Almost half the year has passed and Hill Realtors are happy to report that business is brisk. The diversity in housing stock on Capitol Hill allows for a broad spectrum of affordability, welcoming fat wallets and penny-pinchers alike. So there is no scarcity of transactions.
Each “micro-hood” within the broader Capitol Hill area has its own affordability range — what some might call the “price of admission” as the low mark, and the “ceiling” as . . . well, the ceiling. I remember when $400,000 was a big price tag around Eastern Market, as well as when $400,000 would barely get you in the door. The level of affordability in many Hill micro-hoods has leaped in the last few years. A $400,000 ceiling in Trinidad only 60 months ago is now a floor, below which, if you’re lucky enough to find it, is not very pretty.
Here are some of the highs and lows, five years apart, broken down by micro-hood:
- Twenty-four “renovated” (habitable) homes have settled in Trinidad so far this year. Not one of houses settled for less than $400,000, and three of them blew through the $700,000 ceiling without breaking a sweat.
- Compared to the same area and the same six months in 2010, 19 homes sold. Guess what? The bottom was $75,000. The glass ceiling of $300,000 was barely shattered at $312,000.
- Much like Trinidad, although due to the similarity and size of the housing stock, I predict that Kingman Park still has some jumping to do. Seventeen homes settled so far this year, ranging from $400,000 to $775,000.
- Compared to the first six months of 2010, 32 homes settled between $68,000 and $360,000. But an outlier at 15th and Gales streets NE sold for a whopping $465,000.
- These numbers are stunning from a real estate perspective. Twenty-two homes sold this year to date, ranging from $560,000 for a 900 square-foot, two bedroom house, all the way up to $1 million for a 3,000 square-foot house at 10th and K streets NE.
- Within the same six-month period, only five short years earlier, 35 homes sold within a range of $200,000 to $625,000. I was involved in the two top sales that year and the entire neighborhood was shocked at the sale numbers which now seems like peanuts.
- Considered much more established, larger and less transitional, Hill East still experienced major gains in the last five years. To date this year, 49 homes have sold between $450,000 and $920,000. Hill East has breached the $1 million mark, but nothing commanding that price has been put out this year.
- The first six months of 2010 saw 43 homes listed in Hill East between $200,000 and $700,000. Not as dramatic as the micro-hoods further out, but very remarkable increases any way you slice it.
My numbers and statistics are a little rough, my geographical boundaries a little loose, but what’s crystal clear is that these micro-hoods outside of Capitol Hill proper have jumped in value over the past five years beyond what anyone could have or would have predicted. My personal prediction is that we won’t see these types of leaps over such a short period again anytime soon.
The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of HillNow.com.
May didn’t feel like a slow real estate month on Capitol Hill but, compared to April, sales were downright sluggish.
Houses on Capitol Hill Extended
- Just under half of the 81 homes listed this past month have gone under contract. Many of the houses that remain unsold have only been listed for a week, but many more are beyond the 20-day mark.
- In sharp contrast, only 22 of the 100 Capitol Hill homes listed in April remain unsold. Of the 78 houses that sold, only 3 homes took more than 30 days. The vast majority of the rest of the houses sold within 10 days.
Condos on Capitol Hill Extended
- Only 17 of the 50 condos listed in May went under contract that month.
This was a big change from April when all but 11 of 31 condos listed went under contract. Of the 20 condos that sold in April, only 2 of them took more than 30 days.
- These numbers are in line with the real estate climate I predicted six months ago, as sellers continue to push for list prices in line with the most recent dramatic escalation on their block, and buyers push back.
Caveat? Low inventory triggers the rule of supply and demand.
Immunity? Pretty, well-located homes with four bedrooms, a master bath, a basement and parking. Unless they are priced properly, listings without those components will languish and their prices will be reduced.
The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of HillNow.com.
I’ve written a good bit about how to find a good agent and what to look for according to your specific needs and style. It’s an important decision around a very large and very personal transaction and transition. It boils down to having a real partnership with an agent, which can make the home buying or selling process more pleasant. It also can greatly increase the odds of success, while reducing aggravation, so long as you, the client, are on the exact same page as your agent — the tool — and he, you.
