Washington, DC attracts people from all over the country and worldwide. Professionals, diplomats, politicians, educators, and many others come to DC to build their careers. While there are a lot of short-term move-ins and move-outs, the overall population of the metropolitan area is substantial. In 2020, 8,733 households moved out temporarily compared to 186 temporary move-outs in 2019. The ability to work from home was the primary motivation for people to work from their vacation home or even to find a short-term rental during lockdown.

With the real estate market in flux nationwide, hitting record highs and lows over the past few years, and DC’s unique real estate market conditions, how can first-time homebuyers and investors make informed decisions? When, and where, is the best place to create what will possibly be their most significant financial investment?

To prepare to enter the market, read on to learn about current trends for luxury homes for sale in Washington, DC, and the Washington, DC real estate market.

At the beginning of the pandemic, many people moved out of their downtown Washington, DC homes into the suburbs. They were working from home and needed more living space. Now we’re seeing a slow return to downtown as people come back to the office. However, they are still looking for more living space.

Studio and one-bedroom units are sitting on the market while two-bedrooms, and larger units, are going quickly. Vacancy rates for larger units are low in the District. If you are looking for lower-priced condos and don’t need to be right downtown, there are good options in Van Ness, Foggy Bottom, and Cathedral Heights.

While downtown condos are coming back to life, suburban Washington, DC homes remain hot property. The median sale price in DC is currently $669,000. Downtown housing can be found below that threshold, while suburban homes go for more. These high prices are causing first-time homebuyers to rent longer so they can save up for a larger down payment.

Typically, when home values go up, rental rates will go down, which is not the case in DC,  partially because there are so many professionals coming to the area who need short-term rentals and because there is a housing shortage across the board. Now is an excellent time to explore investment property to rent. The average rent for a three-bedroom home right now is $4,282.

In the past, real estate has been hyper-local. Some neighborhoods may have rising values and be in a seller’s market, while others are stagnant or dropping in value. Values at some price points might be growing, while luxury home values stay flat. This hasn’t been the case recently.

Home values have risen across the country and across all price points — all signs indicate that this trend will only continue. The low mortgage rates and need for more living space pushed people to sell their second home and invest in a larger property. The median home price of a luxury home in Washington, DC, went from $1.5 million to $1.8 million in one year.

You can find two-bedroom, two-bathroom condos in the upper $200,000 range. River Park in the SW Waterfront community is one promising area to find renovated units. Be ready to move quickly because they won’t last long! Silver Spring, Maryland, and Arlington, Virginia, provide beautiful two-bedroom condo units in the low $300,000 range if you are willing to go a little further outside of DC.

 

For single-family Washington, DC homes, Capitol Heights, though technically in Maryland, has the most options under $500,000. Most are in the upper $400,000 range. These renovated, open concept homes will sell quickly. Again, you will need to be ready to act fast when a house you want becomes available.

At the beginning of the pandemic, interest rates dropped to record lows. Some people took advantage of the low rates to move to larger luxury homes for sale in Washington, DC, others refinanced and stayed put. Others purchased a vacation home or investment property. Now interest rates and loan fees are creeping upward.

Currently, rates are sitting around the 4% range for those with a credit score over 750. If you are considering entering the real estate market, don’t wait. Home values and interest rates are rising, so the earlier you make your move, the better.

As long as there is more demand for Washington, DC homes than available supply, we will be in a seller’s market. Even as interest rates continue to rise — even if they grow exponentially — the seller will have the advantage in a transaction if buyers must compete for a home. Homes in good condition and listed at the correct price will sell quickly. The key to remember is that homebuyers compete for good homes in good locations. Overpriced homes will not attract buyers because they will be concerned that the house won’t appraise for the sale price.

The key to navigating a changing real estate market with tight inventory is to work with an experienced realtor who knows the area well. Know what you want in your home and why you are attracted to specific neighborhoods or regions. When your real estate agent understands your needs and why they are essential to you, they can help you find a property that might not be the area you first thought of but still has everything you want.
 
Experienced realtors are skilled negotiators and know how to help you place a competitive bid on Washington, DC homes. In a competitive sellers’ market, you need someone in your corner advocating for you.

Peter and Chris at Sarro & Georgatsos Group are happy to answer your questions about the fluid real estate market in Washington, DC. They are experienced real estate agents with expertise in buying and selling investment property, residential homes, and luxury real estate.