The Pandemic
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real estate performance and the pandemic how the washington, dc metropolitan market survives challenges

Redux Extra April 3, 2021
Reading Time: 3 minutes

Following the 2009 Great Recession, it became quite clear that the Washington DC real estate market was largely recession proof. The District and surrounding areas are shielded from the ups and downs of the economy because real Estate stability is tied closely with employment and DC has the Federal Government as a major source of employment. As recessions come and go the Federal Government is unaffected. People remain employed, rents and mortgages continue to get paid, young families upsize their homes, and older homeowners downsize for condos, and the real estate market remains active and vibrant throughout.

Based on my experience over the years, a large number of my international clients considered investment in the Washington DC real estate market a safe and conservative investment for their portfolio. These clients have favored protection against the downside of investments over the prospect of quick double-digit returns. They purchase properties and rent them out to benefit from a robust rental market, knowing that if one day they need to sell their investments, they can do so very quickly and at a high price.

The Coronavirus pandemic changed some of the rules. The first few months of March and April were duds. While brokers and agents were deemed “essential personnel” and continued to be available, buyers and sellers stalled their plans. As Summer approached, not only did the backlog of buyers pour back into the market, but also the usual Spring/ Summer crowd lit up, motivated by record low interest rates.

However, not every segment picked up. First, the rental market saw unprecedented vacancy. Much of the rental demand is filled by people new to the District, college students, or members of international diplomatic communities. With businesses switching to remote working, and colleges switching to virtual classes, and international travel halted, rental vacancies reached record numbers. For instance, last year there were 3-4 rental listings in a favored condo building near American University. This year at the same time and in the same building there were 17. Likewise,
Arlington has been seeing record breaking vacancies forcing landlords to drop rents considerably to attract tenants. In addition, landlords who have been stuck with vacancies and unable to carry vacant properties are now looking to sell those investments.

On the other hand, the luxury and ultra Luxury market saw a significant spike with high net worth buyers looking for larger homes to live and work in prime luxury locations like Kalorama and Massachusetts Avenue Heights. Bidding wars for multi-million dollars properties are not uncommon in a market where a $4 million building is in the Ultra Luxury segment.

More broadly, for almost 20 years we witnessed a migration from the suburban lifestyle back to city centers with buyers showing a preference for an urban walkable lifestyle. This urban return created the drive for renovation, gentrification and development of high-density properties at often eye popping prices. Small two bedrooms condos in trendy areas like Logan Circle sold for up to $1 million.

The experience of the Covid19 pandemic could play a role for a shift to suburban living again. The reality of the pandemic and its limitation on our lives has enforced our dependency on a virtual world. As a result, people are opting for larger homes where they can comfortably have a home office, back yard for the kids and animals, and enough space for families to coexist peacefully. The reversal back to the suburbs paired with historically low interest rates, gave the suburban life an unexpected turn. Also, with companies realizing the significant reductions in overhead
costs, having employees work from home, means some of these changes probably are here to stay in the post Coronavirus world.

All said, the Washington DC metro area will nonetheless remain a recession proof and highly suitable and sustainable real estate market.

JOHN AKHAVAN, MBA, CIPS
Residential & Commercial Real Estate
Licensed in DC, MD & VA
Text/Call: 703 522 6444
Realty ONE Group Capital
7925 Jones Branch Dr. #4275
McLean VA 22102
Office: 703 214 5100

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