Real estate markets across the country, including Washington DC, have seen drastic changes throughout the COVID pandemic. As housing prices soared out of reach, individuals turned to the rental market to fill the gap. As a result, some areas saw significant vacancy spikes after financially impacted renters fled the cities. However, Washington DC continues to rank as one of the top metropolitan areas for rent growth. Continue reading below as we examine the current state of the DC housing market and what predictions may carry over to 2022.
What’s New in the DC Housing Market?
According to a Bloomberg market report, August rental rates were up year over year in 30 major US cities. This included Washington DC, which saw a 6.2% increase. In addition to climbing rental rates, overall rental activity is up over 40% in the nation’s capital.
When the pandemic hit, much of the workforce now found themselves working from home. This, along with health concerns, led many renters to escape bustling cities in favor of the suburbs. That said, pandemic concerns are waning, and renters are slowly returning to the metropolitan areas. While individuals under 25 make up a large portion of the DC housing market, applications from Gen Z individuals are up 92% over 2020.
According to RentCafe, the average Washington DC apartment will cost renters around $2,160. In fact, around 49% of all rental listings fall into the over $2,000 per month category. That said, the job market in Washington DC remains strong, despite pandemic concerns. Yardi reports that applications among renters earning between $50,000 and $75,000 were up 62% during the first half of 2021. Furthermore, 65% of those applications came from individuals outside the region. Therefore, this strong rebound attracts more people to Washington DC, which is a good sign for the rental market.
Is Now the Time to Buy in Washington DC?
Owning a home is still very much a part of the American dream. However, rising costs, increased demand, and diminished supply have made it difficult to enter the housing market. For DC homebuyers, affordability has long been and continues to be a significant issue. Let’s take a look at some of the most recent statistics and market reports from McEnearney Associates STATPAK below –
- Climbing Interest Rates – As of September 30th, 30-year fixed mortgage interest rates were just over 3%. However, that is 13 basis points higher than September 2020 and 7 basis points higher than August 2021. Most experts expect rates to remain above 3% heading into 2022, with a few exceptions.
- Affordability Woes – The cost of a median-priced home is over 60% higher than this same time a decade ago. That said, mortgage payments on a median-priced home averaged $2,586, which is just slightly lower than the median rent at $2,600.
- Cooling Demand – In September of 2020, homes spent an average of 26 days on the market. However, just one year later, that number has crept up to 36 days. So, this could signal the market is beginning to level out.
- Supply is Catching Up – Last year, supply could not meet the pandemic demand for available houses as homebuyers scrambled to take advantage of record-low rates. That said, the number of homes on the market this Fall is up 19.4%. This, combined with other factors, has increased supply to 2.5 months compared to 1.9 in September 2020.
The DC housing market is slowing down compared to the height of the pandemic rush. In general, attached homes are the most robust sector, but the overall market remains desirable.
What’s New for Real Estate Investors in DC?
Like many other areas of the country, outside downtown and into the suburbs remains the most in-demand real estate. For investors, finding homes to invest in involved scrambling in a very competitive market throughout 2020. In 2021, the build-to-rent sector has seen the most significant increase in decades.
Prices are up, and as more millennials enter the homebuying market, those prices remain out of reach for many. This is especially true in Washington DC, where the median home price is $629,000. Although this may be trending down slightly, it is still a significant financial threshold.
Investors have several opportunities as the DC housing market begins to settle down after record-breaking prices during the pandemic. Build-to-rent is an excellent investment for those with the means to meet the increasing demand of renters who cannot yet afford to buy. On the other hand, increased listings and softening demand means more opportunities to find more advantageous deals.
For any investor, researching the local market and demand is vital. With so much of the workforce still working from home, renters are looking for additional space. So, always carefully check area comps and how each neighborhood is bouncing back post-COVID.
Top 3 Neighborhoods to Watch as an Investor
The Washington DC housing market is full of diverse and eclectic neighborhoods that each have their unique charm. However, as an investor, some locations are always more profitable than others. Check out the top 3 areas to watch as we head into 2022.
- Adams Morgan – Best for Movers and Shakers – Just north of downtown, Adams Morgan offers a front-row seat to all DC has to offer. This is a popular spot for young professionals thanks to great walkability and a bustling array of restaurants, nightlife, and music venues.
- Trinidad – Best for Fix and Flip – Bursting at the seams with 1920’s rowhomes, Trinidad is ideal for investors looking to fix and flip for profit. This is an in-demand type of real estate, and with inventory still catching up, investors could cash in with some calculated renovations. In addition, this northeast quadrant of DC sees lower property values than in other neighborhoods, so margins could be favorable.
- Hillcrest – Best for Long-term Investing – Hillcrest boasts the best of both worlds with a suburban feel despite its urban locale. That said, this area is more expensive and caters to renters looking to stay around and put down roots. Thus, making it an excellent choice for investors with a buy-and-hold plan.
How to Get the Most from Your Investment Property
The Washington DC housing market offers many opportunities for real estate investors. Whether you choose to purchase and operate a multi-family building or build to rent single-family homes, managing those properties will be a challenge. In a changing market and world, catering to the needs of tenants while protecting owner interests can be a delicate balance.
Hiring an experienced property management team can be the best way to relieve the stresses of daily rental property ownership. At Bay Property Management Group, our focus is providing third-party expert management with top-notch customer service for both owners and tenants. In addition, by staying up to date on legal changes throughout the industry as well as the local market, we help owners maximize their investment’s potential. For more information on the benefits of property management or to schedule a free no-obligation home analysis, give us a call today.