Tuesday, December 03, 2013

Ward 8 condo values drop over $100,000 and no one is talking about it

I can't stress enough how much it pains me to write these editorials. If I had a magic wand I would wish that Ward 8 issues were considered DC's issues.  The disconnect and lack of awareness just seems so vast. Short of rioting in the streets I am not really sure how we can have our issues heard and acted upon in a meaningful way. Per last week's editorial, Ward 8 continues to be overlooked and underserved. 

Much like the recent (and largely ignored) property auctions in Congress Heights hardly anyone is taking notice of the condo market in Ward 8. Condo property values continue to be in a free fall here. Even for condominiums that are not experiencing a financial hardship or short-sale fire sale the falling condo prices are effecting everyone. Banks don't approve loans for more than the condo units appraise for, leaving homeowner's stuck.  Plummeting comps are effecting everyone.  All of these condo units first came on the market not that long ago and sold for well over $100,000 - several closer to $200,000. You have condo owners (mostly Black first-time homeowners) who have lost 50%-75% of their investment in under 5 years. As most of DC bounces back, the crisis continues east of the river.

Two of these condominiums came online in 2007,
listing prices started around $150k for a 1 bedroom
(photo courtesy of Remax)

I started sounding the alarm years ago that without immediate intervention we would have a serious problem on our hands. It pains me to say that help did not come. As a result of the lack of notice (and action) there has been a major downward price shift in many condo units, several Ward 8  condominiums have failed as a result. Perhaps they could have hung on or come back with nearby development but that development still has not come. As much as people want "affordable" housing they also want to live close to retail and basic amneties such as grocery stores, restaurants, etc.

All the new "affordable" housing dollars pouring into Ward 8 are not going to  help any of these homeowners. I really don't know what is going to happen to them other than to give up and move away. I know several who are just renting their units out to the Housing Voucher Choice Program in hopes that the market here comes back someday. For now the only real market for these fire sale units are investors who are paying in cash. What do investors do with these units? Enroll them in the Housing Voucher Choice Program. Not a bad deal considering that HVCP will pay around $1300 for a one bedroom unit. A smart investor can make over $1,000 A MONTH in profit. Poverty pimping is a very lucrative business east of the river.

I hate to break it to you but those "rich gentrifiers in their Ward 8 condos" don't exist. The only people who got rich in Ward 8 during the housing boom of 2005 - 2007 were shady developers,  shady construction companies, and shady property management companies. They flocked to east of the river and transformed apartment buildings into shoddy condominiums faster than two shakes of a lamb's tail. They knew they could practice their shady dealings east of the river and no one would notice or stop them. I'm one of the lucky few who had a honest and reputable developer, construction company and property management company. Some of my neighbors in nearby condominiums weren't so lucky.

I can't stress enough how serious the homeownership and home value situation is in Ward 8. We hit "crisis level" a long time ago.  There is a bigger story here. I just wish someone (besides me) would tell it and I wish it would encourage some action -- at the very least some council hearings.

FYI -- Only 1 in 4 Ward 8 residents are homeowners.

(photo courtesy of Remax)

(photo courtesy of Remax)

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Anonymous said...

Two things will happen; either investors will buy up the properties and rent to persons with vouchers or, persons will leave these properties, they will convert back to apartments, all of the properties listed were initially apartments and you will have less home ownership in the Ward than before.

The Advoc8te said...

@Anonymous you hit the nail right on the head with all of your points. It is already happening. It did not take a crystal ball to see where this was headed. In truth the signs were there at least 3 years ago that this was going to happen. Between the failed condominiums (turned subsidized housing blocks) and the new low-income rental housing that is going to come online soon I don't see the situation getting better. I definetly don't see the investment in jobs here through new businesses opening. The income levels are just going to continue to drop unless some action is taken and quickly.

I just don't see that happening anytime soon.

anacostia_poet said...

I think one thing to consider in evaluating the loss that some condo owners are experiencing is those properties were probably overpriced from the start. Developers got away with selling properties at those prices because of my of the hype and hollow promises of future development and amenities, so many people jumped at the chance to get a piece of the action, but the truth is the action was already gone. I think what we are seeing is the market correcting itself a little bit, however I do think it is a shame that owners (first time homebuyers) are taking a bath as this happens.

anacostia_poet said...

Nikki,Sorry i hit enter before I finished my comments. I think some of the discounted and distressed properties still represent an opportunity for 1st time home buyers and 1st time investors to get in a realistic prices that will easier to turn a profit on or at least cover your expenses until more growth and density comes to the area. It's kind of funny, but I have seen this happen in many cities before as soon as all the hype about crime, lack of amenities, etc, etc become the main narrative, that is when investors get busy and interested...so my advice is don't believe the hype, don't overpay, make sensible purchases that can withstand the short term ups and downs and your chances of making good your investment...just my humble 5 cents.