Commitment: If someone is committed to working with my team then we are going to give them 100 percent of our effort regardless of how much money they are spending or how long they may take to accomplish their real estate goals. I’ll take five bucks an hour for clients committed both to me and the process over a chance to earn twenty dollars for a drive-by showing. Being nice helps too, but that’s universal. We require a commitment from our clients up front, but then we have to earn it. It should be a mutually comfortable fit. I include language in all of my buyer agreements that allows the client to cancel at any time provided no written or ratified contract is in place.
Communication: It helps us to do the work our clients need when we have a productive flow of two-way communication with them. The best example of this communication is when you are buying a house with me and I’m sending you choices I’ve made that could be a good fit. Your feedback, the more brutal the better, is crucial early on so we can quickly carve out the negatives, the non-starters and those concerns that distract us from the right home. Another example is the productive communication and debate between agent and seller while preparing for a sale. It’s the planning and partnering before the fireworks go off that makes the fireworks go off.
Set expectations early: Don’t be afraid to lay out firm expectations when you’re interviewing an agent. If you find an agent who admits he can’t meet them, he’s just being honest. Lay it all out there. We’ll respect you for it. Does the agent meet your geographic needs and work where you want to live? Does the agent really have time for you? Without clear expectations, you might discover too late that your agent is boogie-boarding in Bethany all summer while you’re waiting to buy.
Don’t wait to be sold (and don’t wait for your new home to magically appear): Stay engaged and alert. Make adjustments if needed. I’ve found that even buyers who are not raring to buy, those buyers waiting for just the right house, can easily miss it if they’re not diligent. Of course I do believe in luck, and the harder I work the luckier I get.
Commissions: If you negotiate a compromise on the commission rate, just be sure that you haven’t negotiated out the incentive for your agent to go above and beyond on your behalf. It’s not always about the dollars and cents, and I assume that most agents are savvy enough to not get themselves into this situation. I’m just putting it out there as an item to consider. I have seen that beaten look in an agent’s face when the demands on their time compared to their potential compensation stopped making sense a long time ago.
The views and opinions expressed in the column are those of the author and do not necessarily reflect the views of HillNow.com.
OK, you’ve done your homework, run the numbers and are ready to write an offer on that perfect home. Unfortunately, in a hot market, you may not be the only bidder. So, you should take nothing for granted related to the terms you set forth. Price isn’t always the top and bottom line in real estate.
- Earnest Money Deposit (EMD): Often called “good faith money,” or simply “deposit,” it is typically a personal check submitted with an offer, deposited into an escrow account upon acceptance, and returned to the purchaser at settlement to serve as part of the closing funds. The deposit is considered insurance for the seller since it could be forfeited if the buyer doesn’t perform under the terms of the contract. In a hot market, if your loan is solid and the contingencies few, the larger you make that deposit check, the more you’ll stand out. It’s called “good faith” for a reason. Give the seller some faith in you.
- Financing Contingency: These days, since so few people write competitive bids without some sort of strong preliminary commitment from a lender, this contingency can be pretty short, which sellers like. A financing contingency insures the return of your EMD in the event of loan denial. When choosing amongst bids, a seller will focus on which bid has the least chance of loan denial. However, there are ways to remove or make this contingency more attractive to a seller. First, buyers please don’t walk into your local bank or credit union and ask at the window for an application. There are many mortgage lenders, brokers and banks that deal strictly with home loans. They can take a broader view of your financial landscape and are often able to provide a more comprehensive approval letter to help you make your bid a better bet.
- Appraisal Contingency: Again, security for the buyer, risk for the seller. If the bank appraisal comes in below the contract price, the seller won’t reduce the price accordingly and you’re not willing to throw more cash at the deal, then your EMD is returned. However, if you’ve done your homework and your agent is experienced, you should know what the home would likely appraise for, what premium you might pay and what risk you are willing to take with this contingency. A local, experienced mortgage broker can help a lot with this contingency.
- Inspection Contingency: This implicitly keeps your EMD safe in the event of defects discovered during inspection that the seller isn’t willing to remedy. But remember, we’re talking about a competitive market. So, if you feel you’ve got a decent chance of getting the home, hire an inspector to go in prior to making your offer, include an AS-IS clause and increase the seller’s faith in you and your offer. In my mind, $300 for an appraisal is a small price to pay to secure such a big-ticket item.
