DC Real Estate Eludes the Recession

by James & Miel on September 24, 2009 · 0 comments

With the recession a full year underway, how is it that places like DC can remain largely untouched?

The scene here in terms of real estate feels a bit surreal. DC homes for sale are simply off the hook.

Back several months ago we happened upon a couple of open houses one weekend and we were a bit surprised to see that prices really didn’t seem to have gone down, in fact overall they may have gone up. Real estate agents that we chatted with mentioned the multiple bids that were dominating the real estate market in DC. I took some stock in all of this, but I was still largely skeptical.

Now several months later my observations of the real estate market continue to confound me. To speak in practicalities, I’ll give a few examples:

First I have a colleague who is purchasing a first home with her husband and quickly figured out that they had to be ready to pounce, as they were out bid or maneuvered on the first three or four bids they put in on places. By the time they made an offer on the place that they are closing on next week, she wasn’t willing to get too attached to the place in case things didn’t pan out.

My second example is another colleague who is purchasing a first home with her husband and they are looking for a foreclosed place to get something within their range. They have toured many houses in DC and have seen the horrors of everything from what can go badly with inexperienced flipping of houses to foreclosures gone wrong as the tenant leaves a parting gift of flooding an entire floor to show their resentment.

Lastly we have a good friend who is finally ready to buy a place on her own and she still can’t find what she wants within her price range. Thus the search continues in hopes of finding something right out there.

This weekend we went around on open houses to five places (some with multiple listings) in the Dupont area of DC, so all are in a good location. To paint a clear picture of what was seen, here we have the stats:

  • $450k – 1 bedroom basement apartment (low light, not renovated, bad layout – what is going is on here people?)
  • $500k – 2 bedroom (this is really a master suite, as the second bedroom couldn’t actually fit a bed into it), completely dark, must enter from an alleyway.
  • Townhouse renovated into four larger apartments (nicely done in many ways but huge wasted space and odd layouts for with functionality). For two bedrooms, prices ranged between $784k and $848k with condo fees between $336 and $423. This makes the building, quite ugly from the outside, worth $3.1 Million.
  • Townhouse renovated into four apartments (gorgeous in every way). Prices ranged from $600k for the basement to $1.5 Million for the two level penthouse that was custom made by the owner. This makes the entire townhouse, pictured above, worth over $3.3 Million!
  • Another was a townhouse broken into three apartments, but sold as a multi-unit building rather than as individual condos. This was by far and away the most reasonable at $1.3 Million for the 3.5 story plus basement. Part of the “bargain” here was that it wasn’t entirely renovated, but still in good shape.

I imagine most readers will read those numbers and wonder if there is something wrong with this picture. We’d certainly have to agree. Looking further at a quick listing search last night we had our suspicions further confirmed that real estate prices are still crazy in this town. It’s tough to find a good deal and save money when trying to buy a house in this area.

One change with the recession is that on the townhouse pictured above. While it went on the market on Wednesday of last week and had all but the basement sold by Thursday, they accepted five offers for each place but did not accept escalation clauses. I think this was really wise and reasonable for the agent, as while there might have been great demand for the units, it would be unrealistic to price things at higher than the already outrageous costs.

So what is happening with DC? There are a couple of things.

1) Unemployment is still relatively low for the country, with many having more safe and secure jobs such as the good ol’ gov.

2) Space is limited - the District simply has finite space when it comes to all of the advantages of living within the diamond.

3) Quality and luxury can also often be the case. Townhouses such as those that we were looking at have longevity and aren’t the same as new build construction. They’ve also been done, like the last example, to impeccable standards. This obviously drives the price further up.

Readers: We’d love to hear how things are in your area. If you have any info on your local markets and how they compare, we would love to hear.

Best,

Miel



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