Sonya Wins said...

@anacostia_poet - What you say makes absolute sense and makes me feel better about my desire to purchase in Ward 8. I was concerned I'd miss the boat and be looking at $300K+ for 1/2 bedrooms by the time I'm ready to purchase (mid-2015), a figure based on speculation of what's to come post the completion of the DC mixing bowl, the new home of DHS, and possibly IBM. I walk those streets way too often to not look at the whole picture and not have considered the points you raised.

h st ll said...

My thoughts:

1) as others have mentioned, it does present an opportunity for persons to purchase homes at a discount

2) other areas, such as Loudon and PGC, had drops in values similar in magnitude, and values should may rise for a number of factors if folks are patient.

3) no one is guaranteed that their investment will rise in value (or not lose value). that's the nature of stocks, houses etc. My bank of america stock is down from 55 in 2007 to 15.50 now. Yeah it sucks and I lost a shit ton of money. But that's how the cookie crumbles.

4) Don't the HOAs have things against too many investors buying and renting? That should protect it against being all investors. Personally I only buy houses and I don't do Housing Choice Voucher tenants, though I consider them as required by law.

Not Ward 8 said...

I see people constantly complaining about the economic conditions in Ward 8. They always sounds like there is a large conspiracy by some unnamed monster to deprive Ward 8 of economic development. Look at the bottom line -- people want dining and retail options. I get that. But Ward 8 has the lowest (by far) purchasing power of any area in DC. Why would a developer want to build retail and dining options in an area where the customer base would be severely limited? There is a high concentration of poverty EOTR, and that is going to have a negative impact on the desirability of the area for economic development. You need customers -- but there aren't enough there to sustain any sort of large-scale, meaningful development. You want economic development? You need to raise the average median income of the entire Ward. And you're not going to get that with public and subsidized housing.

Richard Layman said...

So out of curiosity, what do you think should have been done a few years ago, when you sounded the alarm? Maybe I read the piece too fast, but I don't see any recommendations. (Not that it's required, it's just as important to identity problems, and it is not required to provide a solution. Although I prefer to do that in the context of my own writing.)

It's true that as the DC market accelerated people, the area you're talking about appreciated too, _even though the fundamentals of this submarket were significantly different_ and when the overall market changed, _housing prices have declined to be closer to what the market fundamentals would call for_.

E.g., PG County post-recession. Prices in places like Mt. Rainer have dropped as much as 100%.

What is the best way to improve the viablity of the market in terms of its foundations?

DC Landlord said...

I'm familiar with the condo associations most of these units are in and actually put in offers on a couple of the listings. The reason they are so low priced is:

1) The associations have high delinquency rates and high investor ratios so they are not eligible for loans. These are cash-only sales, which reduces their value considerably. I'm also pretty sure that the majority of those listings are short-sales (similar to foreclosures).

2) The low list prices are meant to attract bidders auction-style. I offered $15K over asking for one of those listings and didn't get it. If you want to analyze the trend, look at the prices paid at closing for comparable units over time.

3) I know the trend in prices for one of the condo associations mentioned. I bought a unit in that association for $65K 18 months ago and a recent comparable unit sold for close to $90K. I've also looked at many listings and can say with certainty, the trend is higher for most of W8.

SWag said...

Does any responsibility lie with the people who live in these communities? And if so, roughly what percentage would you say? I always hear about what the city needs to do for EotR, but what can the residents do in the mean time? Have they done those things? Do they even care to do those things? And I know it's tough to be so general. Obviously the home owners care, but do the ones who are on the vouchers? Sure WotR gets all of the resources, but it seems the vested residents also do more to restore their once similar neighborhoods.

Personally I don’t think the city will pour the resources into Ward 8 that it needs anytime in the near future. As we've seen, they will sprinkle a project here and there to keep everyone at bay with no real, cohesive plan for change. And now, with more than $100 million of "affordable housing" headed EotR, it isn't about to get any prettier either.

As for developers, there is still TONS of low hanging fruit WotR where residents and investors apparently have money to burn. The city has prime waterfronts that have yet to be touched and industrial areas begging to be redeveloped near the core of the city. At this point, only bottom feeder developers would spend money EotR.

With that being said, I hardly think hope is lost for Ward 8, but I’m a TRUE optimist. I think success will come from a totally different and much more difficult approach. It may even be impossible, but it will take a massive overhaul of the attitudes and mindsets of the residents. Our best hope is with the youth, but the goal if for everyone.

