With its steady economy and proximity to other bustling metro areas, Washington, D.C., is clearly a desirable option for relocating. In addition, it showcases an incredible history and comes with plenty to do, whether you’re interested in culture, sports, food or outdoor recreation.
So, if you’re looking for an exciting lifestyle and abundant employment opportunities, this city has you covered! And to help you in your search for a new home, be it an apartment for rent or possibly a home for sale, we’ve put together some helpful information about the D.C. real estate market:
Population Recovery After Pandemic-Related Moves
Washington, D.C., is the capital city and federal district of the United States. It has 683,154 residents and is the 20th-largest urban center in the country. Being an important world political capital, D.C. is an interesting place to live.
Although the city had seen steady growth throughout the last decade, it experienced two consecutive years during the pandemic in which its population declined. According to dcist.com, the most significant dip was recorded in 2020 and was likely attributed to people moving out of the area. Then, the District continued losing residents the following year, though at a much slower pace.
Granted, D.C. mirrored national trends as many large cities across the U.S. experienced population drops during the pandemic, mainly due to less migration to the country, COVID-related passings and low fertility rates overall.
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However, Washington, D.C.’s population appeared to have bounced back from the two-year decline, gaining about 3,000 residents in 2022, a 0.5% increase. The recovery is linked to natural change (more residents being born), in addition to a rise in international migration to the District.
Some of the factors drawing new residents to D.C. include:
- Many post-secondary academic opportunities and a well-educated population, with more than 75% of the city’s residents holding either a college, bachelor’s or graduate degree.
- Well-paying career options, with white-collar workers accounting for 94.17% of the employed population in D.C., and close to 6% of residents being entrepreneurs. Moreover, a handful of Washingtonians (47.21%) work for private companies, while governmental institutions employ 25.24%.
- The numerous employment opportunities give the area a high average annual household income of $138,421, with the median figure sitting at $93,547 per year.
- The city also boasts a lower cost of living compared to neighboring New York City.
Level Playing Field for Homebuyers & Sellers
Of the 310,104 housing units in Washington, D.C., 41.51% are owner-occupied, and 75.95% of these were purchased with a mortgage.
Image: David Harmantas / Shutterstock.com
Following forceful pre-pandemic bidding wars and rising home costs, the housing market in D.C. has been cooling. High interest rates seem to have significantly decreased buyer competition and helped level the playing field between buyers and sellers.
As such, fewer homebuyers have entered the market, and those actively looking for properties appear to be taking their time before taking the plunge. For example, according to the Greater Capital Area Association of Realtors and Bright MLS, a typical house took 42 days to go under contract in March, the highest figure for this month in the past five years.
Even with these changing trends, home values remained quite steep. The median selling price stood at $640,500, up 4,4% compared to the month before but 3% lower than a year ago. Condos in Washington, D.C., went for around $455,000 in March, while the average townhome in D.C. cost $810,000 and single family homes were $980,000.
| Property Type | Median Home Price (March 2023) |
|---|---|
| Detached | $980,000 |
| Townhomes | $810,000 |
| Condos | $455,000 |
| All Home Types | $640,500 |
Paired with the high prices, housing inventory in the area continued to be low, even with a 46.1% increase from February 2023. In fact, the 1,192 figure for new listings in March 2023 is roughly half (51%) of what it was back in March 2019.
Overall, homebuyers in the District prefer larger properties with more elbow room, as reported by Parcl Labs, with single family properties accounting for most home sales over the last 12 months (a total of 51.39%). Condos held a market share of 22.14%, and townhomes represented 18.74% of residential sales.
Building one’s house remains an option for many. So, those willing to engage in a full-on construction project should know that the average cost of building a high-end home in the nation’s capital was estimated at $969,000 last year.
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Similar to conventional homebuyers, investors have also been more reluctant to invest in properties for sale in D.C., with Q4 of 2022 seeing a 24.6% year-over-year decrease in purchasing activity, according to Redfin. One reason for the lack of investor interest involved the overall high price tags in the city, making profitability more challenging. Homes bought by investors were valued at an average of $415,000, making up 10.7% of the market and totaling $675,342,852.
