Living near the seat of federal power has always been a good bet for home buyers, but have you seen Washington real estate prices lately?
No doubt, multimillion-dollar purchases from the new batch of wealthy Trump administration home buyers delivered a lucrative jolt to the greater D.C. housing market last year.
Well-heeled Trump aides all scooped up homes in the toniest neighborhoods, including Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross, presidential counselor Kellyanne Conway and Secretary of State Rex Tillerson – dropping $12.6 million, $10.75 million, $7.8 million and $5.5 million, respectively.
Their purchases contributed to a 31.6 percent average price rise in upper-tier homes (the top 5 percent) in the first quarter of 2017 and an 11.4 percent increase for the entire year, according to the real-estate company Redfin.
But it's what hasn't changed that is remarkable here – aside from the possible irony of capital arrivistes entrusted with draining the swamp being less inclined to drain their indoor pools.
The beauty of buying residential real estate in Washington, D.C., is that the town is largely recession-proof. Washington is insulated from the "real" economy by your tax dollars and the permanent presence of millions of bureaucrats, contractors, lobbyists, military personnel, journalists, academics, service workers and others whose livelihoods are tied to the world’s most powerful government, not to mention thousands of well-paid diplomats and official at high-powered institutions such as the World Bank.
As a result, values in both luxury homes and the broader market tend to hold their ground and appreciate in value over time – providing a less obvious leg up in life’s most important personal investment to those within the federal government’s orbit.
If you’re one of the lucky ones, think of the high-end D.C. market as a casino where over time the house pretty much always wins – your house.
“The Washington, D.C., market is fairly insulated from economic downturn,” said Steve Centrella, a Redfin agent in the District of Columbia. “During the recession, we saw home values plateau, but they did not take a severe dive and the market here recovered fairly quickly.”
It may not have the glitz of Manhattan or Bel Air, but the nation’s capital has been one of the richest areas of the country for a long time. Even before the Trump billionaires arrived, its plush suburbs such as Potomac, Maryland, and Great Falls and McLean in Virginia regularly topped charts of the country’s wealthiest ZIP Codes.
Over the period of the housing bust and recovery, median D.C. home prices more than held their own, rising more than 41 percent from January 2008 to December 2017, according to Zillow. During the same period, hard-hit places like Las Vegas and Fresno, Calif., saw prices collapse after being inflated largely by easy mortgage policies promoted back in Washington. They still haven’t fully recovered, down more than 6 percent and nearly 5 percent, respectively.
Following the old property saw “location, location, location,” D.C.’s power elite prefer to live in neighborhoods not far from the seat of power: the White House -- coincidentally now occupied by the country’s most prominent real estate mogul and top new hotelier. Two preferred localities are the tree-lined streets near Embassy Row, known as Massachusetts Avenue Heights, and Kalorama, which is closer to Dupont Circle.
Conway and Secretaries Mnuchin and Ross are practically cup-of-sugar-borrowing neighbors in the former, while Tillerson lives in the latter. His Kalorama neighbors include the nation’s First Renters: the president’s daughter Ivanka and her husband, Jared Kushner.
But Kalorama also has a distinct air of bipartisanship. The Obamas live there and so does Amazon founder Jeff Bezos, whose Washington Post is one of Trumpworld’s chief antagonists.
According to his paper, Bezos paid $23 million in cash in the fall of 2016 for the 27,000-square-foot former Textile Museum, which combines two historic-landmark mansions, one designed in 1912 by Jefferson Memorial architect John Russell Pope. Bezos paid $1 million more than the asking price and $4 million more than the properties had been sold for just the year before. The Post also reported that the home "is expected to be an East Coast pied-à-terre" for the Bezos family.
Last May the Obamas bought their 8,122-square-foot Tudor-style mansion in Kalorama, which they had been renting, for $8.1 million, from another Washington insider, Joe Lockhart, a former press secretary to Bill Clinton and more recently the top communications official for the National Football League. The sale represented a nifty profit for Lockhart, who paid $5.3 million for it in 2014, according to Maxwell Rabin, a broker for TTR Sotheby’s International Realty.
“Luxury buyers in the ritzy enclaves of Kalorama, Massachusetts Avenue Heights and Georgetown retain their value quite well,” Redfin’s Centrella said, in something of an understatement.
For example, as President and Hillary Clinton prepared to leave the White House in 2001, they bought the five-bedroom, brick Colonial-style house known as Whitehaven in the Massachusetts Avenue Heights area for $2.85 million. Once home to British diplomat Sir David Muirhead and later the American heiress and socialite Muffie Cabot – who became mother-in-law to ex-Clinton spokesman George Stephanopoulos -- the home is now worth an estimated $6.2 million, according to Zillow.
