meant to be a doom and gloom message, and if we dug deeper there may be a clear explanation. However, it is the first consistent multiple month trend upward along this chart over the last couple years, so it is a point of interest.

Housing Market in Logan Circle, 20005, Remains Tight

With a quick look at the housing market activity in Logan Circle and Thomas Circle we can see that things have been tight for quite a few months, with active listings remaining near, or even below the number of pending sales. Generally this creates seller’s market behavior where you can expect fast sales and multiple offers for many homes.


A condo heavy market place, Logan and Thomas Circles are almost always in high demand with buyers looking for access to all that Washington, DC has to offer. In this next chart we can see more clearly that the competition continues to heat up as we see days on market continue to trend downward.

Like many areas in, and outside of the District, buyers will need to understand that they are not operating in a market that is going to bend to their will. It’s competitive out there, and most successful transactions are requiring aggressive action, both with the time one takes to make a decision, and in the offer they bring to the table.

Home Remodeling at Post Recession High… And That Means??

According to HousingWire, (via BuildFax), Home remodeling has been at a post recession high for the last few months. However, they touch mostly on the facts regarding that reality, and avoid the implications and interpretations of that fact.

Paint RollerSo, what does an increased occurrence of home remodeling tell us? How is this for definitive? Not any one particular thing. An increase in home remodeling speaks to several different factors and indicators.

  1. People have more disposable income and are putting that toward projects around the home. Simply an economic indicator that times are improving and people are feeling more confident and secure in their financial position.
  2. Home owners are preparing to list and sell their property. It is always true, but in our recent experience it is especially true today that more and more buyers want a turnkey transaction rather than a place with “potential”. A dated bathroom, or an non-remodeled kitchen quickly makes a buyer’s list of discounts, so it can be valuable to make these changes before listing a property. If done wisely this work can often pay itself back in the sale, and it also give the home a much better chance of selling quickly.
  3. Home owners are planning to stay put rather than sell and move up. Many home owners who had planned to own the home they were in until they outgrew it or could afford more are now laying down roots and adjusting their existing home to meet their needs. Be it basic remodeling or gut renovations with additions home ownership has migrated back to a long term play for many. Though, in some cases people find that it is more cost effective to sell and buy the house that works for them, it all depends on the nature of the existing property and the challenges it presents.
  4. Spring came early. It is important to remember that 2012 has not been your typical year. Personally, I had to mow my grass for the first time in February, and I was dodging daffodils to do it. It is quite possible that we will find out that, quite simply, more people did projects now instead of later because the weather was nice.

The answer to the overall question of why home renovations projects are on the rise will be different depending on location and home owner circumstances, but at the very least I felt compelled to add some context to the basic facts.

Columbia Heights and Mount Pleasant: Real Estate Rollercoaster?

Just one look at this first chart showing the average sales prices in Columbia Heights and Mount Pleasant over the last two years might possibly make you a little nauseous.

Taken at face value this data seems nothing short of erratic and unpredictable, which, in someways is an accurate perspective. One thing you can’t do, is take this chart at face value. For instance, look at rowhomes in February 2011 compared to February 2012 (if you role your mouse over the dot it will bring up the average price for that month). If you take this at face value the the price of row homes in Columbia Heights and Mount Pleasant are up by an average of $190,000 year on year. I can tell you with great certainty that this is not the case.

So why all the crazy data? In short, the Washington, DC real estate market is not easily pinned down by simple property categories. In the suburbs you have nice tidy developments of similar homes, built at the same time, and with similar features. In DC however, you have various home types, sizes, and layouts, built over 100 years ago, that have undergone various forms of renovations and updates over the decades.

My point? A broad look at the sales data, such as this, allows all the above mentioned variables to have a significant impact on the numbers. It’s not that row homes went up in value by $190k in 12 months, its that in February of 2012 there was likely an increase in the number of larger, renovated row homes that sold compared to February 2011. So, that chart above is not so much a roller coaster of actual price fluctuations, but an indicator of timing that certain inventory hit the market and sold.

Confused? Perfect. The reality is, if you want to know what YOUR home is worth in Columbia Heights or Mount Pleasant you will have have to get one on one with someone who can take an honest look at the directly comparable sales with you.

That said, I do offer this anecdote for how the area is fairing overall as we enter into the spring market. In this chart below you can see that in all three major price brackets for these two neighborhoods sales increased significantly over January. Don’t get too excited, we are still only talking about single digit figures for each category, but the trajectory is good.

