After months of house hunting, Justin Markel and Holly Brunner finally finished packing their boxes last weekend and began making their move. The only problem was that they weren’t getting the house and backyard for which they’d been looking. Instead, their new place was just an elevator ride away, a larger rental apartment in the building Markel had been living in for the past three years.
"I have never saved as much money as when I was preparing to buy a house," Markel told UrbanTurf. "I was so petrified of buying something that needed to be repaired that I saved every penny."
Markel and Brunner had been under contract on a short sale in Petworth when they found a home being sold as part of an estate sale around the corner. So they jumped, only to be thwarted by FHA loans and left unable to cover construction costs. Now, between their mounting frustration and the shrinking housing inventory in the Metro area, they’ve decided to put off their search.
"We make pretty good salaries, especially in a town that is dominated by federal employees," says Markel, an attorney with the Department of Justice. "If we can’t afford to buy a house or a condo in a neighborhood we like, I don’t know who will."
It’s a chorus being heard throughout the city in the past few months, as eager buyers looking to take advantage of the first-time homebuyer tax credit have come up against a drop-off in housing inventory and increased scrutiny from lenders.
"People are getting a little panicky," says Carolyn Hurwitz, an agent with Keller Williams. "They want to take advantage of the credit, but they have to be under contract by April. There is less inventory now than we’ve seen for a while."
The market’s inventory is at the lowest point it’s been in the past three years, down from a high of 31,018 homes in May of last year to 22,260 in January, according to HousingTrack.com. A recent report from the Greater Capital Area Association of Realtors noted a 28 percent drop in the number of single-family homes on the market compared with the year prior. Condo listings were down 22 percent.
"Six months of inventory in real estate is traditionally the breaking point between a buyers and a sellers market," Lindsay Reishman, who heads the Reishman Group brokerage out of Dupont Circle, told UrbanTurf. "But right now, we’re down to 4.5 months. It’s obviously a positive sign for the D.C. real estate market, as we’ve absorbed the brunt of the bust. We’re also seeing more competition. When a house is priced right and it shows well, it sells very quickly."
Such was the case for Kurt Bersani, a client of Reishman’s who sold his two-bedroom, two-bath condo in Logan Circle this past November for $580k, slightly less that its list price of $589k. After only 17 days, he had three offers, two bidding wars, and a contract.
"I knew the neighborhood was hot, and at the time there were only about four comparable units on the market," Bersani said. (He looked at each of them and was unimpressed.) "I felt I blew away the competition."
Reishman says he’s seeing an increase in multiple offers, with about 30 to 40 percent of the homes he represents having had competitive bids in the past few months. And Hurwitz has noted an uptick in escalation clauses.
"People are still thinking it’s a buyers market, so they’re not expecting to pay full price," she said. "But now we’re seeing things getting a lot closer to full price or selling at full price. One of my listings recently went on the market and within four days we had seven offers, including a couple with escalation clauses. When I listed it I was preparing them for the fact that they might get lower offers. I was so happy to be wrong."
Realtors aren’t certain that the current drop off in inventory will persist. "During the winter we typically have less inventory, and with the severe weather, I’m sure a lot of people who were going to list decided to postpone," says Greg Scott, a broker and branch manager with Long & Foster in Capitol Hill. "Who wants to sell a property when there’s 20 inches of snow on the ground?"
Reishman thinks the current shortage of inventory may mean things have hit an equilibrium. "It’s a more healthy market," he says. "People are buying and selling when they have needs."
That’s the attitude taken by Jerry Sealy, an art director in D.C. who is looking to move from his current rental into a condo. Having just met with his realtor this week, he’s nonplussed by the current inventory drop-off.
"I’ve owned three different properties in D.C., so I know who I am and what my needs are," he said. "I’ve been in other markets when it was hot, and it’s a different kind of stress -- you have to overbid and practically give them your first child. The lending process is a lot more complicated now, but things in general seem so much more sane. And I’m patient and am not going to settle."
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