Market Update - Growth in supply continues to outpace sales

D.C. condos and co-ops

New listings in December were 53 percent greater than in the same month of 2004, with much of the growth, surprisingly, at more moderate price levels. Of the 332 apartments put on the market during the month, 129 were offered between $150,000 and $300,000. The $150,000-200,000 level had a 123.1 percent gain, to 29, while the $200,000-300,000 level posted an increase of 112.8, to 100. Every other price level but the one at $100,000-150,000, which declined from eight to four units, had double-digit increases below 50 percent.

By month's end, 878 condos and co-ops remained on the market, 131.1 percent more than at the end of 2004. But the total was lower than the 12-month peaks post last fall. Most remarkable were jumps in supply at $200,000- 300,000, up 243.8 percent to 165 apartments and at $300,000-400,000, up 251.9 percent to 190. At the two higher levels, there also were triple-digit increases. In the case of those priced at more than $500,000, the change in available units was from 138 in 2004 to 284 now.

Yet sales grew during the month and year. They climbed 8.6 percent December to December, reaching 265 ratified contracts, with the entire rise in activity at levels above $150,000. The biggest increase was 41.2 percent, to 24 apartments, at $150,000-200,000. There was single-digit growth between $200,000 and $400,000, and modest double-digit growth above $400,000. Volume was close to even with September and November but about half that of October and significantly lower than in every month since the end of 2004.

The market absorbed 23.2 percent of available apartments, somewhat higher than the 20.7 percent in November and 22.6 percent in October. In September, the market absorbed 25.4 percent of the 1,212 homes available. That rate compares with 53 percent in April and lower rates in each of the successive months, dropping to 43.5 percent in July and 38.7 percent in August.

In 2005, the average price of an apartment ballooned from $364,425 in 2004 to $425,525. In 2001, it was $231,744. Going up somewhat more slowly, the median last year was $375,000 in comparison with $325,000 in 2004 and 185,000 in 2001.

Single-family homes

The transition to a new market advanced further, with supply growing and sales falling. There were 9.3 percent more new listings, or 360, during December than in December, 2004. In absolute terms, the 104 homes put on the market at $300,000-450,000, were the most newly listed, but there were only 4 percent more than in the previous year. Below that level, there were small declines in inventory. Above that level, supply was up, ranging from 13.6 percent at $450,000-600,000, to 75 homes, as high as 78.9 percent, to 34 homes offered at a $1 million or more.

Inventory reached 945 by the end of the month, 61.3 percent more than in 2004, with high double-digit gains at every level above $150,000. At $300,000-400,000, the 251 homes on the market represented the biggest component, and it was 70.7 percent higher than in 2004 at the same time. The smallest increase was 30.8 percent, to 140 homes listed at $1 million or more, still seeking buyers.

Sales statistics for December were striking, below every month of the preceding 12. Volume was 23.2 percent lower than in the previous December, with the only rise in the slim single-digits at $600,000-750,000 and at above $1 million. In all, 251 homes found buyers, resulting in a 10.1 percent decrease of sales activity for the year, to a total of 4,887 versus 5,438 in 2004.

Only a few more than one in five homes went to contract during the month. The 21 percent rate of absorption was significantly lower than it was all year. In November, it was 24.9 percent. It was 26 percent in October, 28.1 percent in September, 35.8 percent in August and 35.5 percent in July. Earlier in 2005, the rates were far higher.

Despite the foregoing, prices ascended steeply. The average in 2005 was $627,502 in comparison with $510,262 in 2004, $412,127 in 2003 and $349,653 in 2001. The 2005 median was $490,000; it was $361,800 in 2004 and $224,500 in 2001.

What it all means

Clearly, the condo boom continues, though its days likely are numbered. (See Items of Interest above for more on that situation.) Apartment listings are spending more time on the market than in the heyday of recent years, and buyers have the luxury of shopping longer than at that time. But there is a mismatch between percentage increases in sales activity and percentage increases in supply - 9.1 percent growth in sales at $200,000-300,000, 112.8 percent in new listings and 243.8 percent in listings still active at that same level. There is a much closer parallel at the top levels, so it is possible that the asking prices – not necessarily the sales prices – of apartments will start to drop, especially between $200,000 and $400,000.

With respect to single-family homes, the disconnect between sales volume and inventory cannot be ignored. Buyer price resistance is palpable, and there is no reason to expect a change. Buyers are demonstrating unequivocally that many properties listed at almost every level are priced too high, but especially so those offered between $150,000 and $600,000 and $750,000-$1 million. The wise sellers will hear the message and act accordingly.

