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When real estate flips you the finger

The cost of land in the nation's hottest urban neighborhoods is only going up, and that has developers building up, higher, even when the new construction might not fit in with the old.

The buildings have been nicknamed "pop-ups"as tall as 65 feet, these modern rowhouses are springing up between smaller, historic homes. They stick out like a sore thumb, or as some charge, a middle finger from profit-hungry developers.

A skinny house on V Street in NW Washington, D.C.
Diana Olick | CNBC
A skinny house on V Street in NW Washington, D.C.

"Condos are selling great, and investors do things that sell," said Michael Watson, developer of a pop-up on Washington D.C.'s K Street. "Inventory is small near Capitol Hill, so you need to maximize square footage."

That is just what he and others are doing all over D.C. as well as in other pricey urban areas, like Philadelphia and New York City. Not every neighborhood allows for the pop-ups in the zoning rules, but for those that do, the air rights are selling fast.

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"They will take it up as high as they can go to get more units out of the square footage of the lot," said Hilda Lawrence, a real estate agent showing condo units in a similar building on 8th Street NW in D.C. "The value is going up, the demand is out there for housing, and the limited land that's available is going to continue to allow the developers to construct these types of buildings."

The zoning may allow for these buildings, but neighbors have put up a fight in some instances, even holding up construction. There was considerable controversy over a project on D.C.'s V street, nicknamed the "Monster." Now that it's been up awhile, however, it is actually drawing people in, rather than putting them off.

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"The only time when people who have seen it stop is when they have family in town visiting," said the Rev. Kevin Hart, a pastor in the church across the street. "They want to show them the building on V Street. This is like a tourist site."

With housing demand in D.C. far higher than supply, the condos in these buildings are carrying million-dollar price tags. What is an eyesore to some neighbors is an opportunity to weary house hunters.

"One of the big trends right now in D.C. is the old and the new coming together, so you're seeing a lot of these old buildings being converted with new finishings, and it's got that nice mix," said Jenna Golden, who has been looking to buy for eight months.

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Golden, a renter for 10 years, has lost out in multiple bidding wars, especially against all-cash offers. She toured the new pop-up on 8th Street and was far more interested in the fact that there were four available units. As for the height? Is it flipping the neighborhood the bird?

"Well maybe that's one way to think about it," laughed Golden. "I would disagree. I would say it's unique."

—By CNBC's Diana Olick. CNBC producer Stephanie Dhue contributed to this piece

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  • Diana Olick serves as CNBC's real estate correspondent as well as the editor of the Realty Check section on CNBC.com.

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