Residential Housing Market Update for Washington, DC 2023
Nest DC
The Washington, DC housing market has seen tumultuous times over the last few years. Home prices, interest rates, and rental rates have steadily increased, and 2023 has seen a halt in movement because folks are giving careful consideration to the costs of moving versus staying in place. Still, DC’s market will always have a level of stability that can’t be guaranteed in other parts of the country. We will always have an influx of families moving to the area, investors parking money in our nation’s capital, and election cycles that boost demand for short and longterm housing. In this article, we’ll talk about housing values and what your thought process should be if you are considering a move.
Mortgage Interest Rates
Mortgage interest rates have dipped slightly from their high point earlier in 2023, however, they have started to climb again as of mid-May and sit just over 7%. In Washington, DC, high interest rates do not necessarily deter buyers, but have caused many sellers to think twice, leading to less inventory on the market. First-time buyers must factor higher monthly payments into their home purchase plans, not to mention possible competition from other buyers who are hard-pressed to make the best offer. High interest rates also mean that people who want to sell are reconsidering due to the “golden handcuffs” of the low interest rates they secured prior to 2022. Holding an asset to build equity may be the best option for many.
Rental Rates
Rental rates are increasing alongside inflation, and faster than incomes. As of May 2023, the median rent for a two-bedroom apartment in Washington, DC is about $2,950, and affordable units are not being built quickly enough to keep up with the increasing need.
In response to the growing concerns about affordability, local government and developers have been working together to increase the availability of affordable housing options. Initiatives such as inclusionary zoning, rent control policies, and public-private partnerships have been implemented to address the need for more reasonably priced rentals. While these efforts have made some progress, the rental market in Washington, D.C. still remains a challenging environment for many prospective tenants in 2023, as high demand and limited affordable options persist.
Home Values
In 2023, the housing market in Washington D.C. is expected to cool down due to higher interest rates, leading to a more balanced pre-pandemic market for both buyers and sellers. Intense bidding wars witnessed during the early pandemic phase have become a thing of the past. With higher interest rates, fewer homebuyers will enter the market, resulting in longer selling times and giving buyers more time to make decisions.
Sellers are expected to remain competitive through moderate price reductions and increased openness to negotiation. While more homes are anticipated to come on the market in the next few months, the region will still face a low-inventory problem.The 2023 housing market is predicted to be more stable, allowing buyers and sellers to plan ahead with confidence that conditions will not change significantly.
Should You Sell, Rent Your Property, or Stay?
Whether you're planning to sell or rent your property, there are a number of factors that can help you make the right decision.
- Current housing market conditions: We’ve given you an outlook on the market today, but you should always speak with your realtor for the most up-to-date insights. They’ll help you understand current trends, and also what to expect in the future.
- Rental market demand and rates: Evaluate the potential rental income and demand for rentals in your neighborhood to decide if turning your property into a rental is a profitable option. Speak with a property manager to assess the unique trends in your specific DC neighborhood.
- Landlord responsibilities: Consider the time, effort, and costs required for property maintenance, tenant management, and compliance with local rental regulations. You may have the capacity and desire to self-manage, or you may seek the support of a dedicated property manager.
- Personal needs and future plans: Assess your current living situation, family needs, and any potential changes in circumstances (e.g., job relocation or growing family) that may impact your decision. Then, think about what you’ll need a few years in the future.
- Financial considerations: Analyze your financial situation, including mortgage payments, potential sale profits, or rental income, to determine the best course of action for your long-term goals.
While not everyone wants the responsibility of owning a rental property, there are many benefits to doing so. One of the major advantages is access to equity. Owning a home means that you have an asset that can increase in value over time and generate cash flow from rental income. In today’s market, we are seeing many homeowners turn to renting out their property vs selling and losing an asset.
Conclusion
The Washington, DC housing market is expected to continue its positive trajectory in the upcoming year. Demand for residential units is high, and supply remains low. This has led to increased prices and rents across most neighborhoods in the District. For property owners who are looking at buying or selling a property, now may be the time to consider your options before prices rise further out of reach. However, it’s also important to consider whether staying in your current home and upgrading your space to suit your needs, or renting it out, is the better financial option.
