As featured on Urban Turf
All cash offers. Seventeen bids. Escalation clauses of several hundred thousand dollars. No contingencies. Personal appeals to the seller. These are just some of the more commonplace dynamics in play in the current DC housing market, a market that has been more competitive for buyers than any year in recent memory.
Real estate agent Todd Vassar recently shared word of a Capitol Hill home that he would be listing, with other realtors in his network. Shortly thereafter, seven home inspections were scheduled to take place prior to the home hitting the market, a commonly-used tactic so that buyers do not have to include a home inspection contingency in their offer. Eight offers ultimately came in, a bidding war ensued, and the home sold for $192,000 above its asking price. Not long after this, a home in Mount Pleasant received ten pre-inspections and sold for $225,000 above asking.
“It’s not unusual to hear, after a property went under contract, that the seller received anywhere from 8 to 13 offers and the price escalated at least $100,000 above the list price,” Compass’ Pam Wye shares. “The reality of competing in this market is that if you’re writing what you think is a competitive offer, you have to remember that your competition could be a buyer that is submitting their third offer and is ready to put together the profile of an offer that is going to win.”
In addition to buyer frustration, competition can be drummed up in certain cases when a home just might not have been priced accurately.
“Somebody told me the other day that there were 17 offers on a property, but I think that that just shows that the property was priced really artificially low,” David Getson of Compass told UrbanTurf.
The change in supply year-over-year
While the market competition could be attributed to a variety of factors, it largely boils down to a supply and demand imbalance that has plagued the DC area for years.
In 2015, UrbanTurf reported on how an increase in housing inventory was doing little to quell the frenzy of the regional market. Since then, new development has done little to ease the increasingly constrained supply of homes for sale in the city. Consequently, home prices have been hitting long-time highs almost every month since briefly plateauing in October.
“Lack of inventory has consistently been a driver of price appreciation, which is great for sellers,” explains Jonathan Hill of Bright MLS. “Part of the paradox about price increases is that sellers see the equity in their property increasing, so unless there’s a pressing need for them to move — either to increase their living space or because they’re being transferred for work — many people are content to stay in their equity-generating, appreciation-generating asset.”
Constrained supply is not just an issue for home buyers. OPaL’s Sean Ruppert has experienced stiff competition when it comes to purchasing parcels of land for development, although he prefers not to participate in multiple-bid situations. However, with his recently-delivered New Union Garage project on Capitol Hill, Ruppert benefited from the competition drummed up by the constrained supply — two of the three luxury condos sold within days of being listed despite carrying price tags above $1.4 million.
Similarly, Ditto Residential listed a six-unit condo development on 6th Street NW on a Friday evening in March where the average price exceeded $1.1 million, and by the following Tuesday night, all the units were under contract. While the breakneck speed of these sales can certainly be attributed to the brand that each of these developers carries in the DC marketplace, it also illustrative of the current climate in the market.
“We definitely benefitted from [the competitive market] because the people that end up buying our homes have been through that situation and lost,” Ruppert acknowledges. “In order to be able to buy something and just straight-out write a contract and let it be ratified is really kind of a wonderful situation to be in these days.”
However, it’s a situation that seemingly fewer prospective homebuyers in DC can expect to feel for the foreseeable future.