Hill Slowinski • Real Estate: Blog: District of Columbia: Washington

(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.

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

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)

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.  

Third Quarter Results Show Prices Stabilizing, Confidence Building 

Led by a surge in single-family sales, new contracts for all residential properties jumped a very impressive 38% from last September.  Nine months into 2009, combined sales are 13% ahead of those at this point in 2008 and the gap between the top of the market in 2004 and now has narrowed to 28%.

There was a slight (2.4%) increase in the number of properties on the market at the end of this September from the same point last year; but with the increase in sales, the effective inventory of homes and units on the market today is down to 3.7 months (higher for condos and co-ops than for single family homes) as compared to 4.9 months in September of 2008.

The average sales price of single family homes, condominiums and cooperatives declined slightly from mid-year but the decline was small enough (in the 2.5% range) to suggest that we may be approaching the bottom.

Single Family Homes

There was a sudden sharp upturn - up 40% from last September -- in the number of new single family contracts in September.  Year-to-date, new contracts were up 21% from a year ago with these gains largely coming from homes priced under $800,000 (over 80%). Home sales are lagging above $800,000 and particularly those over $1,250,000.

Rather surprisingly, fewer new listings came on the market this September than a year ago and with stronger sales the inventory is down nearly 19% from this time in 2008. Some potential sale homes may have been diverted to the rental market for a year or two  (See recent articles at: HillSlowinskiRealEstate.com and HillSlowinski.com).  This has left only a 3.4 months supply of homes currently for sale, which is lower than it has been for years.

Average sale prices are presently off 16% from the end of last year but they are down only 1% from mid year. Median prices are down a similar amount from 2008 but they were actually up a fraction from the end of the second quarter in June.

Condominiums and Cooperatives

New contracts on condominiums and cooperatives rose 35% over September of 2008.  The largest increases over last year were in the $200,000 to $300,000 range (up 48%) and the $500,000 to $800,000 range (up 52%). 

Through nine months of 2009, contract activity on condos and co-ops is up 5% from the same point last year.  Most price categories show slight losses or gains from 2008. The most activity for the year has been in the $300,000 to $400,000 range (28% of the market) and that range is ahead of 2008 by 12%.

The inventory of available units at the end-of-September is 13% lower than at the same point last year.  The effective inventory actually went up slightly to 4.17 months.  The average price of a condo/co-op in the District is even with 2008 prices at this point, while the median price is down 1%. 

Summary

All of this strongly suggests that the decline in single family home prices is nearing an end, but it will take months, probably into next year, before we begin to see even small gains.  With sales apparently on the upswing we can anticipate seeing prices stabilize by late this year or early 2010 but price increases are likely to be modest, at best, after that.  Sales were stronger than any other month this year and all the way back to June of 2005.  Favorable interest rates and concerns that the first-time buyer subsidy may not be renewed certainly contributed to this, but the strength of this upturn certainly indicates at least some improvement in consumer confidence about our local housing market.

"It's all about my clients ... "

         When clients engage me, either with the renowned Washington brokerage of W.C. & A.N. Miller
REALTORS®, exclusive affiliate of Christie's Great Estates, or with Sloans & Kenyon in its marketing
association for their luxury real estate needs, they find my service levels cannot be matched. 
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 of a full-time, experienced, dedicated REALTOR to purchase or market their largest asset.
          I always have time to help you, your friends and neighbors, and family.  My goals are to provide
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