When it comes to purchasing a property, buyers are far more sensitive to monthly costs than to prices. It appears that they are adjusting to the truly modest rise in mortgage interest rates and changing market conditions more quickly than are sellers. At the same time, they are enjoying for the first time in years the opportunity to take the time to check out the market thoroughly, make a reasoned decision and bargain hard.

Out and About - Heaven can wait

Who could dispute whether $7.5 million is a lot to pay for a house? That's the price of one that has been on the market in chic Massachusetts Avenue Heights since last April, originally at $8 million. It's so big that finding the front door can be a challenge. With five bedrooms, five full and two half baths, the house is thus described by the listing agent: "Magnificent Baronial Tudor Revival estate on market 1st time in 18 years. Wood paneled walls, leaded glass windows, excellent entertaining space indoors and outdoors on terrace and terraced garden. Many fine period details. Half acre park like setting includes additional lot with secluded pool and guest house w. bath, frpl, kitchenette. Rare opportunity to purchase landmark Washington property."

Yet the listing fails to mention how much of the house is down at the heels, how lacking glamour it is, how impractical the layout. You would expect grandeur in a dwelling that costs so much, but the living room is too small for serious entertaining and looks more like a library than anything else, lined as it is with bookshelves. Not one of the five baths merits a second look, and the kitchen is humdrum, even if it is reasonably up to date. The agent says it can take time for a property at such an elevated price point to find a buyer. Of course! Especially when the price is unwarranted and based primarily on the size of its lot as well how posh is its location.

A house around the corner makes glaringly evident the defects in design and in pricing of the $7.5 million property. Once owned by former Sen. Jon Corzine, this unprepossessing house cascades down a hillside, with each of three levels opening to stunning wooded views via romantic balconies, large custom windows and French doors. There are four bedrooms, four baths and masterly design touches at every turn – from strategically placed rough-hewn beams to a massive fireplace and the interplay of textures and colors throughout. Architectural Digest and House Beautiful have lavished pages on the property, the latter magazine having rhapsodized: ". . . a touch of design alchemy transformed a 1920s cinder-block house into a classic pavilion in the garden."

The house has numerous wonderful qualities, among them a dramatic master bath with large cast-iron tub and separate stone shower; step-up dining room with sliding doors that can separate the living and dining rooms; European styled kitchen with the best of everything; three-zone heating and cooling; wiring for computer access in all the rooms; an electric dog fence; an antique 18th century stone fountain; and a private outdoor pergola-covered dining area with hidden grille, smoker and rotisserie encased in Moroccan tiled cabinetry.

It is offered at "only" $4.5 million. Although on the market for about two months, this thoughtfully designed house certainly represents excellent value, throwing into high contrast the overpriced behemoth not two blocks away.

Other properties seen in the past week:

In Bethesda, near NIH, a four-bedroom, three-bath Cape. Starting life in 1954 as a classic two bedrooms up and two down, the house now boosts two bedrooms up and two down with original baths on the two main floors. The late 90s addition resulted in a nonsensical floor plan (you have no idea where you are once you walk in the front door) of labyrinthine sensibility (a small kitchen that granite doesn't fix, family room with pretentious vaulted ceiling, freezing breakfast room, and one more small space behind yet another door for some undisclosed purpose). Priced aggressively at $769,000 for close to two months, this one is likely to sit a while longer.

• A three-bedroom, one-and-a-half-bath rowhouse in "extended Capitol Hill," meaning near Lincoln Park in this case. Approximately 90 percent renovated (some floors haven't been refinished, and the bath is unimproved), this charmer lacks central air conditioning. But it has many things going for it, including a small modern kitchen open to the living room, den, sunroom, rear deck, front porch and two parking places. Perhaps because of a typo or misunderstanding, it was listed originally at a bargain price of $479,000 but went up almost immediately to $530,000. Even at that amount, this house may well have found a buyer by now.
  
• In American University Park, a small three-bedroom, two-and-a-half bath Tudor in need of absolutely everything. This is a green granny sporting original woodwork and baths, teal shag from 1969 and a mustard yellow refrigerator from the same era. Great location and decent level lot make it a good candidate for renovation, but the $779,000 price makes that unlikely to happen any time soon.
  
