DC Condo Market Tightens Again in June

What a difference six years makes in real estate! The peak for condo & co-op inventory in the history of DC occurred six years ago in June of 2006. On the sixth anniversary of the peak, inventory has dropped 49.1% (827 vs. 1,684) according to the most recent data released by the Greater Capital Area Association of Realtors. (Click here for the report)

Supply Side
On a monthly view, new inventory coming on the market dropped 6.4% from a year ago (470 vs. 440), while that’s good news it lags the pace that was set in the spring of the year. The total available homes to buy is down 31.5% compared to last year, which is incredibly strong. (1,027 vs. 827).

Unlike the house market, the condominium inventory is down pretty evenly across all price ranges except the $600,000-$700,000 and $800,000-$900,000 ranges where the inventory is actually up year over year.

Demand Side
One major divergence between the condo/co-op market and the house market is on the demand side. Unlike houses, condos and co-ops have seen demand pick up in the last month versus the year as a whole. The total number of contracts for the month is up 21.9% last month vs. 2011 (283 vs. 345); this compares to the total contracts for the year which is “only” up 17.5% (1,512 vs. 1,777).

Summary
It’s interesting to see that the market for condos/co-ops is able to absorb everything on the market and continue to bring down the inventory levels. This  inventory decline is drawing the “shadow inventory” onto the market.

In the past six years owners who could not sell their condos/co-ops chose to rent their homes to defray costs. Now that the inventory is shrinking and pricing is starting to firm up, the owners are putting their units on the market. But, we are not going to see a flood of shadow inventory come on the market. Here's why:

The ridiculous tenancy laws in DC effectively prevent owners from selling their homes for market price while tenants are occupying the home. This means that landlords are waiting until tenants leave their properties before marketing them. This process of getting rid of tenants can take months or years and this artificial restraint on the market is slowing the pace at which the shadow inventory reappears.