The Insane Cost of Living in DC
Think DC is expensive? Of course it is. But as things evolve, there are some sneaky ways to save money here that you need to know about.
I’ve done several cost-of-living videos already and while prices keep going up, there are new and exciting things to cover. I am covering real facts here. Most searches for DC Cost of Living appear to be written by AI. I do not use AI for anything. I probably should, but writing or speaking to get my points across has never been a shortcoming of mine.
In 2023, local news station WTOP reported that DC’s cost of living overall was 53% higher than the national average but housing is 144% higher.
Using MLS, let’s look at averages for the last six months. One thing to know – in this area we consider rowhomes to be single family as well, whereas in other areas they may be called “townhomes.” But it’s such a prevalent house type here that to not include it would skew the results.
In DC, single family homes & rowhomes closed at an average price $1,092,000. Condos closed at an average of $585,000. One bedroom condos closed at an average of $405,000.
Over in Arlington the average closed price on single family homes & rowhomes was $1,293,000. Condos closed at an average of $501,000. One bedroom condos only had an average of $365,000.
In Alexandria, the average closed price of single family and rowhomes was $1,047,000. Condos closed at an average of $476,000. One bedrooms only had an average of $351,000
Once you get to Fairfax County, prices are going to be pretty varied. You have areas like McLean which are much more expensive than the towns and areas farther west and farther from DC. You’ll see average prices on single family homes around $850,000 in Fairfax to $2M in McLean.
In Bethesda, single family homes closed at an average of $1,583,000 and condos sold at an average price of $528,000. One thing to note on condos, if we separate out just the one bedrooms, the average closed price is $269,000. This may sound like Bethesda condos are a good value, especially in light of the single-family homes having some of the highest prices in the area. But, many of the condos are in high rise buildings with very high monthly fees. High monthly fees negatively impacts market value.
In Silver Spring, single family homes – and most are truly single family homes, average $629,000. Condos average a closed price of $284,000. One bedrooms average $191,000 but same story here as Bethesda – a lot of the close-in condos are in high rise buildings which generally have very high fees.
Average rents for a 1 bedroom in the last year are as follows:
- DC: $2319
- Arlington: $2010
- City of Alexandria: $1950
- Bethesda: $2035
- Silver Spring: $1691
What’s the secret to saving money in the housing market? Pretty simple and it’s what I’ve been spouting for many years. Go for the house that’s been overlooked. Buy in the best location possible then work on making the house into your home. Don’t be afraid of renovations. Don’t be afraid of high interest rates. You want to buy when others aren’t in the market, and you want to buy what others have overlooked. Prices here always go up – even when the interest rates came close to 8% this past fall, prices were still up a few percentage points.
Over the long haul here it’s been proven, you can’t afford not to buy.
DC Property Taxes are pretty straightforward. It’s just DC, there’s no second layer of taxes like you might have when you live in both a city or town, plus the county who wants their cut. 85 cents per $100 of assessed value. Or to make the math easier, figure $850 for each $100,000 of assessed value. If the property is your primary residence, congratulations! You will save about $800/year in taxes with a Homestead Credit. A home assessed at $1M in DC with a homestead exemption will pay about $7700 annually.
In Montgomery County Maryland, your tax rate depends on where you live. Many of the towns and municipal districts have tax rates anywhere from $1.15 per $100 of assessed value to $1.70. There is a Homestead Credit in Maryland as well that limits the increases they can impose each year to 10% and a $692 credit. A home assessed at $1M in Montgomery County with the homestead exemption will pay between $11,000 to $17,000 if they live in an area with additional taxes.
In Northern Virginia, Arlington’s property taxes are $1.03 per $100 of assessed value, bringing that $1M home to $10,300 per year. In the City of Alexandria it’s $1.11 per $100, so the $1M home has taxes of $11,100. Fairfax County is $1.14, but different areas in the county can vary, but it’s in line with Alexandria.
One exciting item of note, Virginia has a personal property tax on vehicles, planes, RV’s and boats. But at the end of 2023, Republican Governor Younkin introduced legislation to abolish vehicle tax. This is a game changer because this has been the equalizer between taxes in Virginia and Maryland. This hasn’t passed yet and likely has a long way to go, but this is on the table for discussion.
Virginia income taxes are pretty much a flat tax. Anyone earning over $17,000 of income pays 5.75%. And you’re not taxed locally by your county or town because Virginia prohibits local income taxes.
Maryland has a bracket system of taxes, but you don’t hit the 5.75% income tax rate until $250,000 in income. Before you call Maryland the winner, it is important to know that the counties/cities and towns can all levy income taxes. That adds anywhere from 2.25% to 3.2%.
So what’s happening over in DC with income taxes? You’ve got a bracket system here as well, and it starts at 6% once you have $10,000 in income and rises pretty steadily and rapidly. By the time your household income is $250,000, you’re paying $20,000 plus 9.25% of the excess over $250,000.
When it comes to grocery stores, repeat after me. Pay Attention or Pay More! You really must watch what you’re doing. If you like to go to one store and do all your shopping, you will pay more than if you go to different places for some items.
Let me give specific examples. For some reason, Boursin Cheese costs $8 at Safeway. But you can get it at Trader Joes for $4. If you go to Costco you can get 3 packed together for $10. I’ve found fresh pomegranate seeds at Whole Foods for $20. I thought it was a joke. It wasn’t. But I also found a pomegranate at the other grocery stores for $2.00. Don’t get hosed. Pay Attention or Pay More!
The same applies with restaurants. I have watched prices steadily increase here and it’s impossible to get out of a full-service restaurant for less than $30 – and that’s if you drink water. Tack on 10-20% service charges plus 10% tax and then you still have to tip! It’s literally highway robbery.
My stepson wanted to meet at a hibachi restaurant – and he chose Benihana. I about fell out of my chair when I saw the prices. Everything was 30-40% higher than at other hibachi restaurants in the area. Someone ordered Hibachi Steak and Shrimp and it was $55.
Gas here is hilarious. There are several notorious gas stations where you will see the price per gallon of Regular Unleaded is over $5.00. Considering most other gas stations are in the $3.75 – $4.00 range right now, it seems silly to go to one of the $5.00 gas stations. But you see people pull into them, which confuses the heck out of me.
There are also some awesome gas stations which are low in price. I’m looking at you Liberty Gas Station on Duke Street in Alexandria. Right now where most gas stations are at $3.75, my friends at Liberty are selling their regular unleaded for $2.93/gallon. Not bad at all!
We have toll lanes here. Most highways offer an option for you to go into a special section or lane and you pay a toll to do so. Whether you do this or not depends on how much you value your time. I’ve seen tolls as high as $20 to go a few miles. Your mileage here will literally vary. This is a personal choice and one I’ve not made quite often. Once in the summer, we were driving to Myrtle Beach. We were in 2 cars, my husband with the dogs and me with the kids. As we sat in hours of traffic trying to get out of Northern Virginia, he went flying by us in the toll lanes. I regretted my decision to not suck up the $20 but then we somehow beat him to Myrtle Beach and we even stopped at a bookstore for an hour.
Pay Attention or Pay More, that is the mantra of 2024 for the cost of living in DC.