• A beautifully renovated 3,000 SF Mount Pleasant attached rowhouse with five bedrooms, three and a half baths, including a nice rentable in-law suite, two-car garage, two decks, deluxe baths, new floors, handsome kitchen and aspirations to be sold for at least $1,049,500. Don't bet on it, though one less improved and without parking came in under a million down the block not long ago.
  
• In the Glenwood neighborhood of Bethesda, a four-bedroom, three-bath Colonial built in 1948. It's a decent brick house with nice lot in good location. Upstairs are tiny bedrooms and a small bath. Confusing room designations likely have made buyers hesitate: The dining room is now the kitchen, there is no dining room, and the den is now a bedroom with huge full bath right off the living room. And what is that room off the (now) kitchen? Originally priced at $799,000, now reduced to $775,000 – after nearly three months the market says it's still too high.
  
• A five-bedroom, three-bath rowhouse north of Logan Circle in the U Street Corridor, with one of those bedrooms and baths in the neglected basement and the others divided between two apartments for buyers who are smitten with narrow hallways, tiny unappealing kitchens and bedrooms that would function better as dining rooms. The owner spent $400,000 renovating the property. He should have saved his money, as should any buyer considering the reduced $995,000 asking price. The hot tub on the roof is small compensation for putting up with a renovation that tries to delude as new and wonderful rather than own up to its poor layout and cheap finishing.
  
• In Chevy Chase, D.C. right near Rock Creek Park, a three-bedroom, three-bath ranch built in 1957 on a hilly lot. This is an intelligent renovation where thought has been given to the way people live today, and an effort has been made to make the space work to its fullest extent. The well-designed kitchen has top-of-the-line appliances and is open to the large living/dining area. The baths are brand-new, as are the wiring and plumbing. And the lower level features cool storage, a beautiful fireplace and loads more living space. On the market just two weeks, time will tell what the market says about its $799,000 price tag.
  
• A two-bedroom, two-and-a-half-bath, bi-level condo with in-unit washer/dryer, a lot of space taken up with a staircase, and a decent open kitchen into which you enter the apartment in a Penn Quarter building with numerous amenities, not including free parking. The asking price of $599,000 with a $634 monthly fee is quite reasonable for the location, given how much such units sold for in the recent past.
  
• In Glen Mar Park in Bethesda, a four-bedroom, three-and-a-half-bath 1966 brick Colonial. Badly placed on a busy corner, this house smells musty and neglected. The galley kitchen needs a total makeover, the baths are original (think Barbie pink tile), and the garage is now a cavernous "family room." Other than its Bethesda zip code, there is very little to make a buyer even think about this house. Originally offered at $749,000 in October 2004, the price is (448 days later) $749,000. 'Nuff said.
  
• Attached rowhouses that have been converted near downtown D.C. into six look-alike condos offered as high as $925,000 with fees as much as $266, plus two interior spaces for $60,000. These units are long on sizzle, but the steak is a bit thin, just a bit. Because the houses are relatively narrow, so are these multi-level units with most rooms on the small side, some kitchens awkwardly laid out and views soon to be blocked by an 11-story building.
  
• In Mount Pleasant, a nice-enough four-bedroom, three-bath rowhouse with inviting front porch, undistinguished rooms, parking for one car, an okay kitchen, an in-law suite for much disliked parents, and a little deck. Two years ago, a house like this would have sold for $200,000 less than the current asking price of $725,000, which today seems to be optimistic.
  

Out and About - Some like it hot

Have a look at your wardrobe. See that suit from two seasons ago. Still like it? Think back to that must-see movie of 2003 that you stood in line to see. And how about tiramisu - do you crave it now? You probably don’t even remember fruit-flavored vinegars as the must-have bottle in your pantry. So, too, with two- and three-tone cars with big rear fins if you’re old enough to recall them. Let’s not reflect even a moment longer on the popularity of mauve, autumn gold and avocado green as hot colors, on shag as the rug to own or on knotty-pine paneling as the perfect covering for a rec room wall. Does anyone retain a fondness for grass cloth?

To some degree or another, all of us are affected by trends. When it comes to real estate, they are not a trivial consideration. It cannot be irrelevant that anyone with an eye can spot a kitchen that is of a decade, scorning one as oh-so ‘70s, or ‘80s or ‘90s. The unfortunate underbelly of trends is that they inevitably become old and dated, and that is the danger of falling victim to them.

What will we think a decade from now of the kitchens of today? How rare is the new one that is not equipped with stainless-steel appliances, finished with stone countertops and graced with solid-wood cabinets. They are beautiful to be sure, but is the danger not great that we will weary of seeing those kitchens a short time from now and wish we had opted for originality instead of a trend? The betting here is that the answer can be only - yes.

