Real estate news rarely grabs national headlines, but in 2024, all of us were glued to the news that commissions would change thanks to a pivotal court decision.
Real estate can be dramatic.
As a new year approaches, you are likely thinking about those new commission structures, and maybe you’re also wondering how to best position yourself and your Washington, DC real estate investments for 2025. We expect a good year, and we want to make sure you’re up to date on all the trends and shifts we see coming to our market specifically and the industry as a whole.
Navigating the real estate market can be complex, especially in a dynamic hub like Washington DC. For investors looking to make informed decisions in 2025, understanding the key trends and factors influencing the market will be critical. Here’s a deep dive into what you can expect in the coming year.
Washington, DC Home Values and Prices
Washington, DC’s real estate market has always been an expensive and competitive market, whether you’re buying in the accessible, urban neighborhoods or the residential, suburban spots in the northwest part of the city. This is a market driven by its status as the nation’s capital. Lots of people want to live and work here, which is good news when you have a home to sell or a property to rent out.
As 2024 begins winding to a close, many submarkets within Washington, DC are experiencing a drop in home values. It’s not extreme, but it has given owners pause before selling a property. While sites like Zillow and Redfin and Realtor.com have been reporting that overall, home values have dropped by about two percent, in neighborhoods like Capitol Hill, home values have been rising.
Take a look:
According to Redfin.com, home values in Capitol Hill were up 8.5% in August of 2024 compared to August of 2023.
This is a good reminder of how nuanced the market really is. Performance always depends on the specific neighborhood you’re in. Those desirable areas are retaining their value and home prices are going up.
In 2025, home values are projected to continue their upward trajectory in specific neighborhoods, albeit at a more moderate pace compared to the rapid increases witnessed in the past few years. This moderation offers opportunities for savvy investors to capitalize on value growth while avoiding the high peaks of a volatile market.
The areas where we expect the best growth (based on reports from Baseline, a research firm) include Dupont Circle, Adams Morgan, Foggy Bottom, Navy Yard, and Columbia Heights.
Mortgage Rates and Washington, DC Home Sales
We anticipate more good news from the Fed in 2025, hoping that interest rates will continue to come down, making home buying more affordable and attractive to consumers. Market observers and experts are talking about 2025 mortgage rates resting between six and seven percent. Over the next 18 months, decreases seem rather inevitable.
An article in the Washingtonian magazine does a good job of explaining how dipping mortgage rates are likely to affect our local housing market.
What does this mean for real estate investors? It means that you may have the opportunity to refinance if you’re currently paying down an expensive mortgage. It also means that if you’ve hesitated to buy, waiting for rates to become more attractive, it’s a good time to be thinking about acquisitions.
Investors should prepare for these potential changes by securing favorable financing terms and considering fixed-rate mortgages to hedge against rates that could always potentially rise again.
It’s also a good time to think about tenant retention. A lot of Washington, DC tenants who are qualified to own a home might have been putting off the purchase, thus staying in a rental home. They might think about buying in 2025 with more favorable rates.
The Washington, DC Rental Market
Let’s talk more about those tenants.
With this being an election year, we could potentially see some new residents showing up in Washington, DC. Turnover can be expected, but we can also expect an influx of new people looking for high-quality rental homes. Are you prepared to meet their needs?
The rental market in Washington DC is anticipated to remain competitive, fueled by a steady stream of professionals drawn to the city’s political and economic opportunities. High demand for rental properties will likely keep vacancy rates low, making rental investments an attractive proposition.
As an investor, you don’t want to take high tenant demand for granted, however. There are some new trends in tenant preferences that you’ll want to be aware of and prepared for:
- There is an increasing demand for properties that offer more than just living space. Remote workers are a big part of the tenant population, and they’re looking for co-working space, great tech amenities, and an opportunity to build community.
- Smart home technology is in high demand for Washington, DC rental properties. Tenants are drawn to rental homes with digital keypads and smart locks, video doorbells, and smart thermostats.
- Energy-efficiency and sustainable properties matter more and more to tenants, too. Upgrade your lighting and replace aging appliances with those carrying the ENERGY STAR certification.
These are differentiators for modern and qualified tenants in 2025.
Supply and Demand Dynamics
Washington DC’s supply and demand dynamics are shaped by several factors, including regulatory policies and the city’s finite land availability. While demand consistently outstrips supply, there are initiatives underway to boost housing development and meet the growing need. Check out that Washingtonian article we referenced earlier, where there’s a larger discussion about supply and demand and the impact that new construction is having throughout the city.
Investors will want to monitor zoning changes and development projects closely, as these can provide new opportunities and influence property values. Strategic investments in developing areas could yield significant returns as the market evolves. We are expecting some new buildings and communities to come online in the New Year.
Washington, DC remains a growing, diverse, and promising market for real estate investors in 2025. By understanding the relationship between home values, rental trends, mortgage rates, and supply-demand dynamics, investors can position themselves to maximize returns. As always, staying informed and adaptable will be an important part of navigating this dynamic market successfully.
Please note this information is deemed reliable, but not guaranteed. The information shared is based on our personal and existing knowledge as a D.C.-area property manager, not as a legal or financial expert. Feel free to contact me for further details.
Data Sources:
Washington, DC home values down:
https://www.zillow.com/home-values/41568/washington-dc/
https://www.realtor.com/realestateandhomes-search/Washington_DC/overview
Capitol Hill home values up:
https://www.redfin.com/neighborhood/18449/DC/Washington-DC/Capitol-Hill/housing-market
Growing markets for investors:
https://www.baselane.com/resources/best-places-to-invest-in-real-estate-in-washington-dc/
Supply and demand up:
https://www.washingtonian.com/2024/02/27/dc-area-real-estate-trends-to-watch-in-2024/
Mortgage rates:
https://www.washingtonian.com/2024/02/27/dc-area-real-estate-trends-to-watch-in-2024/
Scott Bloom, Owner and Senior Property Manager,
Columbia Property Management
Bloom founded Columbia Property Management in 2012. CPM’s goal is to provide a powerful, personal level of service to our clients. We focus on smaller landlords, professionally managing their assets, so they can succeed by investing in rental real estate.
Scott is an active member in multiple professional organizations including the National Association of Residential Property Managers (NARPM) and serves on the property management committee of Greater Capital Area Association of REALTORS® (GCAAR).
For more information and resources, go to www.ColumbiaPM.com
