Monumental as ever, Washington, DC, is a powerful and thriving capital with much to offer. The DC housing market features 67 distinct neighborhoods spread across four quadrants.
DC is a pricey market, but the median list price varies across neighborhoods. The district’s northwestern area is typically the most expensive, with median sales prices reaching more than $650,000.
Washington, DC, is a stable market due to its position on the U.S. map, being home to government institutions. Its residential landscape also features historic and modern developments. As such, it is a profitable place for investors and homebuyers.
If you want to invest in DC real estate, this Washington, DC, market forecast will help you. In this article, we’ll cover:
- Key Washington, DC, housing trends
- Housing forecast for 2024 and home value trends
- Economic growth and its effect on DC’s real estate
- Market trends in the surrounding markets of Alexandria and Arlington, VA
- Hot tips for buyers and sellers participating in the DC market this year
Current DC Housing Market Trends and Forecast
The new year will bring about some changes in the Washington, DC, housing market. Here are some key predictions for the sector:
- The median home price in Washington, DC, will rise by about 1%.
- Home sales fell by 24% in 2023 compared to the previous year. This trend will partially reverse in 2024, with home sales expected to rise by about 11%.
- There will be good news for home buyers, with 30-year mortgage rates predicted to fall below 7% by the end of 2024.
- Home inventory will rise this year, regaining about 77% of its pre-pandemic home supply. This will help offset the rising demand caused by lowered mortgage prices.
Home Value Trends in DC
The value of homes in DC has been slower compared to the rest of the country. It increased by only 9.4% to the national average of 33.9%. This steady market makes Washington, DC, a gem to invest in. Here are some other home value and sales statistics worth noting:
- Home sales in DC dropped by 19% year on year in the fourth quarter of 2023
- However, home prices increased, albeit marginally. There was a 0.9% year-on-year increase in the average median home price in DC, with prices averaging about $625,000. This was due in part to the low home inventory.
- Homes stayed on the market for an average of 51 days before selling. This indicates a 4-day year-on-year rise.
Analysis of Sales and Inventory
By the end of 2023, home sales fell by 19% year on year, with only 470 homes sold in September 2023.
However, you will see the new year ushering in adjustments in this pattern.
Many homebuyers waited along the sidelines in 2023. This will change as more people return to the office and transition away from remote work. There is a projected 13% increase in home sales over 2023, indicating a rebound trend for 2024.
You will also see an increase in listings this year due to several factors:
- Baby boomers are in a downsizing phase. Many prefer to sell their big homes and move to smaller units. This means there will be several housing units on the market soon.
- Changes in life circumstances and job changes will prompt more people to put their homes on the market.
Despite the increase in inventory, you should note that the active listings percentage will still fall short of pre-pandemic supplies.
Nonetheless, the housing market in Washington, DC, will be more active and thrive in 2024 compared to the past year.
Economic Factors Influencing the Market
Like any other housing market, the Washington, DC, market is sensitive to economic and job growth fluctuations and mortgage rate changes.
The Role of Economic and Job Growth
The district is one of the most thriving job markets in the country, with a 5% unemployment rate. It’s at the center of the nation’s political pulse, attracting many businesses and investors, such as:
- Amazon
- Capital One
- Fannie Mae
- Amtrak
- Marriott International
Its diverse job market fosters a robust economy that is unlikely to crash. It draws young professionals and graduates from across the country.
Because of its strong economy, there are many high-cost homes in the DC area. However, the high-paying jobs and stable employment trends make these houses affordable for most.
Last year, Amazon broke ground on its second headquarters in Crystal City, Arlington, VA. Located just across the river from DC, the new headquarters will encourage economic growth in the region. As a result, home prices will rise.
If you’re an investor, now is the time to buy a piece of the DC real estate market before prices spike further.
Challenges in Homeownership
Despite DC’s booming housing market, there are many challenges to homeownership.
Barriers to Owning a Home in 2024
Homebuyers are struggling to find an affordable home in the DC region. Mortgage rates aren’t helping matters. Currently, 30-year-old fixed mortgage rates are above the 7% mark. The rising demand for DC homes and buyer competition also complicate matters.
The market is likely to see changes in 2024 that will benefit buyers and sellers. Sellers who held back on selling their homes due to the mortgage rate lock-in are yielding as rates drop to 7.35% (from 8%). This well-timed addition to the inventory will provide relief to homebuyers and ease the competition a bit.
Home sellers may face competition as builders push new construction homes with mortgage buydowns. This gives homebuyers some hope since they will have more options to choose from.
Regional Market Variations
Here’s how the Arlington-Alexandria housing market compares to the Washington DC market.
Washington-Arlington-Alexandria Market Insights
Realtor.com released a list of the top 100 housing markets for this year. The Washington-Arlington-Alexandria (DC-VA-MD-WV) markets ranked 44th. Here are some specific trends and predictions for this regional market:
- The median sales prices for this market are predicted to rise by 2.6% year-over-year.
