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Your Guide to Investing in Washington, DC Real Estate

Posted by Walnut Street Finance Team on Nov 27, 2018

This is your guide to understanding one of America's top home-flipping markets: Washington, DC. 

In this guide you'll find:

Overview
Economy
Demographics
Real Estate Market
Top 5 Neighborhoods 

 

OVERVIEW

While the 2018 Neighborhood Housing Index released by ATTOM Data Solutions shows a sharp drop in home-flipping returns, the Washington, DC area continues to lead the nation in flipping opportunities. 

Washington, DC stands out not just for its high rate of flips, but for the investors' return on investment. Business is up in every sector, adding tens of thousands of new jobs to the area - and new hires with high incomes who need a place to live. And of course, one of the contributing reasons for the continued success of the DC real estate market is the city itself, and the people who live in it. Washington, DC continues to find itself atop many "Best Places to Live" lists, and is poised to stay on those lists for years to come. 

When analyzed point by point, metric by metric, it is clear that Washington, DC's prolific real estate market has held strong through 2018, and it is in the right position to maintain its steady course.


WASHINGTON, DC ECONOMY

The economy of Washington, DC and its greater metropolitan area continues to be one of the most prolific in the country. By the end of Q4 in 2017, it had a per capita GDP of $193,091, and, in April of 2018, the average weekly wage was $1,552 — the highest in the country. And while it’s unemployment rate was determined to be the second highest among the states and DC, that has not affected its overall economic growth.

From July 2017 through July 2018, the DC area added 77,100 new jobs. Nearly every sector of employment has shown some level of growth during the past year, but the biggest gains comes from the Professional & Business Services, which added 22,500 new jobs and grew 3%. Education & Health Services came in at number two, adding 12,400 jobs and growing 2.9%. The unemployment rates are much higher in the District of Columbia proper at 6%, while the surrounding areas are at a more reasonable 3.5%. Overall, the Washington area changes to employment are nearly a full percentage point better than the rest of the United States.


BREAKING DOWN WASHINGTON DC'S DEMOGRAPHICS

While the most recent Census data tells us that the District of Columbia has reached a population of 693,972 as of July 1, 2017, more recent estimates place the 2018 population at 703,608, an increase of nearly 1.4% in a little more than a year’s time. This makes it the 22nd most populous city in the United States. When taking into account this new data, DC has grown approximately 14.5% in just eight years.

Of this sizable population, 60% are between the ages of 18 and 65, meaning more than half its population is in the sweet spot for employment. You’ll also find a strong level of diversity in Washington, DC, both in population and business owners. Along race, you’ll find African American, white and Hispanic at percentages of 47.1%, 36.8% and 11% respectively. And with businesses, as of 2012, you’ll find 30,237 men-owned firms, 27,064 women-owned firms and 29,983 minority-owned firms.

Washington, DC also features a highly educated population. While the national average for post-secondary degrees per city is 34.2%, it is estimated that more than half (55.4%) of DC’s residents have such a degree. This makes it the 2nd most educated city in all of the United States. This higher level of education also appears to correlate with the city’s income measurements.

The citizens of the District of Columbia boast greater wealth than the rest of America as well. As of the last Census ACS 1-year survey in 2016, the national median household income rests at $57,617, while DC’s median household income comes in at $75,506. This number shows a 3.2% increase over just three years. And due to a boom in tech companies and government-related businesses, there are now has 2049 millionaires and 34 billionaires in the Washington, DC Metro Area. For a larger look at the wealth of nation’s capital, see the chart below.


EVERYTHING YOU SHOULD KNOW ABOUT THE WASHINGTON, DC HOUSING MARKET

When ATTOM Data Solutions released its Q2 2018 U.S. Home Flipping Report, the news wasn’t great to fix and flip investors throughout many parts of the United States. It turns out that home flipping returns have dropped to a four-year low. The average gross return on investments was 44.3%. This is the third quarter in a row to see a drop. Investors are still making money, but their ROI is far below their expectations.