Ponder, as well, our infatuation with hardwood floors, neutral colors, halogen lighting, wall-mounted flat-screen televisions, and great rooms instead of living rooms. Assuming that past is precedent, their time just has to come.

A case in point is a lovely end-unit townhouse in Wesley Heights with three exposures, unfortunately many of them a blaring horn away from Massachusetts Avenue. But the kitchen is everything you’ve come to expect: It has cherry cabinets, granite countertops and high-end, though not brand new appliances. Virtually open to the small dining room, the kitchen is undeniably handsome and unabashedly like almost every one being updated or newly built today. Will it seem so winning 10 years from now? Will you be contentedly driving the same car then?

Still, this brick home has much to praise - among other things, hardwood floors throughout; through French doors, a patio that may not, however, get much sun; nice living room with wood-burning fireplace; a second floor with two smallish bedrooms, each with a private bath; and third-floor master suite with a sitting area that is little more than a big landing. They’ve done what they can with the good-size family room in the basement, but there are zero windows. This 1979 property is listing for a not unreasonable $920,000 with a monthly fee of under $300, which includes only snow removal, landscaping, night guard and trash collection.

Some other properties seen in the past week:

A two-bedroom, two-bath apartment in D.C.’s waterfront neighborhood. The kitchen apparently harks back to the construction of the 1996 pet-friendly building, the baths are out of date, and entry is into a long hall past the bedrooms before entering the expansive living area. But this 1,485 unit with treetop and swimming pool views toward the Potomac leaves plenty of room for improvement. The $499,000 asking price is fair.

A memorable five-level, bayfront 1885 rowhouse in Dupont Circle. This house with very high ceilings, a welcoming reception hall, exquisite millwork, multiple fireplaces with antique mantles, two-car detached garage, two-zone heating and cooling system and an unusually well done rental unit had almost everything. The only defects might be the L-shaped commercial-grade kitchen (with electric bake oven, six-burner Vulcan range and a salamander) and somewhat outdated, generally modest baths. But if this house has so much original, unrestored and gorgeous period details, including those mantles, pocket doors, built-ins and inlaid floors, who cares? It is listed at $1.875 million. Since there is no way to put an objective value on the character of this property, it may well be the right price.

A newly constructed seven-unit condominium in the U Street corridor. These are strikingly stylish apartments in a contemporarily designed building, but they suffer from impractical layouts and little in the way of spacious bedrooms or closets. Offered at prices ranging from $529,900 (for 1,116 square feet, two bedrooms, a bath and something called a balcony within the unit) to $869,900 (for 1,580 square with two bedrooms, two baths, den, balcony and terrace) with condo fees of $299 to $415, these units have been on the market for quite some time; only one has sold. No wonder.

In Cleveland Park, a mundane 855 SF two-bedroom condo in a 1944 garden apartment complex that permits cats and possesses a highly convenient location. The kitchen and bath in this apartment go back a while, the rooms are all small, and the hike to the door is three flights. It is offered at its lowest appraised value of $397,500 with a $276 monthly fee.

Forty units in a condo conversion still under construction just a block or two from the Tivoli development in Columbia Heights. The apartments, of which six have been sold, range from $279,500 for a 625 SF one-bedroom basement unit to $449,500 for a two-bedroom 903 SF condo on the top floor. With the usual glam kitchens and baths, these apartments have decent-size rooms, and the views from the top floor are excellent. It is said that parking spaces can be rented a block away and that monthly fees estimated between $206 and $365 will be paid by the developer for the first year if a designated lender and settlement company are used.

In Kalorama, a semi-detached rowhouse that was renovated a few years ago with commendable taste. Although the laundry is crammed into the basement of this four-bedroom, three-and-half-bath home with an additional two bedrooms in an au pair suite, nothing else warrants criticism – from the show-stopping kitchen and the well-proportioned rooms with high ceilings to the parking spaces for two cars. It is listed attractively at $1.55 million.

Close to Adams Morgan on a charming block in the U Street corridor, a three-bedroom, three-level attached dollhouse with one and a half baths, tired kitchen just at the entrance, wood-burning fireplace, small patio and a Murphy bed that conveys. Officially built in 1900 but more likely a quarter century earlier, this little rowhouse, which lacks parking, is an excellent condo alternative. It is well priced at $599,000.