- Settlement Date: Contractually speaking, this date is firm unless there is written consent from both parties to make a change, but there is wording that can allow a seller flexibility in their move. Also, if a seller requires some time post-settlement to move, make that available to them. If only a small holdover is needed, and the house works well for you, and of course is priced right, you might consider allowing the holdover at no charge provided you retain a deposit. Again, it’s small money in light of the big picture.
You may have noticed that I didn’t mention escalation clauses in these components. Check out my column from last year on that particular subject, which is unique to D.C. and other hot markets.
Also, you’ve found no talk about offering prices here since I’m assuming you’ve done your homework before spending hundreds of thousands of dollars — or you have learned the hard way after losing a couple of bidding skirmishes and now know what to do.
These contingencies and components can be turned upside down in a buyer’s market. Stay tuned.
“Federal” or “Federal Style” couldn’t be more inaccurate. In truth, 1780 to 1830s New England cannot be found in Hill East. It must be one of those terms applied by the ghosts of Hill realtors past to Capitol Hill post-1920 porch-front homes, in an effort to dress up on paper what many considered drab exteriors when compared to the bay-front “Victorians” (wrong also, but that’s another column) closer in.
To call these homes “Craftsman” might be more accurate, even “Bungalow,” although it may not make sense. But that’s the feel the builders of the time were going for and what was in demand — comfort and function.
Gustav Stickley, who advocated an aesthetic based on functionality, simple design, excellent workmanship, and visible and beautiful construction, had a major influence on popular taste and home design in the early 20th century as the Hill was expanding. (Not surprisingly, he despised Victorian houses and their chopped-up little rooms, clutter and garish colors.)
In the 1920s, middle-class home buyers in D.C. wanted Craftsman bungalows with their wide front porches, horizontal orientation (two stories), light-filled rooms and dormers. D.C. land prices were too high to build detached houses for the middle-class market, but these buyers could afford row houses. The challenge for builders was to offer row houses that “read” like Craftsman bungalows. They succeeded. These row houses, sometimes called “daylighters,” are two rooms deep, with windows in each room so that sunlight flows into the entire house. The typical floor plan is a living room in front, dining room in back, a narrow kitchen on the side and a front porch and back porch. Upstairs are two or three bedrooms, a sleeping porch in back and a bathroom. As climate control advanced, many front porches were removed and the sleeping porches enclosed.
These row houses typically have several Craftsman features, including:
- A wide front porch with substantial columns.
- A mansard roof with a dormer and window.
- The rafters and supports for the porch and dormer are visible.
- Windows with six panes on the upper sash over one pane on the lower sash to let in ample light, but no glare.
Hill East has many daylighter porch-front row houses, primarily from three major builders: Herman R. Howenstein, Thomas A. Jameson and Harry A. Kite. I’d like to thank them for the warmth and simplicity of these homes.
We’ve had another brisk month of sales within broader Capitol Hill, but I’m finding more stability than drama, with selling prices more in line with list prices and many more homes selling at or just below list price than this time last year.
In April, 63 homes went to settlement, with more than two-thirds of them under contract within 14 days on the market. But here’s what I find interesting — only half of the listings that settled in April sold above list price, and of those, only about a third sold at more than 2 percent above list price.
The remaining 31 homes? Only eight sold at list price. That means that 23 sold below list, averaging about 3 percent under asking, but six sold in excess of 5 percent below list, and a few at 10 percent below list price.
This probably sounds a little “Middle America” to many Hill-ites, especially to newcomers who’ve seen nothing but a “blink-of-an-eye” market for the past five years.
These numbers, as units sold, aren’t far off from April 2014, except that now the difference between list and sale price is much larger on those properties selling above list, and much smaller on those selling below list.
In April 2014, 61 homes went to settlement, with all but 14 under contract within two weeks on the market. Less than half (26) of those listings that went to settlement sold above list price, but of those homes, 10 sold at more than 10 percent above list price. So we see a big shift when comparing April 2014 to April 2015.
The remaining 35 homes? Fourteen sold at list price. That means that 17 homes sold below list last April. But here’s what’s remarkable — all but a few of last April’s below-list sales did more than scratch the price-tag. Over two-thirds sold at less than 2 percent below the asking price.
So, April 2014 had bigger escalations and smaller price drops than this past April, almost the reverse.