ATTOM ranked 10,950 neighborhoods by separating them into five categories and assigning each category a letter grade from A to F. From there, they analyzed housing characteristics by group. “While home prices are typically higher in higher-ranked neighborhoods with better schools and lower crime, there are still many top-notch neighborhoods with more reasonably priced homes,” says Daren Blomquist, senior vice president at ATTOM Data Solutions. It’s interesting to note that the highest gross flipping returns occurred in the neighborhoods ranked with D and F ratings.

However, contrary to national trends, DC’s fix and flip investors have a different story to tell. The ATTOM report also showed that the District of Columbia had the highest home flipping rate in the nation — 8.3% of all homes sold in Q2 were flips. Compare this to the national average, where only 5.2% of the 48,768 single-family homes and condos sold in Q2 were flips. Take a look at the number of D- and F-rated homes in the DC area — they represent a real opportunity for fix and flip investors.


WANT TO INVEST IN WASHINGTON, DC REAL ESTATE? MEET THE TOP 5 NEIGHBORHOODS.

As noted in the ATTOM Data Solutions Q2 2018 U.S. Home Flipping Report, Washington, DC continues to claim some of the highest flipping percentages and returns on investment. And though DC remains at the top of real estate investors’ minds, it’s important to note that the hottest neighborhoods for investment have once again shifted. Based on an analysis of the latest data, the following DC neighborhoods are currently the hottest for fix and flip investors.

Trinidad

Located in the DC’s northeast quadrant, Trinidad is a prime location for real estate investment. Once remembered for military checkpoints during a turbulent 2008 summer, it has recently found itself known for far more positive attributes. It’s just a five-minute walk to H Street’s popular restaurant and nightlife scene, a 10-minute walk to Union Market, and you can get to NoMa and the Red Line in just 20 minutes. It’s packed with classic 1920s rowhouses and features a highly diverse community. Nearby landmarks of note include the U.S. National Arboretum and Gallaudet University.

Trinidad by the numbers
Median home value: $367,172
Median sales price: $517,000
Price per square foot: $521

Deanwood

As one of Washington DC’s few underdeveloped neighborhoods, Deanwood is a great location for real estate investors looking for affordable properties. Located along the Maryland border, this area keeps popping up on “Best Of” real estate lists. The neighborhood encompasses about two square miles, and it is served by a network of bus routes and four Metro stations. Actual yards are available to homeowners and renters alike — a small town feel in an urban environment. It features attractions such as the Deanwood Recreation Center and Library and the Strand Theatre, for which renovations are currently being mapped out.

Deanwood by the numbers
Median home value: $254,475
Median sales price: $325,000
Price per square foot: $325

Benning Ridge

Benning Ridge is located in the southeast area of Washington, DC, east of the Anacostia River. It lies just soung of East Capitol Street. Investors will find all sorts of opportunities, including single-family homes, duplexes, condos and apartment buildings. While there is no Metro station, the Benning Rd Metro station on the Blue and Silver lines is nearby in the Benning neighborhood. Residents are fond of the Benning Terrace Recreation Center, the Fort Chapin Park and Fort Dupont Park, which often hosts large outdoor concerts.

Benning Ridge by the numbers
Median home value: $231,611
Median sales price: $248,863
Price per square foot: $262

Hillcrest

Hillcrest residents often consider their neighborhood to be the worst-kept secret in the area. With a suburban charm in an urban area, new residents are being attracted by its affordability and access to more land — which means larger homes and prime real estate opportunities. You’ll mostly find a lot of single-family homes along tree-lined streets. This fairly diverse location features both established families who have been there for decades and young families just getting started.

Hillcrest by the numbers
Median home value: $381,574
Median sales price: $450,000
Price per square foot: $291

Brookland

Also known as “Little Rome,” Brookland has been home to the Catholic University of America since 1887 and you will find churches, chapels and monasteries throughout its tree-lined streets. It is filled with older homes and retro storefronts, but it also changing rapidly. There is a burgeoning art scene, most noticeably with the Brookland Artspace Lofts, the renovated Dance Place, and Alice’s Jazz and Cultural Society. Walking around, you’’ find a variety of bungalows, rowhomes and single-family houses. It is served by the Brookland-CUA Metro station, which is also a hub for numerous bus routes.

Brookland by the numbers
Median home value: $526,524
Median sales price: $576,861
Price per square foot: $395

 


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Walnut Street Finance Team

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