With general access to the same basic amenities, why in 2013 are we as a community still behind our peers? Of course it is a carefully calculated and apparently heavily funded operation by the powers that be to keep it that way, but is that just it...? NOT AT ALL. It's like our community (and I'm including myself as an honorary Ward 8 resident for the sake of this rant :) I actually live in SW, WotR) is in a fog that we can't seem to shake off. We are walking on the same streets, riding the same buses, using the same internet, being exposed to the same media outlets as our peers, but still can't seem to see the glaring differences in lifestyles.

There is a certain level of decorum we are missing as a community that is preventing Ward 8 from being appealing to “other people”. Again, I must stress that I am on the right side of the fight here, and don’t want to seem condescending or negative, but a lot of the stuff holding Ward 8 back is easily preventable nonsense.

The condos that are now on the market for less than parking spaces in other parts on the city need to be BOUGHT by all of the residents of Ward 8. If you are RENTING in Ward 8 and not living on a voucher you desperately need to speak with someone knowledgeable about home ownership. The first time home buyer programs in DC are amazing. A minimum wage job combined with DC’s FTHB programs is enough for home ownership, assuming you are buying a $50,000 - $60,000 condo.

Secondly, residents have to stop waiting on businesses to magically pop up in their neighborhoods. Band together, with strength in numbers, and invest whatever you have to spare in business of your choosing. Other communities are able to do this, i.e. Asian and Jewish, why do we struggle so much with sense of community. We need it the most! If every resident of Ward 8 was able to give $50 to a fund, over the course of one year (that’s roughly 14 cents a day) there would be 3.5 million dollars in that fund in just 365 days – and that’s assuming it wasn't invested! Remember, without struggle there is no progress! And to say that there is no EXTRA money to spend is simply not true, because just look at the fancy wardrobes (pant sagging aside) that teens wear. If you can afford MULTIPLE $150 sneakers, you and your family CLEARLY can afford to contribute to the fund. Will people? Will anyone organize the fund? Who knows?

*continued on nest post

SWag said...

With the money from the fund, organize neighborhood run business improvement districts and contract out work like improving streets and sidewalks and adding more trash/recycling receptacles, updating parks, paying for additional lighting and security (or whatever needs to happens). When business and developers see that the community is making a vested interest, they MAY as well.

And my last (for the sake of getting back to work) thought/suggestion is – stop the violence in Ward 8! Is life REALLY that bad? Do you really have that much hate in your heart? Where does it come from? Are you REALLY trapped in an environment that forces you to shoot people in your own neighborhood, or is it self-imposed? Who exactly are you shooting? Did it ever occur to you that the person you are shooting is actually your greatest ally in the quest for whatever it is you want? Had you banded together with that person you could have achieved twice whatever it is you achieved as enemies. Who do you think really cares about you more - someone who grew up in a similar situation that can relate to you or your judge? Each choice we make is crucial and we must live with the consequences. The change will be slow be it doesn't have to be nonexistent.

I love your blog and what you are doing! One Love.

The Advoc8te said...

From @Swag: "With the money from the fund, organize neighborhood run business improvement districts and contract out work like improving streets and sidewalks and adding more trash/recycling receptacles, updating parks, paying for additional lighting and security (or whatever needs to happens). When business and developers see that the community is making a vested interest, they MAY as well."

Sigh. No matter how many times I hear someone say that (almost always from someone who does not live here) I get frustrated. And then I get mad.

Why do you assume the things you outlined above are not happening now? Why are you assuming people here are not working to improve their communities? Why do you assume people here not only want better or are working hard every single day to have a better ward? Why do you assume that the successes and milestones here are not because of the efforts of the people who live here?

I know why. Because most (if not all) of your experience with our communities is by what you see on the evening news or by blog posts like this which are linked to by websites you read daily. You wouldn't normally be on this blog today if it wasn't for GGW or Housing Complex linking to this post. BTW -- I can always count on outside publications linking to negative posts I write, very rarely posts that talk about the good I write about Ward 8. That is frustrating for me but the reality I have realized when I started writing this thing in 2008.

I'm not saying you specifically meant this in your comments but having heard this for years I can't help but feel there is some underlying perceptions or assumptions regarding race and economics. The idea that Black communities and/or "poor" Black communities have to be "deserving" of the same quality and types of services and amneties that other affluent (and often mostly White) neighbors just take it for granted that they should get those things (I guess they were born into deserving them) just seems so archaic and exclusionary in its basis.

BTW -- I might have missed the memo but I don't think I shot anyone today, or last week, or in the six years I have been living in Ward 8. The idea that you directed your comments to either me or the Ward as a whole as if we are a herd of animals that operate with one mind is absurd to me. Crime happens everywhere, in all quadrants of the city. It is not exclusive to Congress Heights, Anacostia, Deanwood, Bellevue, Washington Highlands or any of the neighborhoods east of the river. Just because the news stations like to refer to everything over here as "Southeast" does not mean that we think with one mind and a barren wasteland of crime, poverty, and Marion Barry.

