Hill Slowinski • Real Estate: Blog: District of Columbia

(Reprinted from The KCM Blog, October 2011.  Disclaimer: This blog covers the national housing market as a whole. Please check with a local real estate professional to discover how the following information will impact your region. – The KCM Crew.)

Hill's Comment:  While the recent S&P/Case-Shiller Index data reflect an overall slight increase in Washington area house prices, this goes against the nationwide trends, in which residential real estate prices dropped more than forecast in the year ended September.  Prices rose and sales volume is highest in price ranges that meet the broadest market, the lower ranges.  Upper bracket properties prices are not increasing.  There are far fewer qualified buyers for higher priced inventory, and these homes are in fact attractive because buyers are getting great value for much lower cost (i.e., more house for their money).  Prices offered are declining or these homes are lanquishing on the market.  Many experts believe pressure inevitably will continue to mount and will drive all home prices lower in the Washigton market in the future.

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Many sellers want to wait until the spring before putting their home on (or back on) the market. This might be for any of several reasons:

• They don’t want to be inconvenienced during the holiday season.
• They believe that they will see more potential buyers and as a result will get a higher price.
• In the northern part of the country, they might not want people walking through the snow and then into their house.
• All of the above

In a normal real estate market, this may make sense. However, this market has been anything but normal. This spring will also see some abnormalities. The biggest difference will be the direction prices will take.

In years past, the spring market would favor the seller because increased demand would outpace any increase in supply: the number of houses coming onto the market would not be as great as the number of buyers newly entering the market. In most situations, when demand is greater than supply, prices increase.

The reason this spring will be different is that the supply of homes coming to the market will be dramatically impacted by foreclosure properties being released by the banks. Many believe this increase in inventory will far outweigh buyer demand. In situations where supply is greater than demand, prices decrease.

Will This Actually Happen?
RealtyTrac, in their latest foreclosure report, explained:

U.S. foreclosure activity has been mired down  since October of last year, when the robo-signing controversy sparked a flurry  of investigations into lender foreclosure procedures and paperwork. While foreclosure activity in  September and the third quarter continued to register well below levels from a  year ago, there is evidence that this temporary downward trend is about to  change direction, with foreclosure activity slowly beginning to ramp back up.

This will impact prices.

What Do Experts Believe the Impact Will Be?
Here are the pricing projections by several major entities:

• Zillow believes we will not see a bottom in prices until the first quarter of 2012.
• Standard & Poors thinks prices will drop %5 in the next few months.
• JP Morgan Chase believes prices will depreciate 6 to 7% over the next six months.
•  Barclays says prices will fall 7% by the end of the first quarter of 2012.

Bottom Line
You may pay a hefty price for the convenience of not having your property on the market right now.

3800 Fulton Street, NW, Washington, DC  20007

MLS #DC7690818, Offered for $1,150,000

This sun-filled 1920s Federal semi-detached home has been thoughtfully updated throughout.  The complete renovation, including new windows and systems, retains many of the original architectural details with a handsome contemporary flair.  There are three bedrooms, a sitting room or den, two new full and one half bathrooms, living room, dining room, foyer, central hall, abundant closet space, chef’s kitchen, and pantry. 

The home has a graceful wrap-around tiled front and side porch, which has French doors opening to it from the living room.  The tiered rear deck overlooks a large open lawn area in the back yard.  The main level rooms include such details as crown moldings, hardwood floors, paneled and true-light glass doors, a chef's kitchen with Sub-Zero refrigerator /freezer, Sub-Zero wine cooler, Wolf gas range and oven, Meile dishwasher, and custom glassed cabinetry in the kitchen and pantry.

The second floor bedrooms have many custom built-in closets, shelves, and storage units.  The bedrooms and sitting area have eastern and southern exposures.  The contemporary bathrooms include marble tiled walls and floors, European-styled vanities and fixtures.  The large master bath features a glassed shower.

The lower level includes a huge open basement with ample space, the laundry area with newer Whirlpool washer and dryer, and a garden supplies storage area.  There is street parking and driveway space, including a one-car garage.

The home is convenient to shopping, dining, the National Cathedral, public transportation, Georgetown, and access to downtown via Massachusetts Avenue.

For more listing information, CLICK HERE, ir Contact Hill Slowinski.

