In real estate, having a historical perspective on the market can help you make smart decisions. So here’s a CliffsNotes-like version of the past 24 years of Capitol Hill real estate — which should help shed light on where the market is headed.
In the 24 years I’ve worked as a realtor in DC, I’ve witnessed a few five-year real estate cycles. These cycles have had a far greater impact on Capitol Hill home values than any administration change or mid-term election. By my calculation, we are now near the end of another cycle, one that has had a real upward trend. And if population forecasts hold true, and commutes become slower than Congress, we’ll peak to a plateau, with no cliff to fall over. Many experts speculate that our home values will continue trending upwards, albeit at a slower pace.
The first, and only, dramatic downturn I’ve experienced as an agent was in 1991, my first year as a licensed realtor. No one saw it coming, but it was tough and was going to get tougher as the market headed south. Crack cocaine was wreaking havoc in urban areas across the country. Until law-enforcement got a handle on how to deal with crack, crimes against quality-of-life ran rampant. D.C. wasn’t just the murder capital of the world; we became the snatch and grab anything worth 15 bucks capital of the world. Fear of crime and plummeting values had home sellers in D.C. leaving more money on the table than I’ve seen since.
Looking back, Capitol Hill as a whole fared pretty well, with its long-time diversity and village feeling, where neighbors recognize and talk to one another (or at least to one another’s dogs). These characteristics have helped retain long-time residents and attract new ones. Nevertheless, from a real estate perspective, it took a long time for Capitol Hill to rebound from the tough years, starting in 1996. But we are activists by nature, a bit type A some might say, with a rolled-up sleeves, get-it-done attitude that began to repair our community while other metropolitan areas couldn’t recover. Some have not recovered yet.
The next shift in real estate values was caused by another tragedy. Following the 9/11 attacks, the real estate market on the Hill and elsewhere in the city geared up. The irony of a boom in real estate following a tragedy is extreme, unless you look at past times of war when the capital city’s population jumped because of an influx in war effort military and civilian support personnel. The rule of real estate — supply and demand — always holds true. The creation of the Department of Homeland Security and increased defense spending and civilian support have had a massively positive impact on real estate values in D.C. and on Capitol Hill in particular, due to the second, third and fourth rules of real estate: location, location, location.
From 2001 to 2005, real estate values on the Hill climbed at an astonishing rate. Escalation clauses, one feature of competitive bidding, became commonplace and resulted in what many term “bidding wars,” although bidding “skirmishes” would more often be the appropriate term.
In late 2005 and early 2006, we hit another high-water mark, caused more by unsustainable increases in real estate values than by the looming financial crisis. The plateau that followed fit a typical D.C. pattern. The great recession, although it gripped the rest of America tightly from 2006 to 2011, barely had an impact on real estate prices within the extended boundaries of Capitol Hill, and had almost no impact within the Capitol Hill historic district. Again, jobs, supply, demand and location ruled. Sure, there were signs of hard times. Can you imagine a home staying on the market for more than two weeks or selling below list? It happened, right on Capitol Hill.
In 2010, I felt the market coming back but can’t put my finger on a specific cause other than the basic principles of supply and demand. National news was still negative, but we continued to be basically at war, as we are today, and recall what wartime conditions do for the District …
So, here we are again. Will the market keep climbing? If the train loses steam, will it stop to stoke its engines or simply switch to a lower gear? No one knows for sure, but you can bet that just like politics on Capitol Hill, D.C. real estate cycles will follow their own pattern.
The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of HillNow.com.