In-Demand Rental Market
A helpful way to determine whether it’s better to rent or buy a home in an area is to use the price-to-rent ratio, which divides the local median home price by the median annual rent. Buying is likely better if the ratio is between 1 and 15, whereas a figure of 16 to 20 hints at renting. Finally, anything above 21 strongly indicates you’re better off in a rental than purchasing a home on that market.
According to SoFi, Washington, D.C.’s price-to-rent ratio is around 24. This goes hand-in-hand with the fact that most households in the city are already renter-occupied (58.49%) instead of owned.
Image: David Harmantas / Shutterstock.com
More specifically, one-bedroom rentals account for a hefty 43% of the total renter-occupied homes in the nation’s capital, followed by two-bed units (28%), studios (15%) and three-bedroom rentals (10%). Overall, the vacancy rate was 6.7% in February of this year, and the average apartment size sat at 745 square feet.
The data shows that space is limited for D.C. renters, who seem to sacrifice much more elbow room than renters in other parts of the country. In fact, even though the average apartment size in the area increased slightly over the past decade (+9 square feet), as WTOP.com reports, the District still ranks among the cities with the smallest rentals in the country, taking seventh place on both the smallest existing apartments as well as new build lists.
In terms of prices, an apartment for rent in Washington, D.C., averaged at $2,327 per month this February, representing a slight 2.8% uptick from a year ago and around $600 more than the national average. A single family home for rent in D.C. cost $4,375.
When residents left the city en masse during the pandemic, rents plummeted. According to Yardi Matrix, what followed was a period of roughly 18 months of steep price increases, which started moderating only recently, at the end of 2022.
Even so, the city still sports some of the largest rents in the U.S., with most rentals (59.21%) having price tags of more than $2,000 per month. Then there are the 27.09% which are in the $1,500 to $2,000 range, and 12.38% come in at $1,000 to $1,500 monthly. Just 1.3% of District apartments are priced below $1,000, according to RentCafe.
Those looking for more affordable options should consider the following neighborhoods, showcasing monthly rents of less than $1,400:
- Randle Highlands
- Skyland
- Woodland
- Saint Elizabeths
- Shipley Terrace
- Anacostia Naval Station & Bolling Air Force
- Bellevue
- Blue Plains Treatment Plant
- Congress Heights
- Washington Highlands
Conversely, some of the most expensive neighborhoods in Washington, D.C., with rents of more than $2,700 per month, include:
- Federal Triangle
- West End Washington
- Foggy Bottom
- Navy Yard
- Bloomingdale
- Chinatown
- Howard University
- Judiciary Square
- Le Droit Park
- Mount Vernon Square
New Trends in Residential Construction
Image: Andrei Medvedev / Shutterstock.com
Housing units in Washington, D.C., are generally quite old, with 67% built before 1969. New developments only account for 10% of the market, i.e., buildings constructed after 2010.
Residential construction in the area remained relatively steady over the last five years, with annual volumes in the $13-$13.5 billion range, as reported by Cumming Group. Even so, slightly lower numbers are estimated for this year and the next.
Construction is changing according to current times, though. Since remote work made it possible for employees to operate from any location, the city’s downtown core has seen numerous people leave its grounds since the pandemic. But, to revitalize the area and attract 15,000 residents to live here again, local officials have launched incentives encouraging developers to convert empty D.C. office space into livable homes. Specifically, construction companies running such projects can expect a 20-year tax break to take effect this October. Nearly 2,500 apartments are currently in the works under Washington D.C.’s office-to-residential pivot, looking to also help with the existing housing crunch.
Sources:
The city-level demographic stats used in this article (population; education, employment and income data; and housing units info, year built included) were sourced from Point2’s Washington D.C. demographics page. At the same time, rent-related data (rent ranges, vacancy rate and average monthly rents) was extracted from the Washington D.C. rental market trends page. All additional sources were referenced directly within the text.
