Why is Everyone Moving Out of Washington DC?
The real estate market inside Washington DC has to be the strangest that I’ve ever seen in my 20 years living here. Some properties have multiple offers. Others, which should have sold immediately linger on the market for months. What’s going on, how can you make wise decisions in this current environment and what do I really think about all of this.
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When I worked for some DC homebuilders, we always said “the pie cools from the outside-in.” That meant that when the markets slowed down, that the ex-urbs as they called them, would be the first to feel the impacts with slowing markets. And the towns closer to or commutable to employment areas like downtown DC or Tyson’s Corner would always have demand for housing.
This theme of the pie cooling from the outside-in blew up during the 2008 housing crisis. All those places where people bought homes way far out were in foreclosure. When the homes lost value, many buyers walked away. We all thought, well we won’t make that mistake again.
No one predicted a pandemic though, and a shifting desire in lifestyle. People wanted yards and more living space. They want home offices, home gyms, in-law suites. The trend now is shifting back to larger homes. The pie is cooling from the middle, outward. Sort of. Think of it more like a microwaved pie, where there are random hot spots and parts that are frozen.
What is happening in DC and what do you need to know?
1. Opportunities Everywhere!
Money is made when there is an opportunity that someone spots and acts on. I’m telling you that right now, there are opportunities. I’m screaming it from the rooftops.
Let’s do a case study. One of my lovely clients was in the market this year to buy an investment property in DC. He wanted to purchase something at a great price that would pay steady rental income.
My model for the best bang-for-your-buck investment is always the one-bedroom condo with low monthly fees. They are lower maintenance, there’s not as many big ticket items like a leaking roof or basement and they rent quickly and easily. Condos are being overlooked right now as everyone slides into the next generation of post-pandemic life and what the concept of working means for them. If you need extra space for an office, small condos may not work for you. But if you are back in the office and you can make a one-bedroom work, do it! Right now, there are many one-bedrooms in all neighborhoods in luxury DC buildings that would normally sell at much higher prices. Condo prices had steadily climbed for one-bedrooms into the $500,000’s. Some buildings reached prices in the $600,000’s. We were tracking with New York City prices.
Now, you can snap something up in the $400,000’s. My client purchased a one-bedroom in Mount Vernon Square, with parking and a rooftop pool for $450,000. I still can’t believe what a steal that was. There are great deals on two-bedroom condos as well. I have this awesome property listed about $100,000 less than it should be, and we have received no offers. What’s frustrating for the sellers, and for me, is that in a year or two, people will look back and say, “Darn, we could have had this place for $100,000 less.” Everyone has 20/20 hindsight but they are blind when looking into the future.
What if you’re not looking for an investment? I had a client just snag a condo in Northeast that had been sitting on the market. It was close to her friends, work and it was perfect for her first purchase. She got a great deal, got help with closing costs and will plan to rent it out when she upgrades to her next home. That is how you build wealth.
What should you focus on in finding the right opportunity? Location, Location, Location! And Price. Ability to negotiate. You and I both know that DC isn’t going to fall apart, it will again have a strong market. So, now is a great time to buy.
2. But…What About Interest Rates
Here’s another thing you and I both know. Interest rates will come down again. This isn’t forever. And when they come down, buyers will come back to the market to get in on the good rates. But by then, the prices will go up. Would you rather buy at a lower price now with a higher interest rate, watch your budget very carefully in the short term and refinance when the rates go down? Or would you rather buy at a higher price with a lower interest rate? It doesn’t matter what your answer to this question is, the proof is in the pudding. There are very few people out there buying right now because it’s painful for them at these interest rates. Once you buy, you never get that money back so choose wisely my friends. I bought a house this year, so I think you know where my head is on the matter.
The reason no one seems to want to do this though is because people live in “today.” And all they can think about is how today the interest rates are in the 7’s. Think about next year. Can you tighten the belt for six months to a year? I want to scream this from the rooftops, BUY NOW!
The DC Market will rebound. It always does. Our country’s government is based here and that will forever keep Washington DC a strong real estate market. But right now, people aren’t willing to take on a higher interest rate for a property in the city that no one else seems to want either. And why don’t they want it?
3. But…What About Crime
We knew the teenager reign of terror on DC couldn’t last forever, right? Crime is down 34% compared to 2023. Finally. We’ve still got a way to go, but the DC Police have been vigilant about getting some well-known gangs off the streets and increasing the police presence in known problem areas. Homicides in 2023 peaked at 274 for the past 20 years. We’re almost at the end of 2024 and currently stand at 158 homicides.
