D.C. Market Update - The market is adjusting

Condos and co-ops

With inventory growing and sales slipping, prices in June have fallen below last year's levels but remain well above 2004.

There were 44.7 per cent more new listings last month than in June of 2005, with at least double-digit increases at every price point but two - $700,000-800,000, which had 19 percent fewer, to 17; and $1 million - $1.25 million, which was off 25 percent, to 6. The bulk of condos and co-ops put on the market – 669 of the 890 total – occurred between $200,000 and $600,000, with 225 of them at $200,000-300,000. By the end of the month, there remained 1,684 active listings, 275.9 percent more than at the same time last year. Some categories experienced huge triple-digit growth. The biggest was at $200,000-300,000, which shot up 480 percent! At $100,000-200,000, the increase was 456.5 percent, and it was 411.5 percent at $300,000-400,000. Consequently, supply is greater than it has been in each of the preceding 12 months.

Sales activity was down 16.9 percent on average, with most of the decline recorded between $200,000 and $700,000, where the 291 ratified contracts of a total 370 compared with 384 a year earlier. June sales were a bit below May's, above April's and below March's. For the year to date, sales volume was off 16.1 percent at most price levels with the exception of the following: 224 at $150,000-200,000, up 44.5 percent; 26 at $800,000-900,000, up 4 percent; 17 at $900,000-1 million, up 30.8 percent; and 13, unchanged at $1.25 million-$1.5 million.

The market absorbed just 18 percent of the available units, below the pallid 19 percent in May. Not surprisingly, the average price has dipped from $426,576 in 2005 to $411,398 this year. In 2004, the average was $364,460. As for the median, it has gone from $375,000 to $359,900. It was $325,000 in 2004.

Single-family homes

Supply is beginning to taper off. The number of new listings in June was only 7.4 percent higher than one year earlier in contrast to May, when there was a 23 percent gain over the previous May. Surprisingly, there were in June actual double-digit declines ranging from 8.3 percent ($1.25 million-1.5 million) to 72.7 percent (under $150,000). Other price levels posting fewer homes added to the market were at $150,000-200,000 (down 65 percent to 7); $600,000-700,000 (down 12.9 percent to 74); $700,000-800,000 (down 12.5 percent to 56); and $800,000-900,000 (down 44 percent to 28). Although all increases were in the double digits, the price point with the most new listings was $1.25 milion-1.5 million, up 75 percent to 28. In all, there were 744 homes put on the market. At month's end, 1,381 homes were still seeking buyers, 109.2 percent more than in 2005 at the same time of year, when they numbered 660. At prices between $200,000 and $900,000, there were triple-digit increases up to 232.5 percent ($200,000-300,000). Above $900,000, the changes were in the solid double-digits, but June's inventory was very slightly lower than May's, the first reduction, however small, since fall into winter. By far the most supply was attributable to the 282 homes active at $400,000-500,000.

Meantime, declining sales volume at every price level but one contributed mightily to the growth in inventory. A total of 376 homes went under contract in May versus 496 in 2005, off 24.2 percent. At $1.25 million-1.5 million, there was a gain of 21.4 percent in sales activity, to 17. The $300,000-400,000 level was essentially unchanged, with a 1.1 percent decline to 86 from 87. Every other price level went down in the moderate double digits, and June sales were lower than they were all spring and most of the fall. They averaged 19 percent lower for the year to date, to 2,238, than in 2005. Homes listed at more than $1 million displayed the most stability, either slightly rising in sales volume or edging down a little. The absorption rate has slid from a low 22.3 percent in May to a lower 21 percent in June, but high-end sales apparently boosted the average price slightly, from $628,179 in 2005 to $646,817. Yet the median has slipped from $489,000 to $486,770.

What it all means

The markets for apartments and single-family homes clearly are diverging. It seems as though single-family home sales and inventory figures may be showing the earliest signs of a slight move toward normal equilibrium. As for condos and co-ops, that market is some distance from balance, as supply keeps climbing and sales fail to recover. In general, buyers have taken to the sidelines, waiting to see whether prices will continue to fall and whether the risk of interest going ever higher is worth taking. The rental market is tightening up in the region, and cautious buyers are the chief reason. This market has firmly entered a time of wait and see.