$625,000 To Be Maximum Loan Amount in Much of DC Area

More buyers in high-cost areas may be motivated to purchase a home before an Oct. 1 deadline when the government plans to scale back the size of “jumbo” mortgages it guarantees in much of our real estate markets.

By Oct. 1, the maximum loan amount that Fannie Mae and Freddie Mac is set to decrease from $729,750 to $625,500.  Buyers should have ratified contracts by August 31 in order to settle by the end of September or sooner if possible.  (The change could occur before October 1.).

This might make mortgages more expensive or more difficult to get for buyers in higher cost areas such as ours.  For example, after Oct. 1, a borrower who seeks a government-backed mortgage for a $1 million property may have to come up with a $375,000 down payment instead of $270,000.

Once the current jumbo loan limit expires, lenders who want to make loans over $625,500 will have to either hold onto the mortgage themselves or find a private investor to purchase it.

Third Quarter 2010 Report: Stable Prices and Lower Inventories

Market Summary

This has been a frustrating market for many buyers, sellers, and real estate professionals. Buyers in certain price ranges and neighborhoods are finding heavy competition and multiple offers on well-priced homes, while certain sellers are suffering through months on the market without an offer or serious interest. 

The third quarter statistics show a 21% decline from Q3 2009; but with the strong first half of the year, year-to-date sales are still up by 14% over 2009.  Initially it was unclear whether the expiration of the Federal Tax Credit for First-Time Buyers would have a negative effect on the DC market, but it is now generally acknowledged that the expiration of the tax credit has dampened continuing sales growth.

The sales increase from August to September does give hope of a stronger October and November, as does the state of the inventory. The number of available homes and units had a modest gain of 2% in September, when in past years that increase had often been in the double digits. An even better indicator of the strength of the market is the effective inventory (homes and units for sale divided by number of monthly pending sales). 

Single Family

Pending sales of single-family homes in September rose 17% from August, but trailed September of last year by 12%. Through the third quarter, pending sales of homes under $800,000 were down 25% from last September, while homes over $800,000 were up 83%, an indication that the low-end has suffered due to the expiration of the federal tax credit.  In any event, the month certainly saw more success in the upper end of the market.

Through nine months of 2010, sales of single-family homes are up 21% from the same point last year. These gains are across all price categories, with the largest gains seen in homes under $200,000 (up 38%), homes between $700,000 and $800,000 (up 37%) and homes between $1,250,000 and $1,500,000 (also up 37%).

The number of homes for sale rose and the effective inventory fell to 3.82 months.  The inventory in the upper brackets continued to grow however, and the $1,500,000 and over range showed a substantially higher 7.68 months.  Prices of single-family homes have remained stable compared to last year with average prices for properties settled through September down 1% and median prices virtually even with 2009.

Condominiums and Cooperatives

Pending sales of condominiums and cooperatives were down 15% from last year however, with double-digit losses in many price ranges. There were 4.36 months of inventory at the end of September which puts this market somewhere between a buyers' market and a market in equilibrium.   Pending sales of units between $150,000 to $300,000 fell 54% from last year, while units over $1,250,000 fell 63%. Units priced between $700,000 and $800,000 did manage a 57% gain, while units between $400,000 and $500,000 saw a 32% gain.

Even with the sales pace slowing through the summer, year-to-date sales of condos and co-ops are ahead 2009 by 6%. The largest gains have occurred in the lowest and highest parts of the market. Sales of units priced under $150,000 were up 92% from last year, while units selling over $1,000,000 were up 49%.

There were 5.19 months of inventory, which unlike the single-family side, puts condos/coops closer to a market in equilibrium.  Units priced over $800,000 have 10.3 months of inventory, while units priced from $300,000 to $400,000 have only 2.9 months.  The sales and inventory numbers show the condo/co-op market trailing the single-family market.  Condo/co-op prices have increased for the year while single-family prices have remained flat. Average prices are up 2% for the year compared to 2009.  Median prices are up 4%.

Outlook

With low interest rates seemingly offset by tighter and sometimes inconsistent underwriting guidelines, the prospects for a quick turnaround are dim; but stable prices and low inventories still offer optimism for a solid fall market.  There were 4.36 months of inventory at the end of September which puts this market somewhere between a buyers' market and a market in equilibrium.  This is good news locally compared to the most recent national numbers which show a much higher figure of 11.6 months. Prices also reflect the comparative stability of the DC market, with single-family prices virtually even with last year and condo/co-op prices up slightly.

