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    January 18, 2007

    That giant dripping sound…

    Posted by: Chris

    Maxwell …I've been hearing the last year or so was the value of my Washington, D.C., condo drip, drip, dripping away. 

    I remember being excited and worried at the same time when a whole slew of condo buildings replaced dilapidated storefronts and the like along 14th Street, N.W., between my office at 14th & U and my home just a few blocks up the hill.  Excited because the neighborhood was changing so rapidly — already a complete makeover since my arrival in 2001.  Worried because I'd seen something like this in Midtown Atlanta — the queens moved in, renovated home by home, then came the developers, then came the condo buildings, then came the glut and the condo market crash.

    Last week, my condo hit three months on the market — not unheard of these days but not so great, either.  I found some solace from this New York Times article from Tuesday that I'm not the only one caught in the glut. The story reports how even a savvy businessman like David Franco, the respected founder and owner of Universal Gear clothing stores, has been forced by the market to convert a planned condo building a couple of blocks from me from condo to rental apartments:

    Since the middle of 2006, the frenzied condominium market here and in several other big cities like Las Vegas, Miami and Boston has collapsed. Once roaring sales have slowed to a trickle, sparse inventory has mushroomed into a glut and soaring prices have flattened out and started falling. 

    In hopes of salvaging something from their costly plans, hundreds of developers like Mr. Franco are looking to the strong market for apartments, planning to rent their units for at least a couple of years while waiting for today’s condo surplus to shrink. …

    Industry analysts also point out that rents may start sagging if too many condos are converted into apartments too quickly. While rents were rising at a robust 6.1 percent annual pace in the Washington area late last year, according to the Bureau of Labor Statistics, some buildings in the suburbs have recently started promoting move-in specials and other incentives to lure renters.

    My place is in The Maxwell, a Wardman building from 1909 that was largely gutted and redone — preserving a beautiful staircase inside and parquet floors — in 2004. The timing was right for me, when I was ready to quit my 30-minute commute to/from my home in Falls Church, Va. That's what I get, I suppose, from being one of those gays who doesn't start trends but tries to be among the first to follow.



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    1. Tim C on Jan 18, 2007 10:24:05 AM:

      I sort of feel sorry for you, but I'm glad it's happening. Housing prices here in metro DC are too nuts. It's been getting to the point where you had to make $200K a year to buy a one bedroom place. I am hoping the market continues to slump so I can buy something at a price no too unreasonable to replace my Atlanta residence. Many people got into the market 2 or 3 years ago planning on making a big killing at the sale, thinking they were going to get the same kinds of increases they paid to get the place, and now they're starting to come up short. Diane Rehm had several realtors on her show a couple of months ago and they were all predicting a continuing slide of the market, with some neighborhood losing up to 20% of their value in the next two years. Assessments in Arlington this year of single family homes are up only 1.5% , while condos are down 5%. Single family houses are now staying on the market for a month or more and the stock of houses for sale is climbing. According to the realtors, there is a disconnect between buyers and sellers. Sellers are not budging on price, thinking they'll somehow get the big gains the previous owner got from them, while buyers are playing a waiting game.

    1. raj on Jan 18, 2007 10:57:30 AM:

      Let's understand something. Your condo was over-priced by your REAL ESTATE AGENTS in their offering memoranda. If you are in a hurry to sell, tell them to price it lower. If you aren't in a hurry to sell, hold onto it, and pay the real estate taxes.

      That's Econ 101. Not really. There's always a buyer at the right time, at the right price, and assuming that the price is right withing your sales time window, it would sell. That's Conservative 101.

    1. Alan on Jan 18, 2007 1:09:14 PM:

      Ah - the downside of free market economics.

      When I moved into my house in the exurbs here in Southern Florida there was only one other development. We paid $110,000 for it 19 years ago. In the past 2 years its assessed value increased by 50% and the 7% more and is now up to $240,000. Which is still cheap for the market because the 20 plus new developments being built within 6 miles all start at $300K-$350K for the cheapest - and people wait in line overnight to buy in developments that sell out in a half-hour because other developments start from $600K to $1.6 Million.

      If it weren't for the legal cap on raising property taxes I would have been forced out of here because I could not afford the taxation on the full assessed value.

    1. jimbo on Jan 18, 2007 2:42:39 PM:

      I don't think the market has "collapsed" - I think it has normalized to more reasonable prices and a realistic situation. I just never thought DC was a good enough buy to pay those prices, as even now the crime in some neighborhoods hasn't really gone away. Anyhow, as a long-time DC citizen who's always had a middle-income paycheck, I'm comforted by the fact that my own place may finally been within reach. For too many years it was just "too bad, so sad" for those of us who earned less than $60K/year and wanted to buy a home.

      But I'm still not ready for the commitment just yet.

    1. Kevin on Jan 18, 2007 11:09:46 PM:

      It has me a little nervous too, but I think the story-behind-the-story in the NY Times article is that too many people (and/or their agents) have put their condos on the market for prices that are so ridiculous that the market is pushing back very hard. There is a percentage of the buyers who can't afford not to overprice it because they are overextended with debt, and are leaving it on the market, holding the line on the price in a state of denial. Another percentage are sort of pussies who are letting their agents push them around (there is also a glut of real estate agents on the market - many of whom are also overextended, and are grasping for the biggest commissions they can muster, also in a state of denial). Then there are a percentage of unfortunate people who are trying to sell in second or third tier neighborhoods, when this is a buyer's market, and buyers are in no mood to take risks. What's left, I think, are a combination of people with either bad luck, bad agents, bad sales strategies, and the truly unfortunate for whom the market is truly hurting. The rest, well, they are selling their condos.

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