Understanding DC real estate: Is buying a house in the DMV possible?

Whether you are renting or buying a home in the D.C. area, the process can be complicated and expensive.

According to data from the first quarter of this year, D.C. has the 7th highest cost of living among major U.S. metropolitan regions. To make matters worse, for-sale signs aren’t popping up as often and mortgage rates are at a 20-year high.

“We are [at a] record low inventory of new listings,” local real estate agent John Coleman said on the DMV Download podcast. “Week over week has been down anywhere from 22 to 28% in the region over the last little bit. And then interest rates have pushed affordability to a spot where people simply just can’t afford.”

Coleman said these two phenomena — high interest rates and low inventory — are related. The former influences the latter and the numbers don’t lie. Coleman said 89% of homeowners have an interest rate lower than 5%.

“We have a lot of people that have super cheap money,” Coleman said. “And so the days of wanting to just move because it’s got a better backyard, or ‘I want to be closer to my friends’ is a little bit different.”

When he looks at the numbers, Coleman said interest rates make buying a home less attractive.

“Right now, those financials, actually, in a lot of spots, look better for renting,” Coleman said.

Despite these barriers, Coleman said his phone is still blowing up with calls about moving to the District.

“The traffic around the city has been to the point where people that have to be coming back into the city might not want to be that extra distance out because that commute in is going to be difficult,” Coleman said.

This raises the question: what happens if and when interest rates go back down?

“People are in more of a wait-and-see approach than we’ve seen in a long time,” Coleman said. “What happens when more people get in the mix, this area knows better than anybody, that pushes up prices. So I think that there’s a real likelihood that could happen.”

But Coleman cautioned potential buyers who lick their lips at whispers of a jump in home prices. In real estate, few things are certain in the short term, Coleman said.

“Homeownership is a long-term game,” Coleman said. “If you’re looking to sell it in three to four years, I wouldn’t buy right now. I just wouldn’t. There’s cost-of-sale in terms of buying and then selling … it’s kind of like driving a car off the lot.”

High interest rates and inventory aside, one of the largest barriers for many is saving up for a 20% down payment. With the median home price in the D.C. area sitting at $669,900 and the median household income at $90,088 — a couple would have to save nearly $27,000 a year for half a decade to save up for a 20% down payment.

It’s a seemingly impossible task for many. But Ronald Clarkson at the Housing Counseling Services Inc. said there are programs that can help.

“It really is based on where you live currently. A lot of the programs require that you live in the jurisdiction where the funds are available,” Clarkson, director at the housing nonprofit, said. “Here in D.C., you have programs like the Home Purchase Assistance Program, also known as HPAP.”

The D.C. program, for example, boasts a maximum housing assistance of $202,000 based on income and house size.

“It is a great program that has helped a lot of homebuyers here in the District of Columbia,” Clarkson said. “And we’re proud to say that we’ve been a good part of that.”

And while the promise of a $200,000 zero-interest loan sounds nice, Clarkson said it is still a loan that you have to pay back.

“Housing can be very attractive and we get very emotional about it,” Clarkson said. “That can sometimes be the pitfall.”

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Luke Garrett

Luke Garrett is a D.C. native dedicated to journalism. He is a reporter and the creator, host and producer of the original WTOP podcast, “DMV Download.” The podcast debuted in 2022. On the show, Garrett takes a weekly look at the biggest stories and ideas in the D.C. region.

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