Adapted from a report prepared by Fred Kendrick, with data from the Greater Capital Area Association of REALTORS®

Prices, Inventories Provide Reasons for Optimism

Market Summary

Fueled by the expiration of the Federal Homebuyer Tax Credit, a strong spring market boosted combined year-to-date sales of single-family homes, condominiums, and cooperatives to a 36% increase over 2009 at the end of the second quarter. 

The inventory of available homes and units began its typical seasonal decline, falling 3% from May to June and is now 7% below June of last year.  We are now statistically closer to a buyer's market than to market equilibrium or a seller's market.

Prices are down slightly for single-family homes and up slightly for condos and co-ops.  This actually is the opposite of what is happening in the national market, with home sales and effective inventories in better shape for homes than for condos/co-ops.  The slowdown in May probably delayed an expected increase in prices perhaps to 2011, but some neighborhoods are already starting to see prices move up a bit - certainly not to 2005 levels - but up slightly from 2009 prices.

Single Family Homes

At the end of the second quarter of 2010, sales of single-family homes were 38% ahead last year with the highest second quarter total since 2005.  Year-to-date settlements were up 61% for homes priced under $300,000.  Sales of homes priced between $400,000 and $500,000 were up by 50% and homes over $1,250,000 were up 44%.  All price categories showed volume gains over 2009.

The inventory of available homes fell 2% from May to June, even while the number of new listings increased by 16% over June of last year.  This is the first time the end-of month inventory fell since February, and it usually drops further in July and August as fewer homeowners brave what is thought to be (sometimes incorrectly) a slower summer market. 

With a decline in inventory and increase in sale, the effective inventory fell slightly to 3.31 months, an indication of the strength of the single-family market in the District.  Homes between $600,000 and $900,000 have an even lower number of 1.92 months, with buyers in this price range often competing for well-priced properties.  At the end of the second quarter, average single-family home prices were down 2%.  Median prices were down by 4%. 

Condominiums and Cooperatives

The condo/co-op market has been on a roller coaster ride since April sales reached a three-year high.  In May, buyers pulled back and in June rebounded with a 41% increase in pending sales.  The end of the second quarter found sales 11% ahead of the same point last year.  Units under $150,000 were up by 78%, units between $900,000 and $1,000,000 up by 40%, and units between $1,250,000 and $1,500,000 up 50%.

At the end of June, there was 4.77 months of condo/co-op inventory.  With the swing in sales totals over the last three months, the effective inventory has also varied widely as well -- from the low for the year of 3.13 months in April to the high of 6.96 months reached the next month in May.  June's 4.77 months is higher than the 3.77 months of a year ago.  Units between $400,000 and $600,000 have an effective inventory of just over 3 months, while units over $1,000,000 are at 8.67 months.

Average condominium and cooperative prices are up by 1% over 2009 year-end, while median prices are up 3%. 

Outlook

Sales fell sharply in May, as buyers interested only in the tax credit left the market, but recovered in June as inventories fell and buyers cautiously reentered the process.  While the up-and-down nature of the second quarter is cause for concern, there are reasons for optimism in the summer and fall markets.

After Labor Day inventories can start to build rapidly, and it is important to end the summer at a low enough level that the September increase is manageable in the fall market.  With low inventories in certain neighborhoods, sellers sometimes miss opportunities that are more attractive in summer months by waiting to list in a more competitive fall market.

With a 38% year-to-date increase in sales over 2009, it might be surprising to see prices fail to keep up with the market's recovery, but the last market rebound that occurred in the mid-1990s also saw price increases trail a bump in sales by more than a year.  The flux in the condo market since April is a cause of concern, but with prices holding firm and inventories falling, the prospects for a good summer market are bright.

Data from the Greater Capital Area Association of REALTORS and adapted from the DC Housing Report, by Fred Kendrick

Maryland and Virginia Among Highest for Technology, Business Friendliness

CNN Money.com and CNBC.com just released their 2010 lists - Top Earning Towns, Best 100 Small Cities to Live,and CNBC for Top States for Business- and The Washington Post announced the area's education level.

