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In this market outlook we review the most recent available data on the D.C. Metro area’s real estate market performance during the first half of 2017.

We focus on the following metrics:

• Sales
• Prices
• Inventory
• Property Type Performance
• Area Income & Employment

Unless otherwise cited, we refer to data compiled by Real Estate Business Intelligence.

We will present a summary of the key facts by analyzing this data, as well as provide a digest of what this data and the first half of 2017’s market conditions mean for you.

Sales

Total sales volume continues to increase year-over-year. May saw a year-over-year increase in sales volume of 9.7%. In June, we ended the first half of 2017 with over $3.4 billion in monthly sales volume—up 5.8% from 2016.

New contracts (6,668) hit their highest May levels since 2004. The volume of new contracts dropped in June (to 5,961), but they still remain above both the five year average (5,657) and the ten year average (5,081).

Recent closed sales have broken records as well. May saw 5,620 closed sales—the highest May level in over a decade, since 2005. Closed sales increased in June, up 9.3% month-over-month to 6,142, hitting a new high for the decade.

Properties are selling faster year-over-year as well. In June the median-days-on-market was only 12 days—two days faster than in June of last year.

Sales Summary: In the first half of 2017, we saw multiple decades-long sales records broken. May was an especially good month. While we saw a small dip in sales in June, overall the market continues to increasingly outperform all data we have on record.

Prices

In May, the median sales price in the D.C. Metro hit $460,000. This is the highest monthly median sales price on record. This data goes back 20 years. The previous monthly high occurred in June, 2016.

In June of this year, the median sales price dropped slightly to $455,000—the second-highest monthly price since 1997.

Median sales price in Washington D.C. ended June with a 5.4% ($30,000) year-over-year price increase. D.C. currently has the third-most-expensive median sales price in the Metro area (behind Falls Church City and Arlington). Yet D.C.’s median sales price increased at a faster year-over-year rate than either of those locales. (5.4% vs -1.6% and .2%)

Rental prices are seeing similar gains. The median rent for a one-bedroom has increased 2.57% month-over-month, and D.C. is now the fifth most expensive city for renting in the United States.

Price Summary: Housing prices are hitting the highest levels we have on record. With sales increasing and active inventory continuing to decline, we expect to see our market continue to break decades-long records.

Inventory

Overall inventory levels continue to drop. In June active listings were only 10,481—down 7.3% year-over-year. They are down 59.1% from the peak of 25,618 active June listings in 2008.

June 2017 was the 14th consecutive month that saw year-over-year inventory levels decline. (Despite the fact inventory increased slightly between May and June.)

Developers due appear to be attempting to meet this continued demand. We saw the highest June level of new listings since 2006. New listings in June were up 4% year-over-year. And June new listings are up a huge 39.6% over our 10-year low of 5,588 (from June 2012).

This increase has two components. The first, is a number of new developments that are starting to come online in the area. The second is a response to the metro area’s record prices—current homeowners appear to be selling their properties in greater numbers to take advantage of the premium they can now command.

Inventory Summary: We continue to see low inventory levels throughout the D.C. Metro area. While we’re starting to see a slight uptick in new listings on the market, the increased speed and price at which properties are selling indicates the new supply coming online is still not enough to meet demand.

Property Type Performance

The data segments sales into three property types—Townhouse, Condos, and Single-Family Detached Units.

Sales mostly year-over-year for all three property types. New contracts for single-family detached units did decrease 2.6%, but townhouses increased 3.3%, and condos increased .6%. For closed sales, we saw single family detached houses increase 1.3%, townhouses increase 4.8%, and condos increase 6.7%.

Prices increased year-over-year at the end of June for both townhouses (2.4%) and single-family detached units (3.6%). Condo prices dropped 1.3%.

Inventory levels dropped for all three property types, while new listings increased. Inventory declined by 5.7% for single-family detached units, 9.0% for townhouses, and 9.3% for condos. New listings increased by 1.5% for single-family detached units, for 7.0% townhouses, and for 6.0% condos.

Townhouses remain the fastest-selling property type, with a median-days-on-market of only 8 days. (Single-family detached units and condos both had a median DOM of 13.)

Property Type Performance Summary: Market performance was strong for all three property types. However, townhouses performed the most consistently strong, across all dimensions, while condos saw the most activity, but an overall reduction in prices.

2017 Mid-Year Summary: What This Data Means for Your

The D.C. Metro area continues to break pricing records, while experiencing severe reductions in inventory. While we’re beginning to see the first substantial crop of new properties hit the market to meet this demand—and more people continue to capitalize on increased prices to sell their properties at a premium—so far the market’s demand appears to be increasing at an even faster rate.

In short: the data indicate our market dynamics of under-supply, and over-demand, will not only continue, but they will only increase in the near future.

At Evergreen Private Finance, we work every day to help borrowers, brokers, and investors make the most of current market conditions. And the market data indicates we continue to operate within a particularly opportune moment in D.C.’s real estate market.

Contact us today to discuss how we can all make the most of these opportunities. Call us at (202) 713-9072, or email us at [email protected], to discuss how we can work together to create a diverse, livable city for all our residents.

We live in a changed city.

Our specific demographic data will continue to shift every year. But the major change—D.C.’s transformation into a city of the wealthy—has already happened. Any further shifts will simply make this more and more true.

In this article, we’ll discuss this change, its many significant positive implications, and some of the challenges this change has created that we need to solve together.

