- The Washington Times - Wednesday, July 9, 2003

Weary commuters and homeowners haggled by maintenance and yardwork sometimes look to a condominium as a low-stress lifestyle change. Young professionals always have been connoisseurs of the condominium market, appreciating the lack of maintenance and the relative affordability of these homes.

The Washington market in recent years has experienced a shortage of housing along with a rising demand, and condominiums are no exception. In response, builders are putting up more and more condominiums, particularly downtown and along the Metro lines.

“In about 1978, there was a condo frenzy downtown in D.C., with lots of conversions of rental apartments into condos,” says Debbie Rosenstein, president of Rosenstein Research Associates.

“Over the years, the market became saturated and condominiums got a bad rap as resales,” she says. “Later, in the ‘80s, the rental market was crazy and competitive, which also hurt the condominium market because owners could get more income in rent than from selling their homes. Builders stopped building condominiums for a while because they weren’t selling. Now the rental market has gone soft, and the condominium niche is growing rapidly.”

According to Tom Murphy, Realtor with Coldwell Banker Residential Brokerage in Georgetown, “The condo market is as competitive as the single-family home market, with a tremendous demand factor for at least the past five years.

“All the new building has helped, but certain categories of homes are still experiencing a shortage,” he says. “I’ve sold more condos than most agents in D.C., but it took me three years to find a condominium for myself because of what I wanted in terms of size.”

Some people have chosen to buy condominiums because they are relatively less expensive than single-family homes and town homes, but they often must make a compromise on the space they will have.

“Lots of buyers of condominiums traditionally wanted a house but have adapted to what they can afford,” Mr. Murphy says.

“Condominiums have become more acceptable because they offer the advantage of convenience and because of the finances,” he says. “Younger people and empty nesters, the two groups which purchase condos the most, often do lots of traveling, so the maintenance and security aspects of condos are important for them. There are very few big condos, though, so even if they are relatively affordable they are rarely large enough for families.”

Single-family homeowners seeking to simplify their lives by downsizing into a condominium need to adjust their space requirements, sometimes dramatically.

“With interest rates as low as they are, condominiums may seem relatively affordable when they are priced in the $200,000s and $300,000s,” Miss Rosenstein says, “but when you look at the price per square foot, you’re looking at $300 to $400 per square foot.”

Realtor Ben Gehrig with Long & Foster’s Bethesda/Gateway office, sells many condominiums in Montgomery County and downtown Washington.

“The bottom line is that there’s way more demand for condos in Bethesda and D.C. than supply, and pretty much everything being built is upscale rather than affordable,” Mr. Gehrig says. “Among the older buildings, such as the 30-year-old buildings in Friendship Heights, there’s not much turnover. One-bedroom places in these buildings range from $225,000 to $300,000, with one-bedroom and den units starting in the high $300,000s.

“Two bedrooms are priced from the very high $300,000s and the $400,000s,” he says. “If you go farther away from the city you can do better and sometimes find two bedrooms priced just under $250,000, but these will be garden-style buildings without any security. The newer condominium developments in D.C. usually start in the $300,000s to the high $400,000s for one or two bedrooms, with one or two homes, usually on the top level, priced at $1 million or more.”

“In Virginia,” Mr. Murphy says, “there’s continuous building of condominiums going on which tends to be along the Metro line, with a mix of price ranges. In D.C., even in the oldest buildings, one-bedroom places cost from the $190,000s or $225,000 and up, and in Bethesda and Rockville the prices for one-bedrooms range from the $190,000s to the $300,000s. Wheaton has more of a range of prices.”

Tom Meyer, president and broker of Condo 1 Inc. in Falls Church, says, “Even with the high volume of building which has taken place along the Metro line in Northern Virginia, there’s still not nearly enough to meet the high demand for condominiums. There’s virtually nothing on the market in the Rosslyn-Ballston corridor for less than the $400,000s to $700,000 or $800,000.