Bethesda, MD has the highest median family income in the US, according to CNN Money.com.  Ellicott City/Columbia, Maryland is named by a CNN survey as #2 Best Small City to Live in the country, up from #8 in 2008, with its  grand homes, a lovely 18th-century downtown, lots of restaurants, wide range of housing, tons of parkland, and a major music venue.  It's also an economic powerhouse with a jobless rate at just 5.2%.

Also named by CNN as high on the list were Gaithersburg, MD (# 25), Centerville, VA (#30), Rockville, MD (#31), and Alexandria, VA (#41).

CNBC named Virginia as #2 overall of the top states for business, bumped out if its 2009 #1 slot by Texas this year. Maryland remained in its #27 position overall, same slot as 2009.  In individual categories, Maryland ranked #8 in Technology and Innovation, and Virginia #2 in Business Friendliness, same as in 2009.

In addition, the Washington DC area has the best-educated population in the nation, as reported in The Post.

See:  http://money.cnn.com/magazines/moneymag/bplive/2010/snapshots/PL2718116.html

See:  http://www.cnbc.com/id/37516043/

See:  http://bit.ly/9Wzfun

See:  http://www.washingtonpost.com/wp-dyn/content/article/2010/07/14/AR2010071405751.html

An Alternative to Brokerage

As consultant to clients who wish to explore all the available avenues for the disposition of real estate, I occasionally am asked what are the characteristics and benefits of the traditional brokerage vs. the marketing method in support of an auction.

Briefly, a transaction conducted in traditional brokerage is a negotiation that occurs over a period of time, with a seller and buyer bargaining and eventually coming to agreement on all terms, conditions, contingencies, prices, and schedule for settlement.  Auctions, on the other hand, are deliberate and competitive interactions among all willing buyers to offer a price for the seller to accept, without negotiation of all the other terms, conditions, contingencies, and settlement date. Those terms are pre-established by the seller and set forth in a property information package.

• Three types of residential auctions: Absolute (no minimum or reserve); Public Minimum (published and made known to buyers), and Reserve (confidential minimum amount set by the seller).

• Seller benefits: Quicker sale; maximum advertising exposure; maximize buyer participation; maximize dollars; no contingencies; property sold in as-is condition; buyer pays all documentary stamps and transfer taxes; commission free to seller in most auctions.

• Buyer benefits: Auctions are fun; bidding process is open and fair; buyers buy at their prices; decision to bid is reinforced by the immediately preceding bid; buyers compete on a level playing field with other buyers because terms and conditions are the same for all.

If you think this alternative might be right for you, call me and I'll help you make an informed decision.  For more information, contact me to talk about whether thisthis is an approach you could consider.

3420 Porter St., NW, Washington, DC 20016 - Available for the first time in 65 years.

• Offered for $1,350,000. 
• MRIS# DC7336115. 
• Open House 5/16, 1-4 PM

This classic 1913 Victorian is filled with character and charm and is located in the heart of Cleveland Park. It features large sun-filled rooms, high coffered ceiling, handsome stone fireplace, gleaming hardwood floors, freshly painted throughout, original architectural details, and terrific space and storage areas. Its four levels include six large bedrooms plus a second floor library with fireplace, separate garage, and private landscaped rear garden.

With its orientation on the hillside, this is one of the more admired homes in historic Cleveland Park. The majestic 1913 pebbledash Victorian retains its original details and a very open feeling starting with its romantic wide front porch overlooking Porter Street.

The home is generous and spacious with well-proportioned rooms. Flow is excellent for entertaining, from the gracious entrance foyer, through the living room with its fieldstone fireplace, to the dining room with coffered ceiling, which opens to the brick patio and exceptional private rear South garden.

Situated in the heart of Cleveland Park midway between Wisconsin and Connecticut Avenues, the home is near top public and private schools, very close to fine shops and restaurants, and in the best Cleveland Park location. Walk easily to restaurants, parks, libraries, theaters, schools, and shops.

This rarely available home offers its original woodwork, high ceilings, and central air conditioning.  It is deceptively spacious with almost 3,000 sq.ft. of living space, and it is offered in "As Is" condition.

CLICK HERE for more information. (Brochure, photos, YouTube Virtual Tour, and much more)

Positive Trend Reverses Declines Since 2004

New sales contracts in 2009 for residential properties were 21% ahead of 2008.   The number of properties on the market at the end of 2009 was 25% lower than the end of 2008 -- a five month supply. This is a market which most housing economists feel is in balance between buyers and sellers. 