Then too, not all of the right neighborhoods occupy that price stratosphere, but they unquestionably hold their value. Former Democratic presidential hopeful and U.S. Sen. Bernie Sanders (I-Vt.), for instance, owns a one-bedroom row house built in 1890 on Capitol Hill that the socialist purchased in 2007 for $489,000, according to Forbes and The Washingtonian. Today, it has an estimated value of $562,500.
CNN’s Wolf Blitzer lives in the Bethesda, Md., suburb. His two-story home near the Congressional Country Club was purchased for $710,000 in 1989. Its estimated current value is roughly double that: $1.4 million.
Over all, Washington home values, encompassing rich and poor areas, have gone up 2 percent over the past year and are expected to climb a slight 0.8 percent this year, according to Zillow. The rental market is robust with staying power too. The monthly median rent in Washington D.C. is $2,595, up from $1,238 in 2012.
While outsiders might envision a mass disruption to the housing market when one administration leaves the city and another enters, that’s not what typically happens.
Homes in the top tier tend to stay in the same hands for long periods of time and, since suited for the rarified buyer, they can take time to sell – hence the price jolt for luxury homes when Trump’s fellow billionaires arrived. In any case, there are ample personal and professional reasons to hang around after a top government posting comes to an end. Ex-high-level functionaries know that political tides reverse with regularity and that new federal gigs might later present themselves; in the interim (or permanently), they can find well-remunerated refuges at nearby think tanks, lobbying firms, consultancies and universities.
To get a sense of how the real estate game works in the District, consider the 1927-vintage red brick Georgian home at 3041 Whitehaven Street overlooking the lawn of the British Embassy and just a few hundred feet from the Clintons’ Whitehaven.
In 1995, the philanthropist Paul Mellon, husband of Bunny Mellon, the gardener and art collector, sold the mansion to the former Secretary of the Treasury Nicholas F. Brady and his wife, Kitty, for $3.8 million.
In 2008, Brady sold the place, with its formal ballroom and a wood-paneled library, as an ambassador’s residence to the Polish government for $9.5 million. Not a bad investment to more than double the purchase price in a dozen or so years.
Today the old Mellon place is situated not far from Secretary Mnuchin’s nine-bedroom home on Rock Creek Drive. Mnuchin bought his manse two weeks before his Senate confirmation. The buyer was recorded as The Rock Creek Drive Revocable Trust, according to Realtor.com – a move typically used to avoid probate proceedings later.
The gated, white-stucco estate has an indoor pool and 12 ½ baths, a fitness room and sauna, according to Washington Fine Properties, the realty agency that listed the property.
Mnuchin’s new lodgings put him just a few doors down from Secretary of Commerce Ross, who parted with $10.75 million of his estimated $2.5 billion fortune to snatch up a Beaux-Arts mansion from the 76-year-old philanthropist Adrienne Arsht, according to the Washington Post.
Conway and her high-powered attorney husband shelled out $7.8 million last spring for her eight-bedroom Massachusetts Avenue Heights home, which was built in 1927. It was owned by Mooen A. Qureshi, a late former acting Prime Minister of Pakistan and former senior official at the World Bank.
Over in Kalorama, Secretary of State Tillerson, former CEO of Exxon Mobil, reportedly acquired a $5.5 million four-bedroom, 4 ½-bathroom Colonial revival home last year from former AOL executive Richard Hanlon and his wife, Pam. Records show that the Hanlons paid $3.15 million for it in 2011. Forbes estimates Tillerson’s total net worth at $330 million.
More properties are likely to be snapped up this year. Potential big-ticket purchasers could be Ms. Trump and Mr. Kushner. Since the election, the power couple has been renting a manse near the Obamas from a company controlled by Andrónico Luksic, a Chilean billionaire, who bought it after the November election for $5.5 million. The rent: $15,000 a month, The Wall Street Journal reported.
Word in real-estate circles is that they’re in house-hunting mode and may have looked at former SEC Chairman Harvey Pitt’s red-brick Colonial revival mansion in the same neighborhood, which was listed in November for $5.7 million.
One fly in this salutary ointment for Washington’s better-off: Under the new tax law signed by President Trump, homeowners can deduct only $10,000 in combined local income and property taxes.
But don’t expect the allure to go out of the D.C. market just yet. After all, it’s been with us a long time. With Presidents' Day upon us, consider how our nation's first Chief Executive illustrates the point.
Aside from inheriting and expanding his Mount Vernon estate nearby, George Washington, who spent his presidency in New York and Philadelphia and never lived in the city named for him, was an avid investor in the newly designated capital region. He owned not only numerous Virginia properties but two townhouses on Capitol Hill and four other lots in the District.
The Founding Father, if not Trumpian before his time, just had a hunch.