Washington DC can be an interesting place in the context of real estate investment and activity. If you look at the micro moves home prices, sales, and more, you may find it difficult to keep track as things seem to be going in one direction at one point, and in another at the next.

For example, February's Bright MLS report painted a picture of the high prices alongside the low inventory and home sales.

Of course, as an investor, you'll want to understand what overall trends and indicators are, whether it be home values, actions of sellers and other buyers, etc. The idea here is to provide you with some context, which should allow you to be in a better place to go with an eventual purchasing decision.

A Few DC Housing Market Trends to Consider

In contrast to last year, the market has finally come to a place where buyers have a bit more wiggle room to negotiate. That's not to say that things have reached a buyers' market stage, but the bidding war situation that saw buyers going to incredible lengths to secure a house is no longer necessary.

As it stands, homes for sale at a decent price are getting multiple offers, which does point to demand still being strong.

The median price for Washington homes rose, being $554,000 in 2022, up from $530,000 in 2021.

Washington DC typically experiences a healthy spring market, meaning things pick up in the industry when winter passes. This trend was seen with activity ramping up after a slow January.

Interest Rates, Demographics, and Other Factors

Whether it's contract activity to build more homes, changes in demand, or even the higher prices that homes sell for, much of the activity you see comes from external factors.

First, there are mortgage interest rates. While these were pretty good in times past, for the past several years, they have been appreciating to levels not seen for two decades, which makes acquiring homes more expensive.

Next, there's the economy. From investors like you, to regular buyers, to developers, inflation, costs of goods, income, and more will affect what the market looks like.

Demographics also play a role, as people who fall under similar groupings will often display demand behaviors that can be indicative of the direction you should expect the market to go.

Will the Washington DC Housing Market Crash?

While experts expect the Washington DC real estate market to slow down over time, it isn't expected to completely crash.

First, lending standards are so high now that they are all but prohibitive to those who don't have excellent credit.

Next, low inventory is a challenge that may be around for a little while. Buyers have a little more breathing room to negotiate now, but the situation isn't yet in an improved state.

There isn't a looming foreclosure crisis either considering that today's homeowners have substantial equity in their homes.

Next, new buyers are almost consistently entering the market. Millennials, for example, are now in their prime buying years.

National Housing Market Statistics to Think About

To give you some perspective at the macro level, here's a quick look at some macro-level statistics:

  1. August 2021 to August 2022 saw 7.7% of price appreciation nationally, according to NAR
  2. By September 2022, there was a 31% decline in home sales year on year. Compared to the previous month, a 10.2% drop was observed.
  3. By Q2 2022, there was a notable drop in housing affordability. Looking at typical single-family homes with 20% down payments, mortgage payment requirements went up by 50% over the previous year, and by 33.3% over the first quarter.
  4. By August 2022, 34,501 homes in the USA were the subjects of foreclosure filings, scheduled actions, bank repossessions, or default notices.

Housing Market Predictions

Considering that the Fed continues to use higher interest rates as a means of fighting inflation, mortgage rates are not expected to slow down any time soon.

Drops in home sales have already been recorded, and with the number of people being priced out of the market, the expectation is that the trend will continue.

For the most part, experts believe that inventory will continue to be a problem. Some believe that greater affordability challenges from interest rates will see a disinterest in the market, which will improve inventory over time.

The Bottom Line

Frequently Asked Questions

What Has Made the Real Estate Market a Seller's One?

Much of it is a result of the low supply that has been the case for some time. With that being the case, buyers who were invested needed to jump through hoops to secure a deal.

Is Washington DC a Good Place to Invest?

If you're looking to have a rental property, Washington DC is a decent option. You will need to ensure that you choose a location that is close to the needs that tenants will have.

Will Inventory Return to Normal Levels?

Most experts don't believe so since the current state of things doesn't show much potential for change. If demand falls based on disinterest as a few experts predict, then normal levels could return.

David is the co-founder & CMO of DoorLoop, a best-selling author, legal CLE speaker, and real estate investor. When he's not hanging with his three children, he's writing articles here!