DC housing prices and the development market

The Urban Turf blog has a report on the houses sold at the recent DC Government auction on abandoned properties, "Winning Bids for the 30 Properties Auctioned by DC Gov." Each has photos. The properties likely came into the city portfolio through the quick title procedure. I recognize a number of the properties as persistently vacant nuisance properties from when I lived in the H Street neighborhood. It's good to know that finally the properties will finally be rehabilitated and occupied, contributing positively to the block and neighborhood. The Post also reported on the auction, "At City Auction, Homes Sell at Fever Pitch: Many Bidders Leave Empty-Handed as Prices Exceed Their Budgets."

Looking at the photos, you can see why people like Haile Bereket were disappointed. He was willing to pay $120,000 for a 3 story + basement rowhouse in the Columbia Heights neighborhood, a building that once rehabilitated (figure $100,000 to $200,000) would likely be worth more than $800,000. The house sold for $380,000.

If you pick up a printed copy of the Hill Rag, you will see when perusing the real estate ads in the February issue, that prices have definitely come down. It looks like asking prices for houses within 6-8 blocks of the U.S. Capitol have dropped $100,000 to $200,000.

The Post also reported on how Clark Realty has dropped out of the game for developing Poplar Point. See "Poplar Point Developer Pulls Out Of Project: Company Cites Risks Of Economic Climate." The Washington Business Journal reported, "Marion Barry: Poplar Point problem 'staggering blow'," how former Mayor and now Councilman Marion Barry has used this as another club to beat the Fenty Administration with.

CM Barry needs to be more honest. The proposals were fueled by the real estate development bubble, and called for a fundamental reproduction of space in Anacostia that likely is deleterious. Sometimes, more time is a better thing. Developed empty buildings aren't better than empty land. They are a nuisance.

MIAMI - JANUARY 22: A home in a subdivision where construction has stopped and the lawns have become overgrown January 22, 2009 in Miami, Florida. The Commerce department reported that new home construction fell to an all-time low in December of 2008, records indicate last year was the worst for builders on records dating back to 1959. Construction of new homes and apartments fell 15.5 percent last month to an annual rate of 550,000 units. Getty images.

This reminds me of the last real estate bubble and crash in DC, which peaked around 1989-1990, and didn't recover until a couple years after Anthony Williams was first elected Mayor, around 2000.

There are a few big differences between then and now:

1. There is a critical mass of revitalization energy in many neighborhoods such as Petworth, Columbia Heights, Logan Circle-14th Street NW, and H Street NE that wasn't present to the same degree back in 1988-1989, and this critical mass will allow the neighborhoods to continue to improve despite bumps, some serious, in the road.

2. Many national trends favor urban living, and in Washington, DC in particular, neighborhoods with good subway access and more traditional urban design (attached housing, smaller blocks, neighborhood commercial districts) are well positioned to retain and extend their value.

3. And rather than go forward, a number of marginal projects have been stopped in their tracks, which means that a bunch of projects haven't been foisted on neighborhoods, only to remain empty and become festering nuisances (or marginal projects with marginal tenants).

4. Despite all the kvetching of blogs and such, the management and operation of the city continues to improve. There are still many problems and improvements come in fits and starts, but overall, the trend forward is positive.

Washington's fundamentals are strong, but cannot be taken for granted.

Two areas that still get grades of "N" or "needs to improve" are the quality of public schools and public safety. I think both could improve with a much greater focus on the problems and real solutions focused on those problems and desirable outcomes. With the schools, the management and development function needs to be massively improved, and it doesn't appear as if that is the primary focus of Chancellor Rhee and the K-12 public education team. With public safety, there needs to be a fundamental focus on reaching and interdicting crime/criminals-perpetrators under 30 years old. For the latter, Boston seems to offer the best way forward (see "Straight Outta Boston" from Mother Jones Magazine). At this point, in neither area do I see the kinds of fundamental shifts that are required to move the K-12 education and public safety agendas forward.