While judging the market from a list price/sale price perspective is only one of many methods to gauge trends in the market, in this case, April 2014 vs. April 2015, a reduction in the escalation caps as a percentage above list price can be seen, if not in home values, then perhaps just the drama factor. Although in general, one can see that the market is pushing back a bit, as sellers list their homes price in line with the most recent “record-breaker” on their block.
It’s a natural thing.
Did you see the new Acura? With the clean lines, sophisticated engineering, leather seats, and real wood trim? What I just heard was “clean” and “sophisticated,” not because I want to drive those two things, but because I want to be those two things. If I hear “hybrid,” I’ll be as green as Al Gore. If I hear “Cadillac,” I’m feeling McConaughey. Otherwise it’s just transportation, four tires and a trunk, plus maybe a 3.57056 liter Hemi under the hood…feeling powerful yet?
Real estate promotion is similar, but residential re-sale involves almost as many individual marketers as there are homes to sell. Like five blind guys touching an elephant, each realtor might describe a different beast of a home depending on their personal perspective. Otherwise, it’s just shelter, four walls and a roof, plus maybe a fancy alarm system…feeling safe yet?
In the D.C. metro area, our Realtor Multiple Listing Service (MLS) allows us a maximum of 400 characters with which to describe a home we’re marketing and, unfortunately, “this home has lovely granite countertops and stainless-steel appliances” only uses 71. So what else is an agent supposed to say to get sellers to agree that we’re painting a proper picture of their homes, or to make that right buyer look twice, or just to eat up the daunting 400 characters?
Thanks goodness for hyperbole (and puffery):
“Chef’s kitchen!” (15 characters) But really, what is a chef’s kitchen? The last time I saw a chef’s kitchen, I was in the basement of the White House. That was long enough ago that they still let guys like me into the White House basement. I wonder how often chefs have Indian food delivered.
“Amazing back yard!” (17 characters) This is a tall order, even on Capitol Hill where I’ve seen folks do amazing things with limited yards. But I haven’t seen a coconut grove yet, which would be truly amazing indeed.
“Great buy!” (only 10 characters) “Fantastic buy!” would have used up 16 characters, but who’s counting. I think the secret is out. If the guy crying “best buy” stands to make a buck on the buy, one needs to explore further. If he is at a loss for filler, he can say, “this house is a really great buy!” and BOOM, he just bought 33 characters!
Then there’s the ever-inspiring “handyman special!” (17 characters). But if the agent is promoting the poor condition of the house, then the place must be missing its roof. Besides, handymen are becoming as rare as WWII vets. How about “call the architect quickly!” (27 much more honest characters).
“Incredible location!” (an even 20 characters). But sounds a bit too South of France.
“Bring an offer!” (15 ridiculous characters) What with the sign, balloons, flowers, and cookies…I believe it’s understood that the seller would like to receive an offer.
Adjectives and redundancy help these listings a lot. Apparently exclamation points are a must. Unnecessarily repeating the number of bedrooms and baths can eat up space. If the front door is a blue (5 characters), we are apt to put it in writing. If not, at least it can be a “lovely door,” “lovely blue,” or an agent can go for broke and use “this home has a lovely wooden deep blue front door,” and BAM, 50 characters knocked out of the park!
What agents are effectively doing in an MLS description is “pitching” the home.
In Hollywood, producers allow less than 10 minutes for television hopefuls to pitch a plot. The pitch is a dynamic verbal description of the show. The key is to keep it short, focus on the highlights, steer clear of too many details, and sell, sell, sell. I like the “elevator pitch,” where an idea must be sold to a potential buyer in the time it takes to ride from the 10th floor to the lobby, give or take a couple of stops.
When pitching your home, try to find its soul, personality, and disposition. Is it a party animal or a bookworm? What would you name it if it were a pet? When I’m pitching a home I take the 400-character rule seriously, which can throw punctuation out the window (the clean, clear, bright, shiny glass window = 45 characters!)(add a few semicolons and you’re up to 48!). But mostly, I try to avoid describing anything that buyers can touch or see with their hands or eyes. I try to aim straight for the heart because that’s where the wallet is located, and yes, occasionally I’ll take a bit of poetic license.