“A one-bedroom place in a nice building will cost at least $250,000,” Mr. Meyer says, “but there’s nothing much on the market like that. In a brand new building, a one-bedroom would be closer to $300,000. Even farther out along the Metro line, such as near the Dunn Loring stop, the prices are very expensive.

“To find an ‘affordable’ condo,” he says, “you’d have to move to Wyoming.”

Miss Rosenstein says several factors are driving demand.

“Besides the fact that low interest rates are increasing the demand for all types of home purchases, demographics are creating more buying segments than there used to be for condominiums,” she says. “There are more empty nesters than there used to be, and more singles, too, particularly in the suburbs.”

“The rollback on capital gains has made it easier for older people to sell their homes and simplify their lives by moving into a condo,” Mr. Gehrig says.

In part of because of these demographics, Miss Rosenstein says she doesn’t see the bottom falling out of the condo market any time soon.

“The absorption rate might slow down at some point, which would mean that we wouldn’t see these incredible rates of sale as we have in the past few years,” she says, “but condos have become a lifestyle choice for people who want to live downtown, or near an urban center such as Reston Town Center, or simply within walking distance of Metro.”

For buyers who want a condominium, careful shopping can determine the future resale potential of the property.

“The most important factor to look for to make sure a condo maintains its value is access to Metro,” Mr. Meyer says. “Because of the tremendous traffic congestion in our area, access to Metro will continue to be a critical factor in appreciation of property values. The condos close to Metro are very expensive already, but they will keep their value even if the rest of the real estate market softens.”

Along with Metro access, Mr. Meyer offers another strategy for increasing a condo’s value.

“The best way to make money is to buy a condo in an older building, where you can get units with 1,100 to 1,400 square feet,” Mr. Meyer says. “You do some remodeling on the kitchens and bathrooms, and you can have a great home to live in plus a greater appreciation. Of course, the buyers need to be prepared to put in $20,000 to $40,000 for the upgrades, but it’s worth it. The newer buildings have a standard two-bedroom unit which averages about 900 square feet.”

One drawback: Older buildings rarely have a washer and dryer in each condo.

Mr. Meyer also recommends looking for a building with parking, which can be harder and harder to find close to a Metro stop.

“Often condos will add as much as $20,000 to the price for one or two parking places, but it is well worth it and will become even more valuable in the future,” Mr. Meyer says.

While in most ways buying a condo is no different from buying a single-family home, buyers should pay careful attention to the condo documents that will be given to them after they make an offer.

“Buyers should work with their Realtor, have a home inspection, and pay careful attention to those first few pages of the condo documents because those are the ones which vary from place to place and can be changed more often,” Mr. Meyer says.

According to Miss Rosenstein, “In order to maintain a home’s value and have more of a chance of future appreciation, buyers should not only buy the unit itself, but also the placement of the unit in the building. Upper floors are usually the most desirable, plus the units with a nice view and a balcony or patio have greater appeal. The unit closest to the elevator may not be the best because of the noise factor, just like in a hotel.”

Miss Rosenstein also recommends looking closely at the condominium documents to make sure the community has appropriate monetary reserves and that the community landscaping and maintenance is covered.

According to Mr. Gehrig, “Adequate reserves are sort of a judgment call, but in general, a building with 300 units should have around $600,000 to $700,000 in reserves. Buyers should look to see how the building is maintained, whether the roof has been repaired, the heating and cooling systems upgraded and the hallways and lobby remodeled.”

Condo fees vary widely and factor into affordability.

“Consumers need to look at the condo fees, which are normally based on the square footage of the unit, and determine what services are provided for the fee,” Mr. Murphy says. “In some cases, the condo fee covers all utilities. It’s important to comparison-shop.”

The famous phrase “location, location, location” becomes even more crucial with a condominium, which should be within walking distance of a Metro stop or an urbanized shopping and entertainment area to maintain its appeal to future buyers, or be part of an active adult community.

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