My scientific data gathering techniques have produced evidence of a housing glut in Washington — a saturation of one- and two-bedroom apartments for rent that is having a negative effect on existing condo sales both on Capitol Hill and elsewhere in the city.
My techniques involve simply stepping out of the forest to look at the trees or, in this case, what I’ve called for a few years the “crescent of cranes,” beginning down by Nats Park and curving north and northwest through NoMa, H Street and up through Columbia Heights. The majority of these cranes represent 200- to 400-unit buildings. The pipeline of new rental units that started coming on line last year in the D.C. metro area is massive compared to the past decade. The Washington Business Journal estimated in late 2013 that 2,500+ new units in the H Street/NoMa areas alone would be coming on line. Looks to me like they’ll be full before the trolley starts.
So what do high-rise, glass-sided, big-lobbied, front-desk rental buildings have to do with selling your garden apartment off Lincoln Park or your two-bedroom fourth-floor flat in an old Victorian overlooking Seward Square?
Supply and demand is always in play, but this is more about options. There were so few options for renters as we began to pull out of the recession in 2010, the inventory became New York-expensive, leading to a mushroom cloud of home and condo owners jumping into the short-term and Airbnb game. I saw one-bedroom rental units jumping, in some cases, from $1,300 to $1,800 per month in the space of three years for standard 12 month leases, upwards of $2,500 for short-term stays.
This shortage was very good for Hill condo owners. A rare phenomenon occurred where a mortgage with condo fees and taxes actually made more sense, even in the short term, than renting. (Unless Bethesda or Alexandria were options … ewww).
Will this oncoming rental glut do damage to the Hill condo market? Not the big units. Large 2+ bedroom units will have some immunity; they will remain a solid alternative to townhomes, although values won’t increase as rapidly as in the past five years.
But I do believe this rental surge will cause problems for sellers of units under 1,000 square feet in the next two to three years — which is either a bump in the road or a minor crisis, depending on when they bought their condos.
The vast majority of Hill listings in MRIS, the realtor listing service, are sales, not rentals. Even Craigslist beats MRIS for rentals postings in my opinion, but it does provide a glimpse of what’s happening.
According to MRIS, so far this year 26 of the 47 one and two-bedroom apartments listed for rent in greater Capitol Hill remain available.
In the same period last year, same location, there were fewer than 30 rental listings posted in MRIS, and 28 of those were rented successfully.
Are Capitol Hill condo sales feeling the pain yet? Year to date, only 47 of the 94 condos listed in Capitol Hill extended have sold or gone under contract.
In the same period last year, roughly 64 out of 74 condos listed were sold.
Time and how much sun is being blocked out by construction cranes will tell if this is a rude awakening or a small bump in the road, but the advice remains the same as last year’s:
Sellers, don’t take anything for granted. Put thought into pricing, look at comps and competition, prepare the product properly and hire a good agent.
Buyers, don’t give up hope, there could be opportunities out there. There may even be a bargain in your future.
The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of HillNow.com.