Over this weekend, a condo on our block went under contract. It had been on the market for only three weeks or so. Asking for the 880 square foot one-bedroom unit was $399,000. Of course, we won't know the sale price for a little while. The last unit to sell The building lacks any amenities other than basic upkeep, but the unit is very large and quite attractive -- wood floors, new remodeled bath, nice kitchen, sunlit living room, fire place. My question to you is whether you believe $400k to be a fair price for such a place in Logan. The last unit to sell in the building went for $340k in November of 2006, and the present owner of the unit under contract paid only $150k in July of 2000.
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Just to clarify a few things based on the comments:
I think that the purchase price in 2000 matters because
1) I truly have a question as to whether a 267% return on any investment over eight years is unreasonably high (the socialist in me says that it is, especially given wage and inflation trends in this decade);
(2) I'm curious as to whether, given the current market conditions, people think that this unit might be worth $60k more than a comparable unit with parking that sold in 2006;
(3) I do see the argument that if a buyer and seller reach an agreement then the price is fair, but, again, I am interested in knowing the general opinion out there. I also know that plenty of people within a few block radius paid more for condos with less square footage and higher condo fees. In many cases, the newest developments seem to be much more highly priced than comparable older buildings in good condition. Any thoughts on whether or not the new construction is worth it?Right now and in the recent past, we've seen a number of row houses and condos for sale for many months that haven't gotten a contract. I wonder if this unit selling relatively quickly is a fluke of luck or if it was "priced to move."
I'm very traditional/conservative about investment and savings. I believe that the old guidelines about spending no more than two and a half to three times your gross annual income on a home purchase makes sense. I also think that spending no more than a third of your gross income minus debt on housing-related expenses is the limit of affordability. I say this because I believe not only in the value of home ownership but in the importance of saving as much as possible for retirement, keeping 3 to 6 months income near liquid for a "rainy day," and saving for non-housing related goals such as buying a car, going to school, paying for a wedding, or planning to start a family. At the current prices for one-bedrooms in Logan, it would seem that either 1) people have a huge amount of equity that from previous home ownership that they are now investing in homes in Logan; (2) new buyers in our neighborhood are in much more debt than traditional guidelines would recommend; (3) incomes of new Logan residents are extremely high.
I worry for the longevity of our neighborhood growth and continue improvement are at risk because there might not be too many potential Logan buyers with the requisite level of income. Are people with that level of income already settled into homes in which they will remain? In other words, is demand dwindling?
On the other hand, are there an increasing number of residents in our neighborhood who, because of being upside down on their mortgages, will be less likely to sell in the near future? In this case, would housing supply become overly tight?
Lastly, do we residents of Logan worry that there isn't enough affordable housing to maintain diversity and basic social equality in our neighborhood and surrounding areas? Are prices going to cause Logan demographics to skew toward older dual-income affluent residents? Do we care if this is the case?
I guess that I was asking a far more nuanced question than simply whether $400k is a fair price for this home. I think that my mind may be on the overall central DC real estate market and the pros and cons of recent price increase and the unprecedented overall increase in the percentage of US residents who own homes.
Monday, May 19, 2008
Condo Under Contract
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7 comments:
Ummm...what is your question? A condo in DC sold for (something around) $399,000. Is that a surprise? Have you not been paying attention for the past few years? If someone was willing to pay it, then that's what it's worth (at least to that person).
Ditto what the previous poster said and also, what the previous owner paid in 2000 has nothing to do with anything.
Anonymouses...
The snarkiness around here is getting pretty thick. Clearly, since we operate this blog and live in the neighborhood, we have *not* been paying any attention whatsoever to the real estate market, and the fact that prices are what they are completely took us by surprise, made us smack our foreheads and exclaim "gee golly gosh" in a nice midwestern twang.
The question (as clearly stated in the post) was "is this a fair price for a (1 BR) in Logan?" As in--with prices starting to drop across the region (even in DC itself) is $400k a reasonable price for a one bedroom condo? Simply because someone is "willing to pay" that price doesn't necessarily mean that it's a reasonable price. And we're not saying whether it is or isn't; only that a casual perusal of real estate listings in the neihgborhood seems to show a number of 1 BRs going for less.
Sorry if my comment was taken as snarky. I think your clarification of your original question is helpful. As you note, your thinking behind it was much more nuanced than your original entry conveyed.
I agree that some prices in these neighborhoods (in full disclosure, I live in Adams Morgan) are insane/unreasonable, and as we've seen, unlikely to be able to be sustained.
I paid $83,500 for a 500ish sq. ft. one bedroom condo in 1996, and it could easily go for almost $300,000 now. I love my place, think it's great, but there is no way I would EVER pay that kind of money for it. So, is $399,000 "reasonable"? Not to my mind, but again, if a buyer is willing to pay it, then perhaps it's reasonable to them.
I think eventually (though DC seems to be lagging behind the rest of the nation) prices will correct themselves. I've definitely seen a slow down in sales in my building/area, which is prompting reductions in the (inflated) selling prices.
I'm guessing the seller of this particular condo lucked out with a buyer who was 1) in a hurry 2) didn't do his/her research on the area or 3) is independently wealthy and blows his/her nose with $100 bills. (Had to throw in a little snarkiness for good measure...)
Couple things, as someone who just bought in the neighborhood. Interest rates are way lower now, so your perception of how costs translated to salaries almost a decade ago aren't compatible. So a dual income household, of even "regular" salaried folks can obtain 400k if they aren't carrying much debt, fore go 2 cars, etc. Throw in the appeal of this area to the high salaried set and you see how the demand increases.
As for it being actually worth that, I'm of the belief that if your mortgage payment is within 85% of what a current rent payment would be for the same home then you're probably safe. The area is incredibly desirable and is on the minds of anyone who's been here a year or two.
Final thought, yes the older buildings are selling for less per sq ft even if they've been completely updated. I think this has to do with how developers carry debts on their books. An individual can sell for whatever they please, reduce price etc, as long as they can pay back their mortgage holder. A developer has to be careful about not underwriting debt so the 500+ per sq ft prices your seeing in big buildings is a reflection of their false assumption of where the market would be way back when they took out their loan. I think they think they can sit it out for a year or 2 till those prices are inline with inflation, but for the time being the older buildings are much better deals.
Even though we hear how bad the housing market is elsewhere, DC is still chugging along very strong.
Condos priced at a far market value are selling extremely fast. Pretty much, and condo priced under $400k in one of the "hot" locations in DC will sell in no time.
Market value is determined by a mutual meeting point of buyers and sellers. It is an ever changing value, but one that historically increases by 3% annually.
Even though we hear how bad the housing market is elsewhere, DC is still chugging along very strong.
Condos priced at a far market value are selling extremely fast. Pretty much, and condo priced under $400k in one of the "hot" locations in DC will sell in no time.
Market value is determined by a mutual meeting point of buyers and sellers. It is an ever changing value, but one that historically increases by 3% annually.
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