Whether you are moving for a job, more space, a nicer place, across town or cross-country, it’s stressful. I’m not saying it “can be” stressful, I’ve been through it over 2,000 times just as facilitator, and the only “can be” is that it can be brutal for me and, therefore, must be excruciating for some. Fortunately for realtors, folks soon forget pain, families get bigger and the grass keeps getting greener, so agents aren’t going to starve any time in the foreseeable future because people stop moving. And there will always be people who need to shop for their new home while they’re trying to sell their current one.
One of the key elements of a simultaneous sale/purchase is a “home sale contingency.” A non-starter for most D.C. deals, the home sale contingency allows a buyer to put a contract on a home with the condition that they need not perform on the contract unless their current home sells within an agreed upon time frame. This scenario is not typically desirable for any seller unless they are unable to attract other ready, willing, able and house-free buyers.
The reverse of this contingency is called a “home of choice contingency,” which allows a seller to accept an offer under the condition that they need not perform if they are unable to secure a home of their choice within an agreed upon time frame. While this is a little more palatable to buyers than the home sale contingency is to sellers, it can create hesitancy in any market.
But depending on your circumstances, your options vary:
- Moving cross country? No problem. All you have to do is act as if you are moving immediately, even if your actual move is weeks or months away. If it’s spring, throw out all of your winter clothing and vice-versa. In fact, and this goes for anyone selling a house, throw out anything you’re not taking with you and store everything else that your agents would like out of the home. With luck the market where you’re moving is more buyer-friendly and home sale contingencies more acceptable. Since your agent will want you out of your house to market it anyway, the more house-hunting trips you take the better.
- Staying on the Hill? Here’s where it gets tricky. I haven’t seen a home sale contingency on one of my own listings in ages, but again, it’s all about acting as if. Once you determine that the size, type, and location of the home you desire is attainable as soon as the funds in your current home are available, you simply start preparing and set the calendar for your listing, all the while keeping an eye on your purchase market. In most cases, if all fails, the worst result is a quick trip to Target to replace all the toys you threw out.
- Buyer flexibility is the key. If your home is priced right and presented well, particularly in a seller’s market, lease-backs (sellers remaining in the home following settlement) are common. Some lenders have restrictions on the amount of time before a buyer must move in, but 60 days is by no means out of the question. This 60 days, when added to a 30- to 45-day settlement, gives a seller three months or more to contract on a new home so long as a “coinciding settlements” contingency is included for safety in the event your contract to sell falls through near the end. Not bullet-proof, but still much more palatable to a seller than if your home hadn’t even been listed.
Of course everything you just read assumes that the majority of the funds you’ll need to buy your new house are tied up as equity in your existing home. But it’s unlikely you would start the process of buying a home without speaking to a lender, so why would you do the same without acting as if you are going to market?
The worst that could happen is a ridiculously clean house…
There are only two things I like about April 15: occasional cherry blossoms and the fact that on April 16 I always write a contract with a certain type of buyer who, having just become a HENRY (high earner, not rich yet), has gotten terrible news from his or her accountant. Seems Uncle Sam wants a larger piece of their larger income, which first sparks the idea of shelter as tax-shelter.
One of the most lucrative tax deductions for homeowners is the mortgage interest deduction. The deduction is the government’s way of incentivizing people to become homeowners by offering them a significant tax break. The home mortgage interest deduction allows taxpayers who own their homes to reduce their taxable income by the amount of interest they paid on the loan, which is secured by their principal residence or, sometimes, a second home.
The National Association of Realtors strongly supports the mortgage interest deduction claiming, “Housing is the engine that drives the economy and to even mention reducing the tax benefits of home ownership could endanger property values. Home prices, particularly in high cost areas, could decline 15 percent if recommendations to convert the mortgage interest deduction to a tax credit are implemented.”
While it may not be true that buying is always smarter than renting, the buying and selling of homes is a massive job creator, and not just to those involved in the transactions, like realtors, appraisers and title attorneys. Roofers, plumbers, even the staff at Frager’s, (or mostly the staff at Frager’s in my case) all benefit from the transfer of real estate.
When I explain the mortgage interest deduction to first-time buyers, they often react with suspicion, but it’s real money, particularly for a HENRY with no kids and few other deductions. I’ve personally found that the mortgage interest deduction outperforms dependents (kids) as tax savers by a mile and a half.