Sometimes when I realize how much ignorance (and I don't mean that as an insult, just as matter of fact) when it comes life in our communities by people who live less than 5 miles away I wonder why do I even try. People are much more comfortable painting us as victims -- or criminals.


SWag said...

@The Advoc8te - I get that it is a very emotional topic for you! Also nothing in my comment was aimed at you or anyone in general. I was more using your blog as a forum for some general issues. Not to mention I didn't assume anything, you did. I don't live in Ward 8 but have spent my entire life in the city. I know what's real and what is not. I don't even watch the news...

I also understand that there is a lot going on in Ward 8. I wasn't trying to imply there wasn't. My hope is the same as yours. I'd like to see Ward 8 become what it has the potential to be, and then some.

I seriously considered Historic Anacostia when house hunting in 2009. The prices were too good to be true. It was my then fiance who talked me out of it, stressing that you couldn't put a price on peace of mind. We moved elsewhere for her sanity.

With that being said, I think I'm much happier where I am now.

But to get back to my original point about using the fund to improve the ward - I think you read the comment with a preconceived notion. I never said these things are not happening now. If you say they are and you are satisfied with the progress, fine - don't contribute. I just said that resident funding can provide an ADDITIONAL, unrepresented sources of money. Use that money in conjunction with the changes you speak of underway now. The parks, sidewalks and streets in Ward 8 DO need upgrades. Safety IS and issue. Ward 8 clearly needs additional help. Who is funding the changes that you speak of now? DHCD, DMPED? Again, it will take more than government funds. You will be waiting your entire life to see the changes you hope for if you leave it up to the city. I was hoping I could rally you, and some of your fellow wardsmen...

And I have read your blog multiple times prior to the GGW post. I prob wont anymore though. One Love.

PG2SE said...

A few points:
1. Comparing current condo prices to what they were before the real estate bubble burst in late 2008 gives a very misleading picture. If that’s the baseline, there are a lot of neighborhoods in DC and the greater metropolitan area in similarly dire circumstances – i.e., it ain’t just a Ward 8 thang.
2. Ward 8 condo values are actually rising pretty steeply. I looked at the two largest neighborhoods in Ward 8, Anacostia and Congress Heights. Going off the averages, condo values in Congress Heights bottomed out in 2011. They rose 28% in 2012. They’ve risen another 11% this year. In Anacostia, condo prices bottomed out in 2010. They rose 12% in 2011. In 2012, they rose an additional whopping 184% (!), but all but one of the condo sales that year were at Sheridan Station, which is easily the best condo community in the neighborhood (brand new construction by an established developer with amazing views of downtown and steps from the Metro). So this is atypical. Still, a rising tide does appear to lift all boats. So far in 2013, only one condo sale was in Sheridan Station but the average close price was still 76% over the 2011 average. These are very healthy increases.
3. These increases do come off of very low baselines. The average condo close price in Congress Heights in 2011 was $39,509. The average in Anacostia in 2010 was $65,460. Still, it is clear that Ward 8 is transitioning. Census data examining DC population growth from 2001 to 2010 show the census tract covering the Anacostia/Congress Heights/Bellevue neighborhoods to be growing faster than Capitol Hill and every census tract in upper NW except for the one covering Tenleytown (source: DC Economic and Revenue Trends Report, August 2012).
4. Before anyone says these are just economic refugees pushed out of gentrifying neighborhoods coming over the river to further depress average incomes in Ward 8, a separate report covering the same 10-year period identified Congress Heights and Anacostia as 2 of 14 neighborhoods where adjusted gross incomes and median property values are increasing fastest. So if these new residents are running from high prices WoTR, they are at least bringing higher incomes with them and raising property values.
5. The fact that the increases come off of very low baselines means there is still a lot of opportunity EoTR. My advice is to be patient and keep putting in that sweat equity to make Ward 8 a better place.
6. I also disagree that the city isn’t doing anything for Ward 8. The city just put over $5M into a *temporary* structure on St. E’s east campus that is designed to jump start private investment and development. More importantly, it is investing millions more in infrastructure improvements on the campus (laying utility lines, roadwork) to attract large scale private development. It’s investing well over $100M redesigning schools in Ward 8. The SE tennis center is getting a multi-million dollar makeover next year. Ground has already been broken to build the Barry Farm Rec Center which is expected to open summer 2015, I think. These latter improvements will greatly benefit those EoTR residents who need it most, our kids.

h st ll said...

Excellent comment PG2SE!