Covid-19 Kindled Washington, D.C.’s Luxury Market. The New Administration Could Make it Even Hotter

For many years, Michael Stock said he never considered selling his handsome Beaux-Arts Revival-style home on Washington, D.C.’s prestigious Embassy Row—not even when representatives from a nearby embassy stopped by with a case of wine and an unsolicited bid of interest.

Then the pandemic happened, sending the local luxury real-estate market on an unstoppable hot streak. The rise in prices, combined with the promise of fresh demand spurred by an incoming presidential administration, proved too good to pass up: Mr. Stock listed his home, which he bought in 2008 and spent years restoring, for $5.5 million earlier this month.

Like many other cities whose luxury housing stock is dominated by single-family homes, Washington, D.C.’s market has only benefited from the Covid-19 crisis, as buyers—often spurred by ultralow interest rates plus the desire for dedicated home offices and large gardens—move to larger homes. As a result, the D.C. real-estate market is pricier than it has been in years, according to local agents.

Now, with a new administration taking over the White House, those agents say they are busier than ever. “I’m on meetings and showings all day long,” said Daniel Heider of TTR Sotheby’s International Realty, noting that he’s already shown Mr. Stock’s house to a couple relocating to the area to serve in President Joe Biden’s administration.

“We didn’t know where we were going to be when Covid hit in March,” said Robert Hryniewicki, a luxury agent with Washington Fine Properties who said he is currently handling a bidding war for a Massachusetts Avenue Heights property priced at $5.65 million. “But after April, it really took off.”

The median price of a home sold in Washington, D.C., was $641,300 in December, a 1% increase from the same time a year prior, according to data from real-estate firm Long & Foster. The volume of sales was up 16% during that same period. The number of signed contracts in December was 731, up 40% from December 2019.

In December, there were just 1.7 months of housing supply available in Washington, D.C., down 12% from the prior year.

The ultra-high-end saw even more of an uptick. There were 72 transactions priced at $4 million and up in the capitol region in 2020, compared with 53 in 2019, according to Washington Fine Properties. There were eight sales priced at $10 million or more, compared with zero the year before.

Coe Magruder, a 67-year-old hedge-fund and asset-management entrepreneur, is one of the many beneficiaries of the hot market. He sold his Massachusetts Avenue Heights home, a redbrick Colonial formerly home to the embassy of Swaziland (now known as Eswatini), for $4 million in August after receiving an unsolicited offer, he said.

He said he and his wife Denise Magruder had already relocated to Vero Beach, Fla., and were planning to do some work to their home, including a paint job and a redo of the bathrooms, before listing it for sale.

The market wouldn’t wait. Mr. Hryniewicki, the couple’s agent, soon had a client for whom the house was perfect. Mr. Magruder agreed to a single showing and threw in a caveat: The buyer would have to meet the fixed asking price of $4 million, or he would continue with his plans to spruce up the property and list it publicly later.

Within a week, a contract was signed for $4 million. Mr. Hryniewicki said the home sold for a notable premium over what it might have sold for prior to the Covid-19 crisis.

Being home with their two young children amid the pandemic made real-estate developer Michael Rocks and his wife Dana Rocks, who was pregnant with their third child, rethink their space. In November, they listed their four-bedroom Tudor in the leafy Wesley Heights neighborhood to move to a larger home in McLean, Va., where the children could each have their own rooms and a bigger yard.

“Little kids have a lot of energy they need to expend,” said Mr. Rocks, 35, who became a father of three in December. “They want a jungle gym, and since they couldn’t go to the playground we wanted to create something like that for them in our own yard.”

The Rockses hosted one open house and about 12 separate tours and received four offers over their $1.795 million asking price, Mr. Rocks said. “What was shocking to us was how many offers there were,” he added. The house went into contract for $2.022 million just four days after it was listed.

While they reveled in the success of a quick sale, the flip side of the market was trickier; the purchase of their new home in McLean required winning a three-way bidding war. “Everything is just so expensive and in such limited supply,” Mr. Rocks said.

Real-estate agents project the market will become even tighter in the next few months, as Mr. Biden continues to roll out new appointments.

Neighborhoods expected to be especially in demand include fashionable areas like Kalorama and Massachusetts Avenue Heights, which are known for drawing Washington high society, including major political donors, lobbyists and wealthy elected officials, as well as billionaires like Amazon Chief Executive Jeff Bezos. In these neighborhoods, a short drive from the Capitol, high-end classic homes are clustered together on tree-lined streets.

Despite for a heavy security presence in some pockets, designed to protect residents like Jared Kushner and first daughter Ivanka Trump, the Kalorama neighborhood was quiet on a recent Sunday. A few walkers with their dogs paid little attention to the security as they passed.

Mr. Stock, 44, leads a nonprofit that trains peacekeepers and military forces in troubled parts of the world. While his home is close to the one owned by President Barack Obama and former first lady Michelle Obama, he said the security is basically discreet and somewhat reassuring. “You couldn’t find a safer block probably anywhere in the country,” he said. “Sometimes, when there are people over for an event, I don’t lock the door.”

During the last presidential transition, administration officials like Commerce Secretary Wilbur Ross, Treasury Secretary Steven Mnuchin and presidential adviser Kellyanne Conway all bought homes within the same tiny area.

“This current administration threw everyone in the housing market for a loop,” Mr. Heider said. “There were people coming from New York and Palm Beach, who were extremely wealthy and that upper bracket market went on fire,” Mr. Heider said.

It isn’t clear if Mr. Biden’s cabinet will be as affluent, or if those Trump administration officials will leave D.C. following President Trump’s departure; as of now, none of their homes are publicly listed for sale.

As for the recent riot at the Capitol, Mr. Heider said he expects it to have little to no effect on demand for homes.

“Obviously, a breach of the capitol building is not something to brush off, but Washington has been home to protest after protest for decades,” he said, though he noted that the curfews imposed because of the riot were inconvenient for residents. “This summer, there was looting and businesses being set on fire and it didn’t impact the real-estate market. It’s just part of living in Washington.”