Falling property values opened the door for a new group of homebuyers who had been priced out of the market for several years. Average and median sales prices of single family homes, still well below 2008 prices, are affected by the larger than usual percentage of home sales at lower to moderate prices, bringing the average and median down.  For condominiums/coops, where sales are about even, the reverse is true, thereby inflating those numbers.

Single-Family

Fueled by huge increases in the low end of the market, sales of single-family homes finished the year 23% ahead of 2008 in number of settlements and 28% ahead in number of total pending sales.  As a result, sales of homes priced below $200,000 were up an incredible 262% over last year.  Sales of homes between $200,000 and $300,000 had a 32% gain, while homes priced from $400,000 to $600,000 were up 16% over 2008. 

In 2009, 57% of  sales under $200,000 were foreclosures while only 9% of the homes sold over $200,000 were listed as foreclosures.

Sales of homes priced above $800,000 were down 9% for the year, with sales over $1.5 million down 12%.  In the upper brackets, in December pending sales of homes above $1.25 million were up 54% over 2008 and homes between $600,000 and $800,000 saw a 119% increase.  Overall, pending sales in December were up 27% from last year. 

The inventory of available homes at the beginning of 2010 is 28% below 2008 EOY inventory. The effective inventory was 4.3 months, well below the 2008 year-end number of 7.57 months.  Inventory has continued to fall to the point where some neighborhoods and price ranges are suffering from a lack of inventory.

The year ended with the average home price down 17% from 2008 and the median price down 18%. 

Condominiums and Cooperatives

Sales of condos and co-ops ended with a 9% gain over 2008.    Condo/co-op sales also had a large increase in the lower end of the market, with units priced below $150,000 up 66% from last year.   There were also advances in the upper end of the market as sales of units between $800,000 and $1,000,000 jumped 59% over last year, while sales of units over $1.5 million were up 20%.  There were also 13% increases in the $300,000 to $400,000 and the $500,000 to $600,000 ranges.

The year ended on a mixed note for condominium and cooperative sales in December.  The year ended with 6.26 months of inventory, down from the 9.57 months at the end of 2008.

The total inventory of available units ended the year at the lowest point in four years, 22% below the same point last year.  This indicates new condos introduced to the market over the last few years has finally been absorbed, and with very few new condo projects scheduled to come on the market in the next year, the signs are good for a strong 2010 in the DC condo market. 

2010 Outlook

The gains for moderate priced homes were possible because of increased affordability and the availability of financing under the FHA and Fannie Mae/Freddie Mac up to $729,750.  Conversely, sales of homes above this limit were affected by the lack of available financing and strict down payment and credit score guidelines.  

Looking ahead to the single-family market in 2010, low inventories and increased sales (hopefully combined with increased availability of credit) should bring a moderate increase to home prices for the first time in two years.  It is more likely that prices for both homes and condos/co-ops have declined by at least several percentage points this year but that this decline is close to bottoming out.

 Price trends always trail those of unit sales by up to a year; so with sales starting to increase it is likely that prices will follow sometime by the middle of next year.  But gains for both sales and prices are most likely to be in line with the moderate recovery projected for the overall economy.  

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Vacant Property Tax, ‘Economic Interest Tax' on Co-operatives

Focus Now On "Blighted" -- But Wait For Final Release

From October 1, 2008 to September 30, 2009, the District of Columbia taxed vacant properties at $10 per $100 of assessed value (rather than the residential tax rate of $.85 per $100 assessed value) , unless property owners applied for one of several exemptions within 30 days of the property becoming vacant.  As of October 1, 2009, DC has changed its focus to ‘blighted' property, not merely vacant property.  However, since DC has not released the relevant amendments and legislative language to the public, owners should continue to treat their ‘vacant' property as requiring a vacancy exemption or risk being re-classed at the higher tax rate. 

Co-operatives Sales and Transfers Now Taxed

In another change, buyers of co-operatives in Washington had been exempt from paying transfer and recordation taxes because ownership of shares in a co-operative corporation was viewed as a security interest and not ownership of real property.  This change is effective October 1, and the DC government has begun charging an "economic interest tax" on the sale and transfer of co-operatives. The rates are 1.1% on co-operatives with a market value of less than $400,000 and 1.45% for co-ops valued at $400,000 and higher.