DC Housing Market Forecast 2022
The Washington DC Housing Market is often described as recession-proof. It is true that the economy is consistently strong in the nation’s capital. Home prices have not declined significantly since the mid 1990’s. There are many factors at play that bolster home values and keep prices steadily on the rise in the metro area. Prior to the pandemic, economists described real estate as local. The story in one city was different from another. But now real estate is hyperlocal. Some parts of a city or even a neighborhood may far better than other parts nearby because of a collection of factors. Let’s dive deep and see what’s happening in DC.
How is the Washington DC Housing Market?
The DC Real Estate Market has remained consistently strong for a couple decades with no predicted end in sight. Median home prices have increased as much as 10% year over year, due to the ever expanding employment opportunities offered by the Federal Government, Lobbyists, Government Contractors, Law Firms, Medical Professionals and many other industries with a presence in the DC Region. With Amazon coming to Northern Virginia, it’s only expected to remain a competitive real estate market.
Covid took the DC Area for a bit of a ride. At first the city cleared out as homebuyers fled to the suburbs and exurbs. It turns out a pandemic was an excellent opportunity for people to express how they really felt about city living. But the metro area recovered relatively quickly and demand evened out as people came back to the city. Some buyers were looking for a steal on a condo no one wanted anymore and other buyers embraced that city living isn’t going anywhere. Living in Washington DC was, for a brief moment, on hold. But things returned to normal within a couple months.
By 2021, the real estate market was again following recognizable patterns. Homebuyers re-learned quickly that buying a home in the DC Metro area is like riding a mechanical bull while white water rafting through a tsunami.
Washington DC Real Estate Market: A Closer Look
The Washington DC Real Estate Market has seen prices go up across the entire metro area. I’m constantly saying the “pie cools from the outside, in.” But with Covid, the pie was like something you heated in a microwave. Some parts were cold and others were sizzling hot. As mortgage rates dropped, many first time homebuyers found themselves priced right out of the market.
The cost of living in Washington, DC also skyrocketed as it did in Maryland and Virginia as well. For people moving to Washington DC or even moving to Maryland or Virginia, there was no reprieve any longer. You could no longer find an affordable home an hour outside the city and just deal with a miserable commute. With no one commuting, the entire metro area housing stock was up for grabs. Let’s zero in on some more specific pricing information.
Median Home Price in Washington DC
The median home price in Washington DC was $630,000 in 2020 and $660,000 in 2021 which is a 4.8% increase. DC Metro area counties saw similar increases with the exception of Arlington, which had a 2020 median price of $666,000. The 2021 median was $670,000 which is just a .6% increase. Alexandria City went from a median of $600,000 in 2020 to $605,000 in 2021 which is a .8% increase and Montgomery County, Maryland jumped 9.8% from $482,500 in 2020 to $530,000 in 2021.
The places that saw huge jumps from last year were further out from the metro area. Fairfax City median sales prices were up 11.3% year over year. Loudoun County was up 12.9%. Prince William County was up 10.8% year over year.
Average Home Price in Washington DC
The average price for a home in the entire metro area in 2020 was $585,517. In 2021, home prices jumped 9.37% to $640,387. Much of this was Covid fueled. The average home price in Washington DC was $755,167 in 2020 and jumped 8.36% to $818,322 in 2021.
Average Condo Price in Washington DC
The average price of condos and attached (not single family) homes in Washington DC was $687,000 in 2020 and jumped 7.36% to $738,000 in 2021.
Washington DC House Prices: Recent Examples
If a homeowner deferred doing any maintenance on their home, expecting that the sellers market will sweep them up, they may be in for a rude awakening. When a home needs work, most buyers will pass it over for something that’s move in ready. Especially once everyone was at home during the pandemic, and home renovations picked up with a fury. It’s virtually impossible to get a contractor secured for several months.
My clients recently purchased a home in suburban Maryland. The comparable home sales indicated this home could approach $1M with a complete renovation. The sales price was $750,000. My clients are undertaking the full renovation and have been told by contractors that the earliest they could expect work to be finished was inside of a year. Considering a house can be built brand new from the ground up in 90 days, this time frame was a bit of a shock to all of us.
