Check out this article below from the Wall Street Journal by Lauren Schuker Blum and Craig Karmin. Find out how DC Metro-area real estate (which includes Chevy Chase, MD) has evolved.
Washington, D.C.: The New Boomtown
Bidding wars are breaking out. Foreign buyers are moving in. A new wave of contemporary architecture is taking hold. And a growing class of tech executives is helping to fuel the boom.
All this is happening in Washington, D.C., a town known for its relative affordability compared with cities such as New York and San Francisco, and for architecture about as exciting as its fashion sense. Today, home prices in Washington and its surrounding suburbs are rapidly rising to new levels.
As other American cities have been buffeted by an uneven economy, Washington’s property market has been buoyed two forces specific to the capital city: a surge of federal contractors and a rising tide of government spending. The result: what real-estate agents and developers are calling an unprecedented real-estate surge.
“Buyers are clamoring for high-end product, and homes are selling in a day,” says Chris Ballard, principal and founder of real-estate firm McWilliams Ballard. “We are getting all-cash offers with no contingencies on lots of properties—stuff we would have never seen a year ago.”
During the first four months of this year, 11 homes in the D.C. metro area—which includes the District of Columbia, the city of Alexandria, Va., Virginia’s Arlington and Fairfax counties and Maryland’s Montgomery County, among others—sold for more than $5 million, according to Metropolitan Regional Information Systems. That’s more than three times the number that sold during the same four-month period last year. Homes priced over $1 million saw a 32% rise over the same period.
Kip Knudson, who relocated last year to Washington to run state and federal relations for the governor of Alaska, says he and his wife looked at more than a dozen houses in the city—but other buyers snapped them up before the couple could make a successful offer. So when the couple spied an “open house” sign on the lawn of a 1920s-era brick row house on Capitol Hill, and learned that more than 300 people had attended the open house, they immediately offered the full asking price of $1.195 million for the 2,500-square-foot, four-bedroom house with modern interiors. “Our thinking was to make an offer first, then figure out where to get the money second,” Mr. Knudson says.
A number of factors are driving the real-estate renaissance. First is a dramatic lack of housing inventory. There are 72% fewer active listings in the entire D.C. metro area now compared with five years ago. In 2007, there were nearly 20,000 new condos on the market. Today, there are fewer than 3,000 units under construction or being marketed, according to real-estate research company Delta Associates.
Washington’s economy—which was never hit as hard during the recession as other major U.S. cities—is flourishing. From 2007 through 2012, the local economy expanded 7.6%, compared with the nation’s growth of 5.4%, according to economist Stephen Fuller of George Mason University. Federal procurement spending in the Washington area increased by 182% from 2000 through 2010, which has led to an influx of contractors, lawyers and consultants. Overall, the area saw a population increase of 776,280 between 2000 and 2010.
Several large companies have also moved their headquarters to the D.C. area over the past several years, including defense contractor Northrop Grumman,NOC -0.12% which moved from Los Angeles in 2011. Volkswagen GroupVOW3.XE +0.15% of America relocated in 2008 from a suburb of Detroit. Bentley, also part of Volkswagen Group, moved from Boston in January, while Hilton, SAIC, and CSC have all moved recently from Southern California.
And then there’s the contractor effect. According to Mr. Fuller, annual government spending on federal contractors in the D.C. metro area increased from $12.6 billion in 1990 to $29.3 billion in 2000, and to $82.5 billion in 2010. And 70% of the $82.5 billion was for technology services. “There’s been a huge increase in federal spending on technology goods and services that we didn’t have a need for before,” says Mr. Fuller, who adds that the spending has contracted slightly since. In 2012, the amount spent on local contractors was down from its peak in 2010 to $75.6 billion.
The government sequester, a package of about $85 billion in spending cuts that went into effect in March, is already being reflected in a sudden drop in local apartment-rent prices. It isn’t yet clear whether the sequester, and its resulting job reductions, will affect the high-end housing or condo markets.
Roger Mody, 49, is a former federal contractor who now co-owns several sports teams in the area. At 38, he sold his Fairfax, Va., information-technology-services company, which did contract work for the government. The company sold for $227 million; his share was $125 million.
This past January, he bought 5 acres in McLean, Va., for $4.88 million. He is planning to build a 16,000-square-foot, French-Normandy style home with a large lawn and pool on the site, which has panoramic views of the Potomac. Mr. Mody estimates spending $13 million to $15 million on the project, including the land. The house will be complete by late summer 2015.
“More and more people like me are building now,” says Mr. Mody. “You can see that architects and builders who were desperately trying just to break even two or three years ago are now incredibly busy and get offered more projects than they can take on.”
D.C.’s tech scene has also exploded. The number of jobs for engineers, technicians, scientists and those in the computer and math occupations grew by 19.5% from 2001 to 2013 in the D.C. metro area, according to Economic Modeling Specialists, an employment-data firm. In California, by contrast, employment in those professions was flat during that time. In the country overall, it grew by 3.4%.
Tim O’Shaughnessy, who founded the company now known as LivingSocial in 2007, three years after he graduated from Georgetown, has remained in Washington rather move his company to Silicon Valley or New York. The district has offered his company as much as $32 million worth of tax breaks beginning in 2015 if LivingSocial keeps its headquarters in Washington and hires a certain number of local employees.
Last year, Mr. O’Shaughnessy and his wife, Laura, bought a Kalorama Heights home for $2.15 million. The four-bedroom, four-bathroom Victorian townhouse has a rooftop deck, and an au pair suite, and is 4,305 square feet—more than 2,000 square feet larger than the townhouse they sold for $1.24 million, also last year. Mr. O’Shaughnessy declined to comment.