Robbery is also down almost 40%, and we hear less news about car-jackings. There will always be crime in a city, but at least it doesn’t feel as hopeless as it did a year ago. However, it was too much for a lot of people, and they bailed out of DC life. The pros no longer outweighed the cons.
I have to knock on wood, because we’ve been lucky in this respect. Looking back, I wouldn’t do this again. We’ve been extremely vigilant about being aware of our surroundings and staying out of danger. I’m always talking to the girls about paying attention and staying alert, not dawdling in the car when we get somewhere, moving out of the way when someone with issues is barreling down the sidewalk toward us, and aggressively yanking them away when they are too close to someone shouting their sidewalk manifesto. When a field trip was taking my daughter’s 3rd grade class to a DC neighborhood I was not comfortable with, I wasn’t the only parent who kept their kid home that day.
Sometimes when I head out to show homes, one of the girls will ask to come. And I have to say “not this time” because of the location. I never used to feel that way, but I do now. Last year, I went to show a condo near GW Hospital – a neighborhood I’ve never felt unsafe in. And my older daughter was off school so I had her with me. When she got out some man came screaming toward her, yelling at her for getting out of the car. She started yelling “Mom, Mom” and I grabbed her and we had to run. He grabbed one of those empty 5 gallon bottles of water off someone’s porch and started chasing us.
I’m armed now with multiple items when I have the girls now.
People will always say that crime can happen anywhere and that is true. But, it’s also true you take more of a chance living in the city as opposed to the suburbs, so that’s why a lot of people have left.
4. But…What About Schools?
We happily got through elementary school, but we admittedly went to private for middle school and I have no regrets about it. We trek up to Maryland twice a day for drop off and pick up. This was a decision we had to make, because we couldn’t send Mercina, who isn’t the best at standing up for herself, to a school with unchecked behavioral and educational issues with kids vaping in the bathrooms. The year she would have enrolled, the PTO had the Principal overthrown. It was wild.
Provided you’re fine with your in boundary school and don’t have to go into the lottery, you may have a better experience. But, you are always at the whim of DC Public Schools and the things they come up with to make life miserable. If you want to be a field trip chaperone, you have to get re-approved every two years. Do you know what the re-approval entails? You have to get your fingerprints taken. Do you know how often my fingerprints have changed? So why do we do this?
If you want your kids to be successful with school, you have to be part of a strong group of parents who advocate hard for their school. The parents got the middle school turned around so quickly that I would be fine letting Leia go there. But just know that my comfort level with a school – or any parent’s comfort level could change quickly. While the Principal and other problematic staff were removed, that is not normally how dealing with “DC Powers That Be” happens. And I know things can turn on a dime so private school for Leia it is.
5. Taxation Without Representation
I don’t really think this is a reason people leave but there are things to know about how DC is run. People are always lobbying for statehood here, but DC has a long, strong history of corrupt politicians. We all just learned that the Representative for Ward 8 was taking bribes from contractors. Frankly I don’t want to see another layer of government added because I’m not so naïve to think the oversight would be competent. We would just have two levels of government – one as ridiculous as the other. And instead of going to one moron in one department for approval, they would probably make us have to go to two. And you know they would both be pointing at each other saying, “This is for the state to handle” or “This is a city government issue.”
Dealing with most agencies within DC is a nightmare. (Except the morgue. I had to call them a bunch of times because my friend died and they are really nice there. But I guess if you work all day talking to people who don’t talk back, you might be happy when the phone rings.)
If you want a firearm to protect yourself from the teenagers with firearms, but you want to do it legally, here’s what you have to do. You go somewhere to buy the firearm, but that somewhere won’t be in DC so you have to have a car. Then they ship it to a third party dealer of which there is only one in the city. Then that person holds your firearm until the Police Department does the background check, they fingerprint you and sign off on your license – after it sits in their inbox for 90 days.
I moved to Dupont Circle from Rockville, Maryland in 2004. DC was then a thriving, bustling place everyone wanted to be. I watched as growth moved from west to east with new residential and retail developments gentrifying everything in its path. While you always had that group of detractors who longed for the gritty days of open-air drug markets and when you couldn’t walk to your car without getting mugged, these changes were for the better.
I was one of DC’s biggest boosters for all those years. Even my tune has shifted though. I loved and still love Dupont Circle. My first 10 years in the city were spent there. Now, the second decade has been in Glover Park. I love this neighborhood, but If I didn’t live here or a few other neighborhoods that feel safe enough for my kids to run around without me on watch, I would be one of the people leaving for the burbs.