Washington D.C.—Now the Richest Metro Region in the Country

A recent report by Inman summarizes our city’s recent change succinctly:

“While the rest of the country got hammered by the Great Recession of 2008 and struggled to recover eight years later, a remarkable inversion occurred in Washington, D.C. … As real estate markets receded elsewhere, the District of Columbia blossomed… By some measure, our nation’s capital has become the richest region in the country.”

The report goes on to explain how these changes have made Washington D.C. one of fastest-gentrifying cities in the country:

“In Washington, according to a study by Governing magazine, 52 percent of Census tracts that were poor in 2000 have since gentrified—more than any other city bar Portland, Oregon. Young, mostly white, well-educated millennials have crowded into a district once build for largely for families.”

Reports like this have caused a litany of op-eds about the effects of gentrification. Some of them have approached this change from a negative perspective. Most of these negative pieces rally around a single idea— gentrification reduces poverty by pushing out long-term low-income residents. They argue that D.C. has only become a wealthy city by “pushing out” poor residents.

But, as we’ll see looking at D.C.’s population data, that may not be the case. There might be a more positive explanation for this change in D.C.’s demographics change into a wealthy city.

The Surprising Cause of D.C.’s Change into a Wealthy City

Gentrification of D.C. is nothing new.

As Inman’s report notes, gentrification has been occurring throughout the district for decades. In the early 1990’s it occurred in Dupont Circle, and over the following decade it transformed Logan Circle, then U Street, Columbia Heights, and Bloomingdale.

What has changed is D.C.’s rate of gentrification. These changes have been accelerating in recent years. But this change had less to do with an accelerating number of long-term residents getting “pushed out”, and more to do with an accelerating number of new residents arriving.

In the ten years between 2000—2010, D.C.’s population added about 30,000 people.

In the only the five years between 2010—2015, we added 40,000 people.

As the Washington Post notes:

“What distinguishes gentrification is not who moves out; it’s who moves in. In a gentrifying neighborhood, new residents are more likely to be well-off . As a result, the neighborhood’s poverty makeup can shift, even if no one leaves.”

The author went on to note that “a neighborhood’s poverty rate can drop from 30 percent to 12 percent in a decade with minimal displacement.” Why? Because new wealthy residents—like those who have been flocking to D.C.—shift the demographic data by their presence, and, as the author notes, this gentrification “often leads to new construction or to investment in once-vacant properties.”

More Positive Implications of D.C.’s Change to a Wealthy City

We are not blind to the fact that rising housing costs can create a burden for low-income residents and, yes, cause some people to have to move.

We’re simply pointing out that D.C.’s change into a city of the wealthy may have to do with more wealthy residents moving in, than it has to do with low-income residents moving out.

This is an important distinction. It suggests that D.C.’s overall change into a wealthy city does not mean D.C. has to be a city without many low-income residents at the same time, or one in which low-income residents don’t reap the same benefits as wealthier residents.

In fact, D.C.’s change into a wealthy city has produced many implications that are positive for all of our residents—wealthy and low-income alike. These include:

1. An Increase in Tax Revenue. As NPR recently noted, “the city’s tax base improved significantly over the past decade. As more people move into the city, its coffers are in a better position to fund new amenities and services.”
2. Improved Public and Private Facilities. Increased city revenues result in better public facilities (such as improved lighting, libraries, and community centers) and new, welcome, private investment (often in grocery stores and other necessary day-to-day retail previously missing from the neighborhood).
3. Improved Schools. In a recent article, a long-term D.C. resident made the point clearly, “When I was in fifth grade, my teacher didn’t even show up. The current school system is better than it’s ever been.”
4. Upgraded Housing Stock. Often when a property is handed down generation-to-generation, it maintains its original—often functionally obsolete—infrastructure. However, in the process of the development and sale of these properties, their infrastructure gets brought up to a modern standard of living.
5. Increased Property Values for Long-Time Home-Owners. Long-time homeowners can see the value of their property skyrocket. In one cited example, a D.C. resident purchased her property in 1981 for $42,00 now saw her property valued at $888,000 in 2017 (in part due to a massive $150,000 valuation jump in 2016 alone).

Looking Forward: Our Shared Challenges

In discussing the positive implications in D.C.’s change into a wealthy city, we don’t want to paint a perfectly rosy picture. This change—and our ongoing shift to an increasingly wealthy city—has raised many challenging questions. These include:

• How can we ensure all of D.C.’s residents benefit from the above positive implications?
• How can we best use our city’s increased tax revenue?
• How can we provide modern, high-quality affordable housing for our city’s low-income residents?

These are important questions to answer.

In future articles, we will bring more of our perspective on how to best answer these questions, and to tackle these challenges.

But for today, we’d like to hear from you.

What do you see as the major challenges and opportunities within D.C’s change to a wealthy city?

Hit reply and let us know. We’d love to discuss your perspective, and (with your permission) share your thoughts in a future article.

Direct Lender providing acquisition and development loans, bridge loans, and mezzanine loans.

Provide up to 80% acquisition costs and 100% development costs

65% LTV for stabilized assets

Washington, D.C., Maryland, and Virginia

Term: 6 - 24 months

Rate: 12%

Ability to close in 10 days

202-760-3073

[email protected]

www.evergreenprivatefinance.com

Direct Lender providing acquisition and development loans, bridge loans, and mezzanine loans.

Provide up to 80% acquisition costs and 100% development costs

65% LTV for stabilized assets

Washington, D.C., Maryland, and Virginia

Term: 6 - 24 months 

Rate: 12%

202-760-3073

[email protected] 

www.evergreenprivatefinance.com 

Hello Everyone!

I work for a private lender in the Washington, D.C. metro area and I am looking to get connected with real estate investors in the area. Feel free to contact me for any of your financing questions!

Katie