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With Fewer Homes for Sale, Bidding Wars Erupt in Washington With Fewer Homes for Sale, Bidding Wars Erupt in Washington
(about 13 hours later)
WASHINGTON — Daniel Handel left his bachelor pad in the Truxton Circle neighborhood in 2011 to take an overseas post. Returning this May with a wife and two children in tow, he found the capital had changed as much as his family life had.WASHINGTON — Daniel Handel left his bachelor pad in the Truxton Circle neighborhood in 2011 to take an overseas post. Returning this May with a wife and two children in tow, he found the capital had changed as much as his family life had.
Hipster coffee shops and gentrified homes have popped up around his old neighborhood. A real estate mogul is living in the White House. And house prices have skyrocketed.Hipster coffee shops and gentrified homes have popped up around his old neighborhood. A real estate mogul is living in the White House. And house prices have skyrocketed.
Forced to give up his search for a new home in the center of the city despite his $700,000 budget, Mr. Handel, 37, describes prices in the capital as “astronomical.”Forced to give up his search for a new home in the center of the city despite his $700,000 budget, Mr. Handel, 37, describes prices in the capital as “astronomical.”
“I’m mystified,” he says. “There can’t be that many people making that much more than us. Who are these people who can afford these houses?”“I’m mystified,” he says. “There can’t be that many people making that much more than us. Who are these people who can afford these houses?”
It is easy to think that it is caused by the influx of very wealthy people, some recruited by Mr. Trump to work in his administration, who have pushed prices up. The housing market in the capital sees a slight churn every four years as political appointees and staff members pass the baton after an election.It is easy to think that it is caused by the influx of very wealthy people, some recruited by Mr. Trump to work in his administration, who have pushed prices up. The housing market in the capital sees a slight churn every four years as political appointees and staff members pass the baton after an election.
Instead, Washington is beginning to suffer from a problem facing other American cities, like San Francisco. An influx of professionals is bidding on a limited supply of affordable homes.Instead, Washington is beginning to suffer from a problem facing other American cities, like San Francisco. An influx of professionals is bidding on a limited supply of affordable homes.
Real estate prices in the capital did not slump during the Great Recession as much as in the rest of the country. In the five months since Mr. Trump took office, they have grown 7.14 percent year-on-year, the fastest pace since 2010, which is as far back as the local multiple listing service, Bright MLS, has data.Real estate prices in the capital did not slump during the Great Recession as much as in the rest of the country. In the five months since Mr. Trump took office, they have grown 7.14 percent year-on-year, the fastest pace since 2010, which is as far back as the local multiple listing service, Bright MLS, has data.
The price of the average house sold in Washington has grown 40.3 percent since 2009, to $680,449. Washington ranks fifth of the 20 cities the Case-Shiller index of housing prices tracks, behind only Los Angeles, Miami, San Diego and San Francisco.The price of the average house sold in Washington has grown 40.3 percent since 2009, to $680,449. Washington ranks fifth of the 20 cities the Case-Shiller index of housing prices tracks, behind only Los Angeles, Miami, San Diego and San Francisco.
Certainly, the luxury end of the market has experienced a particular boom this year, as many billionaire investors, lawyers and oil and gas executives relocated to the capital. The average price of a luxury property in the capital, defined as the most expensive 5 percent of homes, rose 32.6 percent year-on-year in the first quarter, according to data from Redfin, a national real estate brokerage firm.Certainly, the luxury end of the market has experienced a particular boom this year, as many billionaire investors, lawyers and oil and gas executives relocated to the capital. The average price of a luxury property in the capital, defined as the most expensive 5 percent of homes, rose 32.6 percent year-on-year in the first quarter, according to data from Redfin, a national real estate brokerage firm.
Among the big-ticket buyers are Steven T. Mnuchin, the Treasury secretary, who spent $12.6 million on a property in the stylish Massachusetts Avenue Heights neighborhood in February and Wilbur L. Ross, the billionaire commerce secretary, who picked up a $10.75 million mansion a few blocks away.Among the big-ticket buyers are Steven T. Mnuchin, the Treasury secretary, who spent $12.6 million on a property in the stylish Massachusetts Avenue Heights neighborhood in February and Wilbur L. Ross, the billionaire commerce secretary, who picked up a $10.75 million mansion a few blocks away.
“This cabinet in particular has been touted as one of the richest in history, with Trump being a real estate mogul and moving in those circles,” said Steven Centrella, a real estate agent with Redfin. “They do have more resources available to them and they’re used to certain lifestyles.”“This cabinet in particular has been touted as one of the richest in history, with Trump being a real estate mogul and moving in those circles,” said Steven Centrella, a real estate agent with Redfin. “They do have more resources available to them and they’re used to certain lifestyles.”
These purchases are putting the spotlight on exclusive neighborhoods like Georgetown and Kalorama. Barack and Michelle Obama recently spent $8.1 million on a property near where Mr. Trump’s daughter Ivanka Trump and her husband, Jared Kushner, are merely renting for $15,000 a month.These purchases are putting the spotlight on exclusive neighborhoods like Georgetown and Kalorama. Barack and Michelle Obama recently spent $8.1 million on a property near where Mr. Trump’s daughter Ivanka Trump and her husband, Jared Kushner, are merely renting for $15,000 a month.
In the same neighborhood, Jeff Bezos, the chief executive of Amazon, paid $23 million for a 27,000-square-foot former museum that he intends to convert into a single-family home.In the same neighborhood, Jeff Bezos, the chief executive of Amazon, paid $23 million for a 27,000-square-foot former museum that he intends to convert into a single-family home.