How Does Days on Market Impact Home Prices In Arlington?

I have a theory that is relatively complicated to prove. In that theory, the best time to sell a home in Arlington (or anywhere for that matter) in order to get the highest possible value is within the first 10-14 days on the market. With the data tools I have access to I cannot concisely prove this theory. I can infer it, but once you bring in varying data sets for “days on market” the overall picture becomes muddied. Higher value homes tend to sit on the market longer, thus driving up the average price for any given longer range data set. Point is, unpacking that theory and proving it would be a thesis, not a blog post.

Regardless, I believe it to be true, and I believe so not only because of the data, but because of behavioral realities in the market as well. In general, when an owner first lists a property they gain an audience of everyone looking within the price range they have chosen. If that crowd of buyers (of which there is currently a back log) agrees that the owner’s home is priced correctly, the owner is likely to garner a quick response, and quite possibly from more than one of those waiting buyers. There is a sense of urgency, and potentially a sense of competition.

If that same crowd of buyers disagrees with your price, they are likely to baulk. And right now (March 2012) buyers are still very hesitant to feel they may be over-paying, and even the most slim of margins between perception and an owners price can leave that owner in the cold. After that initial offering produces no response from buyers the owner is left with two options; wait for a new buyer to come along who may feel that the home is worth the price, OR lower the price. Or put it this way: wait for serendipity, or price to the readily available, willing and able buyers who are out there swarming.

Often what happens is a home’s price is adjusted too slowly. Eventually a buyer comes forth, but they see the home has been on the market for a while, so they don’t offer full price. Essentially the home becomes, in the mind of the buyer, an opportunity for a deal. “I’ll take it if I can get it for ‘x’.”

In many cases home owners are uncomfortable with this theory because there is the sense that if they sell the home in the first week they must have been priced too low, and thus they would leave money on the table. There are certainly grey areas in this theory as we go up the pricing ranks, but even in the high value real estate market there is a clear correlation between days on market, and percentage of asking price obtained. See the charts below… and notice the corresponding peaks and dips between the two.


My personal take away is that, as with anything in real estate, there are no absolutes. I am confident that my theory stands strong in Arlington for the $500 – $700k price ranges. Get from $700k – $900k and it is still notable. Over $900k and we just need to be conscious of where an acceptable number of days on market lies. For instance, as we can see in the charts above, for the $1,000,000 – $2,500,000 price range in Arlington 40-80 days on market seems to be the sweet spot.

DC’s Southwest Waterfront: A Before And After

Approximately one year from now (Q1 2013), a massive change will begin unfolding at the Southwest Waterfront of DC. PN Hoffman and Madison Marquette have obtained approval for phase 1 of The Warf: Southwest Waterfront project which will break ground early next year. If  you have not seen the plans for The Warf I certainly recommend doing so, it is going to be quite an undertaking that will truly transform DC, and reunite the city with the waters of the Anacostia.

So, with such a dramatic overhaul on the horizon I wanted to document where the Southwest Waterfront is now as a benchmark for better understanding the value added in the future. My apologies if the title of this post is misleading, but let’s have a look at things as they stand now, “Before”. And maybe a few years from now we can come back for the “After”. How’s that for a long-term blog series?


Currently a condo heavy market, this will remain true after the Southwest Waterfront renewal is complete. Most of the residential plans incorporate condos and apartments.


Look for the areas of development around National’s Park to both benefit from, and feed demand at The Warf. Listings in the Southwest Waterfront are already touting the future development as a benefit to buying in the surrounding areas now.


Though demand has been softer than in other areas of DC, it has been consistent, with days on market hovering just below the 100 day mark for condos, and Row-homes are being scooped up relatively quickly. Demand for row-homes is of little surprise since there is such a small selection compared to the condo market.

Predicting what will happen with existing inventory when a major development occurs is always a difficult proposition. Will the new community and new inventory hitting the market create a boon for existing developments, or overshadow it as buyers are only willing to consider the hot new thing, and reject mere proximity to the hot new thing? Only time will tell, but there is reason for hope in that the area around Nationals Park is just far enough away that existing neighborhoods will be there to bridge the gap between the two. For me the question is more “how much will existing values go up” rather than “if” they will.

