Folks looking to become luxury home owners in the District this year will soon be spoiled for choice.
For the first time in a decade, D.C. is about to see an influx of new construction inventory—11 condominium developments with more than 50 units each will hit the market this year. That’s nearly 1,750 new construction condo units to choose from, according to forecasts released by development services firm Urban Pace earlier this week, first reported by BisNow.
In the District, homeownership rates have dropped from 47.2 percent in 2007 to 40.3 percent in 2018, according to the D.C. Chamber of Commerce, although homeownership rates in D.C. are lower among residents of color than they are among white Washingtonians. The Chamber attributes the decline in great part to the fact that the majority of new construction in the past decade was for rentals.
It shouldn’t come as a surprise that an average new construction luxury condo unit isn’t cheap. On the thriftier side, a 679 square foot one bedroom, one bath condo at The Lexicon in NoMa costs $428,500, whereas a 1,466 square foot two bedroom unit at the new 1745N in Dupont Circle goes for $1.6 million.
Apparently, a myriad of choices doesn’t come cheap for developers in D.C., either. The lack of new construction inventory in the District has mainly been caused by developers not being willing to take a financial risk by constructing large scale condo buildings, especially as the rental market was growing, according to Clint Mann, president of Urban Pace.
“You have to deliver a building now with 50 percent of the units already sold to guarantee the financing,” says Mann. “When you look at new construction projects in the city, most buildings are selling 4 to 6 units a month. Plus, buyers are only willing to commit a year in the advance, so that’s a total of 60 advance sales and a 120-unit [building] is where most developers are comfortable.”
Even with this new inventory, the supply for new condos still won’t meet demand, says Mann. Local realtors have seen an uptick in the demand for new condos in the District in recent years as well, especially larger units.
Erich Cabe, principal at the Erich Cabe Team at Compass, says his team is “seeing a lot of interest from ‘move-up buyers’—buyers who have an expanding family or who would have moved into a single family home or a rowhouse or would have moved further out from the city, but are actually preferring to stay in an urban environment.”
It’s not just growing families who want to live in D.C. proper. The allure of city living is also attracting empty nesters who are downsizing in the suburbs and those who crave the sense of community that living in an urban center can provide, says Cabe.
In a report released in October, the D.C. Chamber of Commerce noted that between 2009 and 2016, 10,000 families with incomes greater than $200,000 arrived in the District, while approximately 4,300 families that made less than $35,000 annually left. D.C.’s population is now at its largest since 1975.
The city having a higher percentage of wealthy residents means that more people may be willing to shell out the steep premium that buyers typically pay for a new construction compared to a similar older condo. The difference in price can be as much as 10-20 percent more, according to Cabe.
“You’re paying a significant premium and you don’t always recoup that premium when you sell,” says Cabe. “But some people are willing to take that on because the amenities and finishes are ‘of-the-minute’ and there is a certain allure of something that is brand new.”
Of course, no real estate conversation in the D.C. area can be complete these days without mention of the “Amazon factor.” So how will the arrival of HQ2 impact condo sales in D.C.?
“That kind of confidence in the region encourages investors at all levels,” says Mann. “We’ve seen a slight uptick in individual investors buying condos and holding those as short or long-term investments to rent out.”
By Monna Kashfi
https://dcist.com/story/19/03/08/a-bunch-of-new-condos-are-about-to-hit-the-d-c-market/
