Emily White spotted the listing on a Friday night in January. A three-bedroom detached house in DC’s Brookland neighborhood—exactly what she was looking for.
She immediately contacted her agent, who arranged for White, a 29-year-old University of the District of Columbia employee, and her boyfriend to visit the property the next morning. When White arrived at 10:30 am, she was surprised to see another pair of potential buyers already inside. “It had only been on the market for 12 hours,” she says. By the end of the open house on Sunday, more than 100 people had visited the property and four offers had come in.
White and her boyfriend raced to put together an offer of their own. It included an escalation clause, which increased their bid to $105,000 above the asking price. But it wasn’t enough. They lost the house to an all-cash buyer who was willing to close on the property within a week.
If you’re not in the real-estate market yourself, you probably haven’t even noticed. But for would-be homebuyers, stories like White’s have become increasingly familiar. Last spring, a couple won a bidding war over a house in Gaithersburg by agreeing to adopt the seller’s dog. In December, a four-bedroom, four-bath fixer-upper along Northeast DC’s H Street corridor attracted 168 offers in two weeks. The following month, a penthouse in Chevy Chase sold for $8 million—the highest price ever paid for a Washington-area condominium.
While Washingtonians were distracted by the 2012 presidential campaign and Redskins quarterback Robert Griffin III’s knee injury, a funny thing happened: The local real-estate market snapped back to life.
After plummeting by a third during the housing bust, area real-estate values have increased by 14 percent since hitting bottom in 2009, according to the S&P/Case-Shiller Home Price Index. Only in five cities, including Phoenix and Detroit—which suffered steeper declines in the downturn—have prices rebounded more strongly. Sales volume is up, and properties are now selling faster—and for closer to their list prices—than at any time since 2005. And in certain neighborhoods, a pop of pent-up demand and a historic shortage of inventory have created market conditions—bidding wars, escalation clauses—that resemble the frantic days of the real-estate boom.
“This is real,” says developer Jim Abdo. “Buyers are suddenly finding themselves in a situation where they are having to compete for real estate again.”
But with memories of the housing crisis still fresh, the burst of activity has triggered concerns. How did competition for property get so intense so fast? Are current appreciation rates sustainable—or are we headed for another bubble?
We analyzed data and talked to dozens of economists, developers, builders, mortgage experts, and real-estate agents to determine where Washington housing prices are headed, what threats could derail the recovery, and which neighborhoods are best positioned for long-term growth.
One thing is clear: It’s not a buyer’s market anymore.