Learn more about the housing market in Washington, DC

Every state is unique when it comes to the real estate market. That’s why it’s critical to understand the market you live or operate in. Whether you’re renting, buying, or selling, it will impact many aspects of your life.  

Washington DC Housing Market Overview 

Washington, DC is a compact city near Maryland and Virginia and the capital of the United States. It is best known for centrally housing all three branches of the federal government and for its extensive tourist attractions, including famous museums and monuments. In this article, we will be taking a look at the notable housing market in DC, including what specific metrics from recent months can tell us about what to expect from its market going forward. 

At the beginning of the year, experts predicted that the housing market in Washington DC would continue to see an increase in homes’ list price and the number of prospective buyers, though the interest rates across the city would settle. As of May 2024, these predictions all appear to have come true, with certain indicators that these trends will continue.  

In fact, historically high interest rates have seen a significant decrease across the country. The national average 30-year fixed mortgage rate in late 2023 approached 8% but settled in April 2024 to just below 7%. As we will discuss later in this article, a similar trend can be seen in the DC housing market, reflecting easing inflation that is bound to benefit a growing demographic of prospective homeowners across the country.   

Washington DC Market Trends 

To understand the housing market DC is currently facing, it’s important to keep up with trends. Let’s take a look at some key ones in DC. 

Median Home Price 

The median sale price of a home in Washington, DC in May 2024 was $706,050, according to Redfin’s monthly housing market data. This is a notable increase of 14.8% from May 2023, accurately reflecting predictions of continually rising home prices in the state. The DC metropolitan area ranks among the most populous in the nation, so it is important to remember that the median price is pulling from a diverse housing market experiencing many influences and factors. 

Number of Homes Sold in May 2024

595 homes were sold in Washington, DC in May 2024, which is a 24% decrease from the previous year. This number can be expected to increase in the summer months. It is important to keep in mind that nationally speaking, sales usually peak during the spring and summer months and slow in the winter. In fact, the National Association of Realtors (NAR) predicts that in February and March alone, sales activity increases by as much as 34% and prices by 3%.  

Despite this, the number of home sales from the previous two years have failed to reach the same peaks that were recorded in the summers of 2020 and 2021. Inability to sell may be related to a home’s sale price, the impact of new listings, or limited inventory of affordable properties. 

Median Days on Market (DOM) 

Days on market (DOM) is a measure of the average length of time a home remains listed on the market before being put under contract. A lower DOM signals a highly competitive market dominated by sellers with more pressure on buyers to make higher offers and remove contingencies. A higher DOM signals a buyer’s market as sales are slower and sellers have less leverage. 

The median DOM in Washington, DC in May 2024 was 42 days, which is an increase of three from the previous year. This means that, on average, listings spend about a month and a half on the market before they are sold. Though this is a slight increase, the current median suggests a market that is gradually giving leverage to buyers and becoming slightly less competitive over time.  

New Supply Statistics 

In 2021, there were about 7.07 new residential construction permits per 1,000 people in Washington, DC. This statistic, which points to the rate of housing inventory growth, is above the national average. However, despite increased construction, the D.C. area is currently experiencing a severe housing shortage. An April 2024 article from the Washington Post suggests that to combat this shortage, the region would need to build 87 homes a day. However, it is currently falling short of this number, meaning that the issue is persisting. 

Property Tax Rate 

According to Rocket Mortgage, the average property tax rate in Washington, DC is 0.62%. This is one of the lower tax rates in the country. When compared alongside the 50 U.S. states, DC’s property tax rate is ranked 11th lowest, with the average annual property tax in DC being around $1,815.55. As previously mentioned, it is important to keep in mind that this statistic reflects the average of a lot of data, gathered from economically diverse situations. Tax rates are likely to vary depending on the value of a property and its location in DC. 

Foreclosure Rate in Q1 of 2024

In the first quarter of 2024, 1 in every 929 homes in DC experienced a foreclosure filing, according to recent data from ATTOM. This is one of the highest rates in the country, and it is ranked third when compared to the other U.S. states. High foreclosure rates indicate a market with low affordability where homeowners aren’t able to make mortgage payments on time. 

Economic Factors Impacting the Washington, DC Housing Market 

A holistic view of DC’s housing market requires a basic understanding of the main economic factors driving the market. Let’s take a look at a few below.  

Mortgage Rates 

Mortgage rates are a common cause of concern for would-be homeowners across the U.S. in 2024. As previously mentioned, national averages have dipped from last fall’s record highs, and Washington, DC is no different. According to Zillow, DC is currently seeing its 30-year fixed mortgage rates decrease to an average of 6.48%, down from almost 8% in late 2023. This accurately reflects predictions that nationwide interest rates in 2024 would settle from dramatic rises but ultimately settle above 6%.  

