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A Condo Shortage by Next Year?

We're feeling a bit suspicious

By Will Smith

| Tuesday, Jul 7, 2009 | Updated 10:46 AM EST

Urban Turf

Could it be that DC’s condo market has corrected so rapidly in the last couple years that it has, in fact, over-corrected? The Washington Business Journal is reporting on a recent report from local real estate research firm Delta Associates which predicts there will be a shortage of condos by sometime next year.

How can that be? It seems like just recently people were worried about the glut of new condos -- and now they’re worried about a scarcity?

Delta says that the number of new condo units currently for sale has fallen to its lowest point in five years. Since condo development has come to a standstill, the supply will dwindle even further as units are absorbed by the market but no new projects replenish the pipeline. The result? Sometime next year the available inventory will fall low enough that prices start to rise.

But don’t expect developers to start putting up new condos anytime soon. First, many of those new condo projects that were forced to convert to rentals will convert back to condos. New construction will not occur in force until the 2012 timeframe, says Delta, when it is clear that the market has truly returned.

It is the boom-and-bust cycle often witnessed with new construction: strong demand leads to over-building and a glut, which is followed by years of under-building and scarcity, which is followed by strong demand and over-building, etc.

The takeaway for anyone contemplating buying a new condo is that, if Delta is right, prices won’t go much lower than they are right now.

For the full article from the Washington Business Journal, click here.

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