The small group of political outsiders appointed to Mr. Trump’s team and the very wealthy are hardly the only factors responsible for the more expensive Washington market. Home to government agencies, embassies and universities, as well as consultant firms, technology businesses and government contractors eager to be near the seat of power, the capital has long been buffered from national economic downturns. It remains popular with real estate investors.The small group of political outsiders appointed to Mr. Trump’s team and the very wealthy are hardly the only factors responsible for the more expensive Washington market. Home to government agencies, embassies and universities, as well as consultant firms, technology businesses and government contractors eager to be near the seat of power, the capital has long been buffered from national economic downturns. It remains popular with real estate investors.
But that growing demand has not been matched with a supply of new homes. A combination of zoning rules and height restrictions in the city limit the developers.But that growing demand has not been matched with a supply of new homes. A combination of zoning rules and height restrictions in the city limit the developers.
“There’s nowhere for them to go but up,” said Boomer Foster, president of the Long & Foster real estate agency.“There’s nowhere for them to go but up,” said Boomer Foster, president of the Long & Foster real estate agency.
He pinpoints the lack of inventory as the core reason for spiraling house prices in the capital. The Market Minute report from Long & Foster shows that the number of months of supply of listed homes in the capital dropped 17 percent year-on-year to only 1.6 months this May. He pinpoints the lack of inventory as the core reason for soaring house prices in the capital. The Market Minute report from Long & Foster shows that the number of months of supply of listed homes in the capital dropped 17 percent year-on-year to only 1.6 months this May.
Those who have been searching for a new home in recent months, like Keaton Van Beveren, 29, say offers on plum properties come in fast and often end with a bidding war.Those who have been searching for a new home in recent months, like Keaton Van Beveren, 29, say offers on plum properties come in fast and often end with a bidding war.
“It’s so competitive,” said Ms. Beveren, who spent eight months house hunting and was outbid on three properties before buying her first home in the Capitol Hill area. “There can be 12 offers on a place in five days and they can go way, way over the asking price.”“It’s so competitive,” said Ms. Beveren, who spent eight months house hunting and was outbid on three properties before buying her first home in the Capitol Hill area. “There can be 12 offers on a place in five days and they can go way, way over the asking price.”
This year’s rally is partly explained by pent-up demand from home buyers who resisted making a big purchase during the uncertainty of last year’s divisive presidential election.This year’s rally is partly explained by pent-up demand from home buyers who resisted making a big purchase during the uncertainty of last year’s divisive presidential election.
“We weren’t sure if people were actually going to stick to their promises and move to Canada,” says Holly Loomis, 31, who bought a new home in Bethesda, Md., shortly after Mr. Trump’s inauguration.“We weren’t sure if people were actually going to stick to their promises and move to Canada,” says Holly Loomis, 31, who bought a new home in Bethesda, Md., shortly after Mr. Trump’s inauguration.
Demand for properties in downtown locations has, for example, been particularly brisk in recent years. A growing number of Americans, like Mr. Handel and his new family, are opting for bustling central locations close to their workplace over more spacious properties in nearby Virginia and Maryland.Demand for properties in downtown locations has, for example, been particularly brisk in recent years. A growing number of Americans, like Mr. Handel and his new family, are opting for bustling central locations close to their workplace over more spacious properties in nearby Virginia and Maryland.
Where the average home in the city was worth 14 percent less than those in nearby suburbs when George W. Bush took office in 2001, these central properties are now worth 27 percent more, according to Zillow, the real estate data service.Where the average home in the city was worth 14 percent less than those in nearby suburbs when George W. Bush took office in 2001, these central properties are now worth 27 percent more, according to Zillow, the real estate data service.
Millennials trickling onto the housing market could provide a lift to the housing market, particularly in the capital, which is the second-most-popular region in the United States for this young demographic, because of the variety of jobs at high salaries. Millennials trickling into the housing market could provide a lift to the housing market, particularly in the capital, which is the second-most-popular region in the United States for this young demographic, because of the variety of jobs at high salaries.
About 15 percent of 83.1 million millennials ages 25 to 35 lived in their parents’ home as of 2016, according to Pew Research, more than previous generations at the same age. But many are eager to save and take their first steps on the property ladder.About 15 percent of 83.1 million millennials ages 25 to 35 lived in their parents’ home as of 2016, according to Pew Research, more than previous generations at the same age. But many are eager to save and take their first steps on the property ladder.
“They’re actually much more aligned to their grandparents than to their parents when it comes to housing,” says Svenja Gudell, chief economist at Zillow. “They believe owning a home is part of the good life.”“They’re actually much more aligned to their grandparents than to their parents when it comes to housing,” says Svenja Gudell, chief economist at Zillow. “They believe owning a home is part of the good life.”
As Mr. Trump settles into the White House, the real estate industry is now watching closely to see whether he delivers on his policy pledges.As Mr. Trump settles into the White House, the real estate industry is now watching closely to see whether he delivers on his policy pledges.
He is asking Congress to eliminate several tax deductions, but he is not touching the mortgage deduction, not even on second homes. Where tax reforms and financial deregulation are expected to raise disposable income and make it easier for home buyers to have access to credit, some economists warn that new immigration rules could raise the cost of labor for construction and worsen the housing shortage in the capital.He is asking Congress to eliminate several tax deductions, but he is not touching the mortgage deduction, not even on second homes. Where tax reforms and financial deregulation are expected to raise disposable income and make it easier for home buyers to have access to credit, some economists warn that new immigration rules could raise the cost of labor for construction and worsen the housing shortage in the capital.
“There is huge potential for macro policy to drive the housing market upward, even though that wasn’t the intention,” said Ralph McLaughlin, Trulia’s chief economist.“There is huge potential for macro policy to drive the housing market upward, even though that wasn’t the intention,” said Ralph McLaughlin, Trulia’s chief economist.