A home I listed for a client in a hot neighborhood lingered for a few weeks before an offer was received. The list price was $1,200,000. The home was in need of some light updates, but had a full 2 bedroom rentable basement with an occupancy permit. The number of homes on the market or among the recent sales with a similar 2 bedroom basement were rare. While this would be an asset in any market before the coronavirus entered our world, now, most home buyers wanted to capture any basement space for their peloton room.
Another single family home I listed received multiple offers with buyers so desperate they searched for the owner’s name online and reached out to them via Facebook to beg them to accept their offer. The home was listed for $450,000 and escalated well into the $500’s.
Washington DC Rental Market: What is a Good Rent Price?
The DC Rental Market has moved in tandem with home sales, which is typically not how it works. Usually as home prices rise and renters leave the market to become home buyers, rents go down. But there are so many people moving to DC on a consistent basis – many of whom will only be here for a short time. Rentals remain in high demand as well.
Studio/efficiencies typically cost around $1500 – $1800. Average rent in Washington DC for a one bedroom apartment is $2450 according to Apartment List. Two bedrooms will cost $3462 and three bedrooms – which are usually houses as three bedroom condos are rare in DC – cost an average of $4282.
Factors that Influence Washington DC Housing Prices
DC property values remain strong regardless of factors that would be considered negatives in other real estate markets. You may think that interest rates are a factor that affect homes in the DC Area, as they do in other areas. That’s not the case here. With one in five homes being purchased for cash, there is less interest rate sensitivity here than in other markets. The strong job economy, location / neighborhood, and quality of public schools affect home values as well.
Neighborhood & Location
No one has to tell you that real estate is about location, location, location. That remains true and will never change.
I’ve covered some of the best neighborhoods in DC in another video and blog post which you should also review. There’s variety included in the list, so it isn’t just great neighborhoods for families since I happen to be a mom – I’ve got other areas included for the younger crowd too.
If you have a little one attending public schools, where you live will matter a lot. DC offers a bit of flexibility among school boundaries but a school lottery governs the process. I’ve covered that with an added dose of Mama style snark in this video.
In the surrounding suburbs in Maryland and Virginia, understanding how the public schools operate is easy, but finding the right fit for your family may not be as easy. Regardless, it’s important to understand that home prices can vary tremendously within the same community if a school boundary bisects it.
Being able to “walk to things” is often cited as one of the most important things to have in a home and neighborhood. While the area offers plenty of trails, not all neighborhoods have sidewalks and offer the coveted high walk score.
Washington DC Real Estate Market: Key Takeaways
With a strong local economy, a variety of home prices and areas, the market has remained steadily hot. On homes that are move in ready and nicely updated, expect multiple offers and tough competition. Get your financing squared away and be fully approved with a lender. Do your home inspection prior to writing the offer. Waive all contingencies. This is what it takes to get a home in the DC Area.
DC Home Prices FAQs
A couple quick tips before we zip this up and bid you on your way!
Is it a Good Time to Buy a House in DC?
It’s hard to say if now is a good time. There’s definitely never a bad time if the last decade is proof. But like any efficient market, there are ebbs and flows.
Do you know that moment in a restaurant where it seems everything suddenly goes silent for a second? That’s the real estate market in DC. It’s always active. There are market nuances and it’s important to pay attention. Real Estate Agents are in the front row for this. Don’t underestimate how quickly word spreads if one of us has a slow open house, and then others remark how all their buyer clients went out of town in the same weekend. Just when everyone thinks there’s a slowdown, the train is out of the station again.
Is DC Real Estate Overpriced?
In short, no. One in five offers is cash. Prices only go up in the area if the past 20 years are proof. Sometimes homes sit on the market for longer than the 1-3 days sellers have become used to, however, homes typically sell for 98-99% of the original list price. The alternative for sellers who cannot sell for the price they want is that they rent, because the rental market is incredibly strong as well.
How Long Are Houses on the Market in DC?
For the whole DC metro region, the average days on market in 2021 is 18. Just Washington DC for 2021, the average days on market was 26.
Statistical sales data courtesy of Smart Charts and Bright MLS. Snark courtesy of me.