So, buyers, before I fall asleep writing about this fascinating subject, here’s the deal from my friend Duke Walker at Guaranteed Rate:
“Nobody enjoys talking mortgages. Trust me, I would know — I approve people for them. Despite the hatred/confusion/boredom associated with these godforsaken things, you can actually save some serious coin if you listen up for another 40 seconds. Here’s the breakdown: say you get a $600,000 loan (20 percent down on a $750,000 home) with a rate of 3.875 percent over 30 years. That will cost you $2,821 in principal and interest per month. But don’t forget about property taxes ( about $350 per month) and homeowners insurance (about $75 per month). You’ll have to add those on top of the principal and interest, rounding out your total monthly payment (PITI: principal, interest, taxes and insurance) to nearly $3,500. Assuming that you’re in the 33 percent tax bracket, the savings from the mortgage interest deduction can save you more than $10,000 in the first year. That takes the adjusted total monthly payment from $3,500 to roughly $2,670 per month.”
Now compare that to what you can rent in D.C. for $3,000. “Mom and Dad, guess what? I just signed a lease for a one bedroom, almost full bath (it’s a shortened tub), 850 square foot condo for $2,950!” “Maybe now you’ll hand over some down payment money?
Paying tax on income is a certainty of life in America, renting is not. There’s money to be saved and equity to be gained out there. Pounce, HENRY.
War is a really strong word. The term “bidding war” suggests an open auction: thrilling and tension-building with occasional scuffles over artwork or farm implements, I’m sure. But unlike most residential real estate sales, this type of auction requires cash in-hand when the gavel comes down.
On Capitol Hill, if a home performs particularly well on the contract/offer due date, when the realtor’s gavel slams I call it a “surrender war.” Buyers must surrender to win in a seller’s market, but is this always the case? Must buyers first swallow their pride and start dialing for dollars? Call Mom and Dad, as if paying for college wasn’t enough?
To be a competitive buyer for a home on Capitol Hill that hits all of the right pleasure points, is priced right and presented well, the loan must be locked and the down payment large. It’s all about risk. Less money down means less dog in the fight, from a lender’s perspective. Agents look for the most “solid” financing and, of course, sellers want a slam dunk. Naturally, after a few weeks without an offer, listing agents and sellers alike become surprisingly tolerant of loans that can allow homeownership with little money down.
Must buyers overlook defects, kick their inspector to the curb and take the home as-is? Well, first of all, Capitol Hill bay and porch-front homes are extremely simple to understand (the physical parts anyway), and, ironically, the fewer updates the house has, the simpler it is. Nevertheless, for the right home, a buyer’s inspection can be a weapon the buyer can lay down if time allows for a pre-offer inspection or a tool to pick up if a listing is languishing on the market.
Must the settlement be lightning fast? Should a buyer pay both a new mortgage and a locked-in lease while the seller moves easily and leisurely? An educated buyer can spot the right house at the right price before walking in the door. However, they have to see, touch and feel it to know if they should pull out all the stops or pay a premium. A “gesture” like settling quickly and/or letting a seller stay in their home for a month after settlement might cost a buyer upwards of $5,000 on an $800,000 home, but can be far more positively impacting than were the $5,000 simply thrown at the purchase price.
Hot market real estate stories and agent fish stories can promote the idea that buyers need to load big cannons for every available house on the market rather than assess the firepower they need on a home-by-home basis. It’s not an exact science, but the truth is that excluding a few outliers, out of 59 properties sold year-to-date in Capitol Hill extended, only 21 homes sold above full price. Of those, only 7 percent sold at or more than 5 percent above list price, which is what some might call a “bidding war.” And the rest? Twelve homes sold at list price, while 18 were below list price.
Buyers, take heart, the only thing you have to fear is fear itself (and the lack of solid intel).
More than 60 homes have been listed for sale to date this year within the boundaries of the Capitol Hill Historic District. More than a third either remain available or have failed to sell (withdrawn or expired).
- Highest price: 700 7th St. SE, at $1.495 million. With C2-A zoning, this building is currently divided into office spaces, but small offices don’t buy pricey buildings, so the best use might be residential. For only a few hundred thousand more, and a couple of conversion headaches, you could easily create a $2 million manse just off Barracks Row.