Foreign buyers, who long overlooked D.C. in favor of New York or Miami, are now beginning to purchase in the Washington area, brokers say. Adam Flatto, president of Georgetown Co., one of the developers behind the new Four Seasons Residences—70 luxury condo units on the site of a former Georgetown heating plant, expected to be completed in 2016—says about half of the inquiries he has received about the project are on behalf of buyers from abroad.
The city is also becoming safer, though longtime residents complain that traffic congestion is worse and prices for parking are rising. Abandoned storefronts and burned-out buildings are being converted into condos. While it used to be dangerous to walk a few blocks to a nightclub in Logan Circle, that neighborhood is now known for its sprawling Whole Foods grocery store.
“Washington has always had the potential to be a truly world-class city, but in recent years it has really come to life in a way that we have never seen before,” says Brad Nelson of TTR Sotheby’s International Realty, a Washington firm that sold nearly $1.3 billion worth of residential real estate in 2012, a 51% increase from the year earlier.
Not all of the District is thriving, however. Much of the city remains home to poor neighborhoods with dilapidated housing, and recent gentrification in parts of Washington has pushed some working-class residents to the outskirts of the metro area.
In the area’s more-affluent neighborhoods, luxury-condo developers from around the country are arriving in droves. Houston-based Hines is developing CityCenterDC, a 10-acre development downtown with 216 high-end condos and more than 60 shops and restaurants, including one from three-star Michelin chef Daniel Boulud. Georgetown Co., co-developer of the Four Seasons Residences, is based in New York and built Frank Gehry’s IAC building there. The Quarry in Bethesda, Md., will have condos with 10-foot ceilings, hearthstone fireplaces and private elevators. Although the building doesn’t open for another two years, it is already 30% sold; prices range from $1.8 million to $4.6 million.
The condos at CityCenterDC were designed by Foster + Partners, the British firm led by Norman Foster that built the Millennium Bridge in London. The spaces feature the sort of fixtures common in Manhattan or Miami, such as European-white-oak hardwood floors and kitchens with Molteni cabinetry. A penthouse in the building recently fetched $3.2 million, or $1,470 a square foot—one of the highest prices ever in the area.
Dan Riordan, president of residential development for Turnberry Associates, a Miami-based development company, says he moved to Washington a few years ago after seeing a gap in the market for modern, high-rise luxury condos. “I felt like, if we built it—they would come,” he says. “And they did.”
George W. Bush’s younger brother Marvin Bush and Jonathan Browning, chief executive of Volkswagen Group of America, both live in the building, Turnberry Tower, an all-glass tower with 250 units that sold out for an average of over $700 per square foot with upper levels of the tower averaging $1,000 per square foot. The condos have floor-to-ceiling windows and direct elevator access.
The largest unit in the building went for $5.5 million to Ronald Rosenfeld, the former chairman of the Federal Housing Finance Board and former president of Ginnie Mae under President George W. Bush.
“It was really the views that sold me,” says Mr. Rosenfeld, who spent another $1 million to finish the 5,300-square-foot space, which has white marble floors and 14-foot ceilings.
“A building as luxurious as the Turnberry is still a rarity in D.C.,” adds Mr. Rosenfeld. “D.C. isn’t a money town, it’s a power town. It’s much less ostentatious than New York, although that may change.”
A more-contemporary design aesthetic is also finding its way into individual homes, as more young people arrive in the city. Homes with floor-to-ceiling windows and skylights are joining the brick row houses and Victorians that have long lined the city’s streets. “People are much less afraid to do modern stuff than they used to be,” says Phil Leibovitz, a contractor in Washington who says demand for his services has doubled from five years ago.
Last September, Jim Courtovich, who runs a public-affairs firm, paid $3.835 million for a 4,800-square-foot home near the National Cathedral. According to people familiar with house, Mr. Courtovich spent about $500,000 to renovate the five-bedroom home, adding a second kitchen downstairs with a 12-foot walnut-and-marble carved kitchen island. Upstairs, he added a separate charcuterie room with a deli slicer and meat locker.
“I really wanted to create a casual and usable space for entertaining, because there’s a lot of formality in Washington,” says Mr. Courtovich, who has lived in Washington since 1990.
Robert Gurney, one of the city’s most prominent modern architects, says he has triple the number of clients that he had five years ago. “In the old days, I used to hide modern elements behind traditional structures,” he says, citing a project where he put a gabled roof on a house to help minimize the conspicuousness of large, modern windows. “But today there is no shortage of people in Washington that want a completely modern house,” he adds, noting he has about 20 active projects in the works.
A few months ago, Mr. Gurney completed an 8,000-square-foot modern home for Tony Dobranski, who worked at AOL in the 1990s, and his wife, Jackie. Mr. Gurney designed the four-bedroom, seven-bathroom home in Washington’s Forest Hills neighborhood, tearing down a dilapidated 1922 Victorian on the property. In its place, he created an L-shaped house with taupe stucco and dry-stacked-slate exteriors. The home has floor-to-ceiling windows and two-story open spaces for dining and entertaining. On the top level, there’s a yoga studio and gym with bamboo floors.
The Dobranskis spent about $4 million to build the home, including buying the land. “We knew we wanted a modern house with big open spaces, clean lines, and lots of light, which is pretty hard to find in this city unless you build it yourself,” says Ms. Dobranski.