- This year, you will see a 1.8% increase in existing home sales and price growth in this market.
- In the Washington DC metro area, 2024 median sales prices are forecast to be 39.7% higher than average sales prices in 2017-2019.
- For the combined Washington-Arlington-Alexandria market, the existing home sales and price growth will increase by 1.8 percent in 2024.
- The existing home sales for this combined market fell by 30.8% from the 2017-2019 average. This implies a 0.8% decrease year-over-year.
- Many businesses in the Washington-Arlington-Alexandria market will impose return-to-office mandates, causing flexible work arrangements to wind down. You can expect at least a 0.6% year-over-year increase in home sales.
The Arlington, VA, market has experienced robust growth since last year. The median sale price in this market increased by 4.6%, rising to $680,000 from $650,000 in 2022 and 2023. You can expect this trend to continue well into 2024.
You can see a similar trend in Alexandria, VA. Alexandria’s median sale price averaged $619,500 by the end of 2023, up 4.5% year on year.
The Alexandria City, VA, market jumped to the forefront with rising demand. Home prices in the city rose by 9.4% from 2022 prices.
According to the National Virginia Association of Realtors (NVAR), single-family homes in Arlington will cost $1.2 million in 2024. Homes in Alexandria, VA, will likely sell for at least $1 million.
Predictions for 2024: Forecasting Sales and Price Trends in the DC Area
The DC housing market is forecast to have a banner year in 2024 despite fluctuations in housing demand due to the tussle between home prices and loan rates.
Here’s what you can expect with regard to Washington, DC, house prices.
Home prices will go up: By the last quarter of 2023, home prices were inching up across top metros in the district. The DC area is seeing a high demand for homes, but the housing inventory is low.
Due to limited supply, home prices are sure to rise in 2024, at least until the supply shortage is resolved.
Homebuyer percentage will rise: In November 2023, interest rates fell to 7.35% after a historic rise to 7.8% earlier in the year. Homebuyers waiting on the sidelines jumped at the chance, raising the demand for mortgages and homes.
You will see a continued rise in house hunters this year while interest rates and inflation stabilize.
Rise in new home construction sales: Real estate developers will continue to entice buyers with concessions in new home constructions in 2024. The trend for purchasing new homes is rising, with 12.3% of homebuyers doing so in 2023.
Key Takeaways for Buyers and Sellers
If you’re a buyer or seller in DC’s hot housing market, you should plan your finances to get the most out of your purchase or sale. Here are a few points to consider:
For Homebuyers
If you’re a first-time homebuyer in DC, check if you qualify for financial assistance programs. The District of Columbia Housing Finance Agency offers assistance programs to help you with the down payment and closing costs. Some of these include:
- The DCHFA DC Open Doors program
- The DCHFA’s DC4ME program
- The DCHFA Home Purchase Assistance Program (HPAP)
- Government-backed programs offered by FHA, USDA, and VA
You will also need to draw a careful budget before buying a home in DC so you know how much you can afford. You can use a reliable home affordability calculator to arrive at a number that feels comfortable.
Next, apply for mortgage preapproval from your lender. This will give you a clear sense of the amount you’ll get approved.
Buying a home in DC may be easier now that the mortgage rates are lower, but living in DC is far from inexpensive. If you’re a homebuyer in DC, you’ll need to consider the high cost of living and factor in your monthly expenditure with your home purchase.
For Sellers
Selling a home in the hot DC market requires caution and planning. The first step is to determine how much your home is worth. You can do this by getting a professional home appraisal and finding the fair market value for your home.
Once you have your facts right, find a reliable real estate agent to arrive at a fair asking price.
Tips to Navigate the Market
Washington, DC, has one of the strongest sellers’ markets on the East Coast, with homes selling well above the asking price.
There are two important takeaways for real-estate participants in the DC market:
- The DC area is a thriving market with high demand. Many upwardly mobile citizens are moving across the country to invest in the booming capital.
Home buyers in the Washington, DC, real estate market have an edge as the market continues to grow. However, even passive investors will gain from the demand for rental properties.
- Investing in the Washington, DC, housing market will yield a good ROI in a few years as home prices continue to appreciate.
As an investor, you must also consider the scarcity of buildable land in the DC area. Over the years, the capital’s landscape has been utilized to its full potential, spiking property rates even further. Rental prices in DC are among the highest in the country, with DC median rent 35.3% higher than the national average.
Because of the limited land supply and increasing prices, now is a great time to invest in the DC market for significant long-term gains.
A Rewarding Year: Outlook for Washington DC Housing Market in 2024
It will be a promising year for the real estate market in DC. Its high employment rate compared to the national average means it is well-insulated against high prices and inflation.
That said, high interest rates are likely to bottom out by the end of the year, resulting in more affordable inventory for buyers. Home prices will continue to appreciate this year, prompting investors to make their move and buy properties with a solid future ROI.