- Lowest price: 419 9th St. NE, at $748,000. A wonderful façade with approximately 1,200 square feet of living space, plus a garage and a solid location. A really good buy due to easy improvement opportunities.
- Average days on the market for all active properties: 28
Properties under contract:
- Highest price: 135 11th St. NE. A beast of a house just north of Lincoln Park, and at zero days on the market (sold off-market), the list price of $1.995 million is likely the contract price. This is a record breaker for the block.
- Lowest price: 906 12th St. SE. It’s a two-bedroom house down by the freeway with only 1,100 square feet of living space, but what do you want for $549,000?
- Average days on the market for all under-contract properties: 8
- Highest price: 214 11th St. NE. Listed at $1.375 million, sold for full price in 10 days.
- Lowest price: 1210 Potomac Ave. SE. Originally listed at $595,000, reduced to $495,000 after 20 days, then dropped another $90,000 for a final sale price of $405,000. A developer will likely turn that into a high $600,000 home for resale.
- Average days on the market for all sold properties: 11
The Capitol Hill Market, particularly within the historic boundaries, remains stable and robust. The number to watch is “days on market” for the first category, the actives, as the months go by. I’m paying close attention to inventory and interest rates.
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.
Selling on your mind?
One of the most ironic aspects of selling homes is the tertiary nature of the repairs and upgrades that bring the greatest return. I’ve seen a $3,000 paint job lead to bigger bucks than a $12,000 bathroom, dollar for dollar, in real time; triple that return comparing a new $8,000 roof to $2,500 worth of not-very-unique staging; and five times the profit pitting new insulation against new carpet installation.
The only conclusion I’ve come to is that we buy with our hearts when we look at something as personal as a home. Left to their own devices, in residential real estate thinkers don’t spend and spenders don’t think. Fortunately for both, and many sellers as well, the strength of the Capitol Hill market has provided a good deal of forgiveness for financial mistakes.
If you’re planning to sell your home in the next five years or so and wondering about smart improvements, your attention is probably drawn to those things that bug you most — a cramped powder room, old windows or a small closet. They’re all worthy projects, but not necessarily worth the investment.
Here are some budget-minded answers to the “should we or shouldn’t we” questions that come up around bigger ticket improvements when you’re planning to move within five years.
Should we replace our old windows? Not necessarily (unless they’re boarded up). You’re unlikely to realize the energy savings within the five-year sale target date, but more importantly, simply removing the iron bars and metal storm windows that often accompany old windows, at a fraction of the cost, will net a greater return in real dollars. Hire a professional window washer for $150 to $300, or use mine — Easy-Off oven cleaner. It’s amazing!
Should we replace our old roof? Not necessarily (unless you can see the sky). Assuming proper installation, the lifespan of our roofs can vary wildly depending on their maintenance history. I’m not suggesting non-disclosure or “hiding” known defects, but let’s face it, roofers can be apt to suggest a full roof replacement at $8,000 to $10,000, rather than a $1,200 tune-up, including silver-coating and flashing or gutter repair. If your roof is sound, spruce it up and spend a fraction of the savings perfecting your interior ceilings, which are, after all, the first signs of a bad roof.
Should we add central air? Absolutely not (unless you’re selling in summer). This point is particularly beneficial to sellers who have a flexible calendar and whose sale is not driven by any requirements other than a desire to move. If you can, plan to sell in the milder months and spend a much smaller amount on cosmetic improvements. But don’t forget to take out your window units. Remember, DC property disclosures are defect-driven, not comfort-driven, so within the five-year sale window I would have to be pretty uncomfortable to install central air.
Should we enlarge our powder-room? Don’t you dare (potential purchasers rarely, if ever, use the loo before handing over the cash). Replacing the sink basin for $300, the light-fixture for $100, even reglazing the tub upstairs for $300 to $450, all have a greater impact and cost less combined than full-on reconstruction, even throwing in new tile in the shower. For better or worse, form beats function here.
We know our own homes intimately, perhaps too intimately. We know every crack in every cranny, and it drives our inner perfectionists crazy. We might know that twice a year, depending on the barometric pressure, our radiator pipes make a funny sound that we’ve always wanted to fix. We may know that our kitchen floor is too cold for bare feet in the winter, but it only becomes a defect when toes get frostbitten.