The Fannie – Freddie Conundrum: Ramping up While Winding Down

[Warning: I am not an expert on the maters that are going to arise in this post, thus it will be light on personal opinion]

You can’t miss the news surrounding Fannie Mae and Freddie Mac lately. Every day this week the two government backed agencies made headlines in the Washington Post, and did so nearly as much in The Wall Street Journal and the New York Times as well. The topics of that coverage were many, everything from conflict of interest, to government waste, to the future of the organizations. Today I only want to touch on the last one; the simultaneous efforts to leverage Fannie Mae and Freddie Mac to keep the housing market afloat, and to wind down the organizations completely in favor of a new government solution or to be replaced organically by the private market.

There is an obvious dilemma here, and it’s not one that is going to be easy to navigate. There are still far more questions than answers. Or should I say, there are far too many answers to each question?

Should we keep Fannie and Freddie?

  • what role would they play long term?
  • how do we scale back after the epic involvement in the housing market they are currently undertaking?
  • who will oversee them?
  • how do we prevent them from fanning the flame of another similar crisis to the one we are overcoming now?
  • etc…

Should we dissolve Fannie and Freddie?

  • who will pick up the slack?
  • will mortgages become prohibitively expensive?
  • what will happen to current home values?
  • won’t this, in itself, create another housing crisis?
  • when do we do it? Currently they ARE the solution for keeping the mortgage market alive.
  • etc…

Here is my solitary opinion on the matter, and the primary point for writing this brief post: Don’t expect that anything definitive will happen anytime soon. It is far too complicated, and there is far too much at stake, both economically and politically. Neither political party wants to have the next housing crisis pinned to their back, so both parties will tread carefully, and both will look to position themselves so the other can be blamed for any negative outcome, while also trying to be able to take the credit for a positive one.

Interested in seeing the news I’m referring to above? Here is a link to the Washington Post articles related to the topic.

The Capitol Hill Conundrum: Housing Inventory is WAY Down, So Why Aren’t Prices Rising?

As we have covered real estate data for neighborhoods throughout Washington, DC and Northern Virginia lately, things have been lining up pretty well. If inventory has been down, prices have generally been steady or rising. However, in most cases, along with a reduced inventory there has been a consistent, or even reduced averaged days on market for that time frame. We are talking about simple supply and demand. Supply was dropping and demand was staying the same or increasing, so prices were on the rise.

In steps Capitol Hill and the somewhat inconsistent data that comes with it, which I will unpack below. Please note; the term “Capitol Hill” is used in quite liberal terms here. The data below is for the 20002 and 20003 zip codes:

Looking at this chart one would think that Capitol Hill has landed squarely in seller’s market territory. Over the last two years inventory has steadily declined. If we were to pull in the data all the way back to 2007 we would see that the inventory of available homes in Capitol Hill is currently at it’s lowest level in 5 years.

So if inventory is steadily decreasing, prices should be steadily increasing, right? Not necessarily. We can see that average home prices in Capitol Hill have fluctuated during this time. Often this has more to do with what homes have sold versus any fluctuation in actual value for individual properties. ie, in the peak months we would likely find that more renovated row homes sold during that time, some of which were likely 3 bedrooms rather than the very common (for Capitol Hill) 2 bedroom variety.

The answer to why prices have not gone up in reaction to low inventory lies in this chart, at least at some level. While inventory plummeted, days on market actually took a sharp turn upwards. In other words demand has reduced as much as, or more than the inventory of available homes.


One very important thing to understand is that this data covers 20002 and 20003, and though these include areas around Capitol Hill, they cover broad range of neighborhoods, including many that are still considered “transitioning”. Though the market has been performing relatively well, buyers are still not willing to push though any sense that they may be overpaying. In my quick glance through the inventory in 20002 and 20003 it seems to me that the homes that are updated and priced well are still selling quickly. However, it seems that there may be a steady stream of homes that are pushing the boundaries of what buyers are willing to consider when it comes to price.

In my opinion this pricing discrepancy is likely the greatest cause of the increased time on market. Ironically, this attempt to push the market is possibly having the reverse effect, as the data shows that prices have actually dipped of late.

That is just a partial hypothesis. There is always more than one or two dynamics at play, I just happen to think that sellers asking a bit too much too soon is one of the factors playing a role in this set of data.

View/Download a detailed report for 20002:




View/Download a detailed report for 20003:



VIDEO: Washington, DC Real Estate Remains Strong In January

The real estate data for January 2012 is now in, and Washington, DC is showing new signs of strength in the real estate market.

In the video below we’ll take a hands on look at a significant improvement in average prices compared to January’s past. The charts we will see take a broad look at the DC market, but I think they tell and interesting and important story.

For a better look at the charts I have included them below: