GDoN Revisited by Hipchickindc

In real life, hipchickindc is actually the not-so-hip Suzanne Des Marais, an associate broker with Urban Pace. Voted one of the best real estate agents in DC by the Washington City Paper Readers’ Choice Poll in 2009, Suzanne is currently Chair of the DC Public Policy Committee for the Greater Capital Area Association of REALTORS® and is President Elect of the Washington, DC Association of REALTORS®. She lives (and sells a lot of houses) in Bloomingdale, but works all over DC, with everyone from first time buyers to highly regarded developers.

Unless specifically noted, neither she nor the company that she is affiliated with represented any of the parties or were directly involved in the transaction reported below. Unless otherwise noted, the source of information is Metropolitan Regional Information Systems (MRIS), which is the local multiple listing system. Information is deemed reliable but not guaranteed.

Featured Property: 516 Buchanan St NW

Original List Price: $525,000.

List Price at Contract: $525,000.

List Date: 03/17/2010

Days on Market: 5

Settled Sales Price: $546,500.

Settlement Date: 04/16/2010

Seller Subsidy: $0.

Bank Owned?: No

Type Of Financing: Conventional

Original GDoN is: here.

Listing is: here. Virtual tour is here.

Last week, you may have noticed an UrbanTurf post about The Neighborhoods of 2015, which considered the up and coming ‘hoods expected to be hot in a few years. The Prince of Petworth, PoP contributor Kevin Wood, and myself were included among those asked to comment. Notably, Petworth was absent from the list; an omission somewhat explained by this Good Deal or Not Revisited (GDoN-R).

Ed. Note: I did not pick Petworth for the UrbanTurf article because the criteria I was given also made it clear that Petworth was already a hot neighborhood! (I was shocked to see Mt. Pleasant listed…)

Quite simply, once a house can be a Good Deal or Not (GDoN) post and be priced over half a million dollars (after having sold less than five months prior for sub-$200,000), and be declared a good deal by commenters, then perhaps that neighborhood is already past “up and coming”. Not to mention that it was on the market for a whopping total of five days and sold over twenty thousand dollars above list…for a house on a three syllable street!

A couple weeks ago, I mentioned that the first house on Capitol Hill to sell over a million dollars sold in 2001. A comparable milestone for Petworth was the first house to sell over half a million dollars, which came to fruition in 2004. The market peak of 2005 saw a total of 28 sales of fee simple properties in Petworth over $500,000., followed by the same total in 2007. The number of $500,000.+ sales in Petworth slowed down to 16 in 2007, followed by a disappointing total of 3 in 2008. In all of 2009, only 6 Petworth properties sold over the $500k mark. Almost at the halfway point for the year, there have already been 5 settled sales over half a million dollars. Petworth isn’t necessarily in line to compete with top of the Boom price activity yet, however, things are definitely moving along.

Of course, price is not the only measure of the health of a sub-market. Back in 2002, Petworth saw 192 fee simple properties change ownership hands. By 2003, that number progressed to 230, to a peak in 2004 at 268 transactions. Number of transactions progressively slid back to lows of 134 and 139 in 2007 and 2008, respectively. Foreclosure sales followed by re-sales of the same (but renovated) properties bumped the numbers to 201 transactions in 2009. So far, for the first half of 2010, there have been 109 settled fee simple sales, which is setting a nice, steady pace.

30 Comment

  • house looks great, i love the inside and big back yard w/ parking. the location is not the best for the hip urban youth though.

  • Wow. People are attracted to granite counters like moths to light. Over half a million bucks in sleepy area of Petworth with nothing to walk to and poor transit accessibility. Anyone with a flipping crew and a granite hook up should be descending on Petworth like vultures right about now. They pocketed 200k easy on that one.

    Hipchick- Would love to see a follow up on the bungalow flip on 13th from yesterday when it sells.
    I say wow only because I bought my house in Mount Pleasant for not much more. Of course it doesn’t have granite counters but it will soon. And can walk to just about everything. Don’t even own a car. As for the articles assertion that Petworth has arrived and MTP is up and coming? I mean. Do I even have to dignify that with a response? I do however agree with the articles take that MTP St is poised to experience a lot of change over the next few years.

    • Prince Of Petworth

      I was shocked to see Mt. Pleasant listed. You need to direct your shock at the author of that selection not me and Hipchick!

      And as a Petworth resident I can attest to the walkability! We just have to walk a little farther than you depending on where we’re going. But as we are hardy folks we love walking! And be honest you’re walking places too…:) Plus they have buses and I’d guess about only a 15 – 20 minute walk to metro from this address.

    • MtP has been poised to experience a lot of change for the last decade or so. I’ll believe it when the neighborhood allows it. There is just too strong of a NIMBY contingent keeping it back (but of course those same people would argue their actions are benefiting the ‘hood). We were *thisclose* to buying in MtP and decided against it only for this reason. The price premium over other areas of the city wasn’t justified enough.

      I always wonder about this animosity towards “Home Depot/IKEA” flips. They have a place in the economy if done right (and, yes, that is a big IF). I can guarantee that there is not a developer out there who would put a house together the way I want it unless it was on spec. Why should I pay a premium for higher end fixtures if it’s not what I want? Short of buying a shell and totally renovating (not an option for somebody who has other obligations) it’s a good option. The buyer gets a perfectly serviceable if somewhat bland house and can upgrade over time as budget and time allows. In the meanwhile they aren’t worrying about the walls crumbling or plumbing and electrical issues (IF the flip was done correctly and with a modicum of care; I know, not always the rule around here). This idea that every home for purchase should be a total gut job for the new owners or a kept-all-of-the-original details-and-Poggenpohl-fixtures gem is ludicrous. There’s a middle ground. And often it’s not the flippers fault that the vaunted “original details” are gone. That’s usually the fault of years of neglect or previous renovations.

      And, no, I’m not a flipper 😉

      • The famous Nimby has packed her bags and left for good. There is still a lot of anti-bar sentiment in the neighborhood but a good restaurant would not be met with opposition. And there are rumors that investors have been snooping around the vacancies lately. I agree the Nimbys have gone a long way to stall development of our strip but that was only possible because the Latino commerce could fill the void. As more and more disposable incomers move in and more and more bodegas and dollar stores go out of business the tide will change. In that sense Urban Turf is right

      • I own a Home Depot/IKEA flip, and I feel the same way about it. It looks decent, and we’re slowly replacing the home depot stuff with nicer stuff. Mine was priced fairly though. A lot of them are priced as if they were an expensive, high-end reno.

    • I thought it was agreed that except for the soft spots in the commercial district, Mt. P is not up-and-coming, as far as real estate, it’s come and gone? That’s what it seemed like when I was shopping for something in NW, a 2 BR+ but affordable in 2008. A house in Petworth goes for the price of a condo in Mt. P.

    • “Anyone with a flipping crew and a granite hook up should be descending on Petworth like vultures right about now.”

      -They already are, my friend. The flippers are waaaay ahead of you. A lot of these 200k properties are foreclosures. Ask anyone who has tried to buy one of these to renovate for themselves and they’ll tell you how often they get outbid by a developer offering all cash.

  • Per the Prince’s comment, neither of us had anything to do with the Mt. P comments on the post 🙂

    I think you may find some Petworthians who disagree with you about things to walk to. Having Metro within reach and businesses with buzz around them are huge selling points.

    • Wasn’t directing my shock at you or Prince. Just posting here since I saw it. Petworth is walkable for someone like myself. But most looking in the 500k+ range wouldn’t consider that location walkable to worthwhile amenities. Sure domku and salathai? maroni bros? MTP street IS lacking, but no more than Georgia ave. and a MTP resident has an easy walk to Adams Morgan/Ustreet. Even woodley and Cleveland park. That said a post flip house of that caliber in MTP would be a LOT more than 500k. It just always shocks me that people will pay such a premium for a decent flip when you can get a 100 percent livable house in a much better location and for as little as 8k have the whole thing painted. floors refinished. and granite installed. Makes me want to get into the house flipping business is what I’m trying to say.

      • I walk to Columbia Heights from Grant Circle all of the time. It’s an easy, breezy 20 min walk down New Hampshire.

  • I think there’s a lot of anti-good bar sentiment in the neighborhood. They have at least three crappy bars which is more than enough for a neighborhood of that size. 11th St, on the other hand, has at least two decent bars and one sure to be awesome, talk of NW, bar one the way. Go figure.

  • This place on Buchanan is a 15 minute walk to the Petworth Metro, but the bus stop for the 64 that runs down NH & 11th to downtown is only a block away. That bus also takes you to the red line Fort Totten metro if you happen to need to get to the red line.
    This neighborhood is awesome for a bike-to/bus-back commute because it’s almost all downhill.
    Another selling point will be the good DCAS scores at nearby Barnard Elementary and the proximity to E.L. Haynes and Bridges charter schools.

  • From a “what you get for the money” perspective Petworth has a lot going for it. Sure, you can walk to less than if you lived in Columbia Heights or Mt. Pleasant, but the prices are a lot lower as well. This house is close to several restaurants, the new Yes market and within 15 minutes of the metro. Plus the renovation was very nice – unfortunately a lot of the flip jobs aren’t very good, but this house shows that a well-renovated house can command a good price.

    Hipchick, thanks for posting the neighborhood sales stats for houses over $500K and numbers of sales – very interesting!

  • Hey PoP,

    How can you talk about the “first half” of 2010, when we haven’t even finished May yet? It seems that home sales in Petworth (and prices, perhaps) are going at an even stronger pace than you indicated.

    Incidentally, the May issue of Washingtonian magazine was devoted to real estate. It listed the 20011 zip code (16th St. Heights/Petworth) as “where the bargains are.”

  • The expiration of the homebuyer credit accelerated the demand . If contracts are entered into post 4/30 and close with the same results, then you can start to claim strength, but until then, the government has created buying incentives with low mortgage rates and the credit, that are driving the market. WDC has jobs, which certainly helps, but is it enough to maintain or increase housing demand? We shall see. If there is a second stimulus package, I wouldn’t be surprised if another homebuyer credit was a part of it, and maybe even a larger one.

  • This is great news for a friend who lives very nearby, but I have to say, I’m kind of shocked. The prices around here are just far more sticky than make sense to me. The longer term pricing trends just make no sense and given the really cheap prices flippers are paying, the differential is…surprising. Still, setting that aside – clearly it moved pretty quickly – so the price was pretty well in-line.

    I’m curious about hipchikindc’s suggestion that things are stabilizing or gradually improving – in terms of both price and transaction volume. I’m not sure how reliable the Realtytrac numbers are, but there certainly seems to be a lot of shadow inventory out there. Perhaps the banks are managing that inventory carefully.

    • I only understand about half of what Scott is writing here…sticky? Shadow inventory? Does that mean you don’t understand why someone would pay $525K for a detached renov. in a neighborhood that was full of $2-300K as-is houses last year?
      Here is a funky old thing, 6 BR, 1908 house selling for $263K that sold in 2006 for $465K. DC7349629. Whassup woth that?

  • The term “shadow inventory” relates to the idea that the banks are so backed up in processing modifications, short sales, and foreclosures, that there is really a glut of houses that have not yet hit the market but are lurking and when released will saturate our inventory.

    So far, in DC, the steady stream of foreclosures has resulted in a steady stream of investors returning to the market to scoop them up. If more inventory comes available at low prices, it will theoretically give more first time buyers an opportunity to buy at more affordable prices.

    Shadow inventory may be a scary concept in other parts of the country, but I think we’re good to go in that regard in the city.

    Many may not remember that there were a lot of foreclosures in the city that were just sitting around for a long time in the late 90’s, early 2000’s. They all sold then, and we’re in a much more optimistic real estate market at this point in time.

    • Um, so this is long, and the blog has marched on…but…

      “Shadow inventory may be a scary concept in other parts of the country, but I think we’re good to go in that regard in the city.”

      …or, paraphrasing…”it’s different here”. Maybe. My question is, why?

      Flippers are snapping things up, clearly, “renovating” (let’s not open that can of worms) and then finding buyers. So, I mean, if the properties are moving at these prices, that kind of answers the GDON (pricing) question. (Personal Disclosure: there is no way I’d pay this kind of insane price – it’s a nice house and a nice reno, but I’d buy a shell closer to the metro and pay 25% of the flip differential for the actual renovation work).

      What I guess really surprises me is that prices have been “sticky” (not fallen very much), given that financing is no longer nearly as easy to obtain as it was during the blow-up phase hipchickindc describes (crossing the .5 mil. barrier for what are very modest homes).

      I think the easy financing, more than any other single factor, *enabled* buyers to run-up prices (to wit: the many GDON commentators who say of properties, “sure, I’d totally pay that, if I had that kind of money”). Looking at the neighborhood, what else has substantially changed in the past twenty years to account for such big departure from historical price trends? The metro station and easy financing. Restaurants and other features have followed the Metro and rising housing prices.

      It certainly seems that there is a new fundamental quality/demand which is drawing (qualified at these high prices) buyers to the neighborhood, at a rate fast enough to soak up the listings as they come on. I’m wondering what that is. It’s a serious question – I would have though things would not be any “different here” or special. The prices really suggest I’m wrong about that.

      I think DC *is* different from the rest of the country in that our economy is protected from the vacillations of the broader economy – incomes here are much more stable, and so is employment (at least among the ranks of people who can afford to pay this kind of money for a house). Income and employment stability should prevent foreclosures, but those are still pretty steep. Maybe those are all among long-time residents, people who cashed out during the boom.

      Certainly a glut of inventory (I don’t know, but I’m guessing the 90s glut was a hangover from the S&L crisis that the metro’s arrival helped soak up) will eventually pass through. It’s the rate of adsorption that affects prices.

      Best Regards and thanks for your insight.

      • “what else has substantially changed in the past twenty years to account for such big departure from historical price trends? ”
        well, a gigantic and obvious difference is that the city is increasing in population instead of decreasing. so taking 20 yrs ago as the benchmark, you now have a continuous stream of demand, as opposed to a 40 year long continuous decrease in demand.

        • Exactly. People want to live downtown and don’t want to commute.

          We are now below a six month supply of inventory in DC. Mortgage rates are below 5% for a 30 year fixed (I just had a client convert to a 20 year because the rate was so low, it affected his monthly payment by not very much).

          As I mentioned a couple of posts ago, if more foreclosure properties hit the market than the investors can absorb, it will give first time buyers back the chance to buy the un-renovated properties. That’s a discussion we’ve had a few times on here…that unless you’ve got cash right now, it’s nearly impossible to compete with the investors.

  • “As I mentioned a couple of posts ago, if more foreclosure properties hit the market than the investors can absorb, it will give first time buyers back the chance to buy the un-renovated properties.”

    I’ll need to go back and re-read a few of those discussions; I have the impression that ‘investors’ are buying up only some of these at foreclosure – a lot are shown by Realtytrac as ‘bank-owned’ which I take to mean as the bank bought their own note at the auction and are holding the property, listed or unlisted (since nobody else was willing to bid that high).

    Why is it (other than not having cash for an auction) that first time buyers would have a shot at un-renovated homes if there were more on the market than there are now? I’m not following something about the mechanics of this. All I can see then is that banks are simply managing their inventory – not listing a lot of empty, un-renovated property.

    Yes, the population influx is important – I’d kind of forgotten about that – it has risen since 2000 until it’s almost back to 1990 levels (to address the 20 year window). That looks like a 4.5% increase in residents – that’s impressive leverage on prices.

  • Most foreclosures ARE bought back by the bank at auction. There are some investors who do catch properties at auctions, but typically they are getting them after they are listed. There’s definitely a lag in the processing time for the foreclosure to go from reposession to actually being listed. I had a property under contract as a short sale, which ultimately went to foreclosure and we just had to watch it every day for months until it popped up as a listing.

    Because properties in bad shape are harder to finance (because of condition, many require a complicated rehab loan), the banks are much more likely to take a cash offer over a financed one. Freddie and Fannie have an owner occ preference on their foreclosures, but most bank REOs will go to cash buyers.

  • “Because properties in bad shape are harder to finance (because of condition, many require a complicated rehab loan), the banks are much more likely to take a cash offer over a financed one”

    I was looking into a private purchase (non-foreclosure, yet) recently. My appraiser commented that no bank would lend (not a contingency) based on the current condition of the property (I see this in terms of FHA inspection guidelines, since FHA lending seems to be 95+% of the market right now).

    I think this may be the story: there is a lot of “shadow” inventory, which doesn’t count mainly because there is no way to work a conventional, conforming deal as is. I think this house on Buchanan is exactly an example of that. I’d love to see the appraisal.

    Lack of inventory for which financing can actually be obtained does really suppress supply and that makes the ‘sticky’ prices make more sense to me.

    Thanks for the exchange!

  • There’s no way that FHA accounts for 95%+ of the financing being done now. The majority of financing in DC is still conventional.

    Actually, it is FHA who does the most user-friendly rehab product right now for owner occupants. If the investors were not making offers, the banks would be more in a position of needing to work through these.

    Fannie and Freddie guidelines for a conforming insurable loan are that there is working plumbing, working kitchen, and a heat source. Outside of that, they are pretty flexible.

  • Yeah, that 95% number I picked up a while ago – right after the “collapse” in 2008 and it seemed improbable. I’m not surprised it’s wrong. I’ve looked at the FHA 203k series “rehab” loan information out of curiosity, and it seems pretty squarely aimed at this kind of property.

    So, if Fanny and Freddie are more flexible and the FHA rehab stuff is out there, then why are only all-cash buyers able to purchase the less expensive bank-owned properties? Are the banks just rejecting offers that are contingent on financing on the face? This doesn’t make sense unless there is some difficulty in getting financing done.

    Or are there just not buyers willing to deal with doing a renovation? I am taking a break from pulling out a bathtub as I gut a bathroom to post right now – hope you are having fun with your memorial day too!

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