This is why, when planning a potential move, even one that’s five years away, it is so important to consult a third party. Not a roofer, who wants to sell you a roof. Not a plumber, who wants to sell you a bathroom.
But a REALTOR, who wants to sell your house!
Days on market (DOM) is a real estate term that strikes fear in the hearts of home sellers nationwide because time is a seller’s worst enemy, and the stigma of sitting on the market too long can be deadly. The correlation between time on the market and diminished sale price is well known. However the stigma, often thought of as the cause of a home’s poor performance, actually happens as a result of DOM.
On Capitol Hill, particularly within the Historic District over the past few years, a listing that’s still available after seven days on the market is enough to raise eyebrows. But for the rest of the country, 30 to 60 days on the market is when sellers are more likely to grow concerned.
In my experience, DOM is almost always about price. No matter what defect or deficiency a home may have, particularly those outside of the seller’s control, it can be cured by price. Whether it’s as permanent as limited outdoor space or as variable as noisy neighbors, it all comes down to the price. Cadavers in the closet can be cured if the price is right. A chef’s worst nightmare of a kitchen can be remedied by a seller, but how likely is that sort of improvement to happen once the home is on the market? Particularly if a stigma has become attached to the home.
Sellers: The market will tell you within 30 days if you have priced your home accurately. I’ve always said that Capitol Hill home value assessments are a moving target, particularly with fee-simple homes and especially within the Historic District. As homes increase in age, so do the opportunities for upgrades, modifications and style changes, some smart and attractive and some … well, not so much. If your home is a viable sale, you will know it very quickly. The vast majority of the ready, willing and able buyers for any given listing will see it within its first week on the market. What remains are those buyers who are either new to the market, or those who might come back for a second look after a price reduction.
Buyers: Follow those listings that you might like at the right price for a potential reduction, following a few weeks on the market. If offering below list, present the strongest terms possible to strengthen your case. Base your offer on logic and stick to it. If no response, spring is just around the corner. Just hope for more fish in the sea.
No, not the TV show! Thankfully, our neighborhood’s too slow for prime time; our homes lack a certain “slickness” required for HGTV exposure. Our gardens are more organically manicured. Even Hill agents are low-key — no suites, socks rarely, more likely to meet over a beer than a conference table.
The contrast between Capitol Hill, the slow-moving two-mile residential fan east of 1st Street, and Capitol Hill, the Wild Bill rodeo show up on the knoll, is ever amazing to me. The latter demands a camera, the former forbids one. It’s as if our village commands a peaceful posture, a laid-back attitude, a humble disposition as a revolt against the puffed egos in the dome next door.
Humility aside, home price-wise, Capitol Hill put on its big-boy britches in 2000, jumped the million-dollar mark and hasn’t looked back since. I remember that as recently as 1996, $400,000 was the price of close-in admission. Now, only 19 years later, under $1 million would barely get you in the door.
There’s no record of a residential sale above $1 million in our local agent listing service, Metropolitan Regional Information Services, until one month into the new millennium, when 712 East Capitol St. sold for $1.15 million, well worth the record-setting price with eight bedrooms, a carriage house, a triple lot and a “best-address” block.
There were only 28 residential sales north of a million dollars on Capitol Hill from 2000 to 2005, and all but a couple of these were within eyesight of the Capitol. That’s not a large number unless you consider that in the five years preceding 2000, there was only one notable record-breaker, barely above $800,000, at 816 East Capitol St., still a far cry from a million bucks.
From 2005 to 2010, the number of million dollar sales on the Hill skyrocketed to 149 sales, nearly six times the number of sales in the previous five years. The vast majority of these were still well within the Historic District boundaries, but many were beyond it. The $2 million mark was broken by a Washington Post book critic’s home at 5th and A streets NE, followed by a handful of others. It was a period of huge increases!
There have been 279 residential sales over $1 million from 2010 to today, but a $2 million price tag is still rare. And the market has barely begun closing in on $3 million.
Of course, many economic variables, not addressed here, led to these dramatic price leaps. I’m reminded however, that the time span from man’s first flight to man’s first step on the moon was only 60 years — a relative blip in time.
Otherwise, some may say it’s just a number, that millionaires are everywhere, but I say no way. A million bucks is, after all, a million bucks. That’s something …