Inflation and Cost of Living 

Mortgage rates are tied to inflation, another massive contributing factor to the affordability of housing and the state of housing markets in general. Inflation has increased the cost of living for many across the U.S., including in DC. This means fewer people can truly afford to limit housing costs to less than 30% of their monthly income. 

Population Changes and Demographics 

A changing population can also have implications for the housing market. According to the U.S. Bureau of Labor Statistics, the unemployment rate in DC is currently 5.4%. When compared to the fifty U.S. states, this is the highest unemployment rate in the country. However, it is important to note that unemployment across the country has decreased comparatively. Still, this has potential implications for the population and its demographics, who may be moving in or out of the area based on employment or their unemployment status.  

Washington, DC Housing Market Forecast 2024 

As previously mentioned, experts considered the appreciating housing market DC faced in 2023 and predicted that prices would continue to rise throughout the year. This has proven true over the course of the year, though steadying interest rates and a hope for increased supply in the housing market signified by an increase in sales may indicate a slowing growth in prices.

Likelihood of Washington, DC Housing Market Crash 

Though continually rising housing prices in Washington, DC may seem concerning, experts have maintained that a crash is significantly unlikely. There are many reasons for this, including the city’s low tax rates and the decline and stabilizing of interest rates. The market seems poised to continue appreciating, but it is unlikely to reach any significant or concerning threshold in the near future. 

Forecast for the U.S. Housing Market 

Now that we’ve looked at the DC housing market, let’s zoom out a little bit. What about the U.S. housing market? What do you need to keep an eye on in the coming years?  

The United States’ current median existing-home sale price is around $384,500 per the National Association of Realtors. The inventory, though, remains low. A balanced market typically has a 5-to-6-month supply, but the current figure is 2.9. 

We’re currently in a seller’s market with buyers looking at continued rising house prices. The same trend can be seen with renters. Housing continues to appreciate, in general.  

Dr. Lawrence Yun, Chief Economist and Senior Vice President of Research, National Association of Realtors, believes the housing market will appreciate 15 to 25% over the next five years. He thinks that the seller’s market will continue because housing inventory will remain low. In five years, however, he predicts a more balanced market, in which neither party has a built-in advantage. Thus, the market will shift to a case-by-case basis to determine what kinds of deals people can get.  

Hybrid work also impacts the housing market. This shift in work culture means suburbia will continue to grow. States like Texas, the Carolinas, Tennessee, and Florida should see continual growth.  

The number of single-family homes built decreased over the past couple years while the number of multi-family homes increased due to lower prices and a demand for affordable housing. Higher mortgage rates and inflation (affecting price of materials) were the main causes.  

Lower income households continue to struggle in the current housing market. This trend appears likely to continue into the foreseeable future. Without enhanced supply or helpful subsidies, the outlook is that many Americans will still wrestle with housing affordability in the years to come.

Washington, DC Rental Market 

The rental and buying market are obviously closely linked. When home prices fall, landlords are more likely to buy properties to rent out. Home prices and rental prices are correlated as well because a hot market means prices rise.  

Rents were more unaffordable than ever in 2021 and 2022. In 2022, 22.4 million households paying rent said it was unaffordable, which is the highest that figure has ever been, according to a January report from the Joint Center for Housing Studies at Harvard University. The study found that half of all renters in the United States spent over 30% of their income on rent and utilities.  

The markets cooled in 2023, though, due to new units and decelerating demand. But a serious problem persists: Rent increases are still outpacing income gains.  

Moreover, high interest rates are keeping borrowing and transaction activity down. Over half the banks surveyed by the Federal Reserve reported that demand for multifamily loans decreased year-over-year.  

The pandemic caused a housing disparity that isn’t going away anytime soon. Unaffordable housing is a serious issue across America. Whether high rents or low income is the main cause doesn’t change the fact that this problem is widespread. 

This short summary leads directly into Washington, DC’s current rental market. Below are just a few of the current trends for DC’s rental market based on data pulled from Zillow: 

Washington, DC Rental Market Key Trends 

• Median rent: $2,600 

• Month-over-month rent charge: $7 

• Year-over-year rent charge: -$77 

• Available rentals: 3,197

Conclusion 

As one of the most populous metropolitan areas in the country, DC is undoubtedly experiencing many different influences on its housing market. As a whole, however, 2024 has seen many significant indicators of a stabilizing and healthy housing market that make DC a location that buyers and sellers alike should watch closely. Experts and analysts will continue to monitor this market, as well as nationwide factors like interest rates and new construction.