- Rent fell across the US for the 19th month in a row in February.
- But apartment prices in Washington, DC, rose 3.3% — even as DOGE cuts hit federal workers.
- A slowdown in new apartment construction may cause rents to surge in DC and elsewhere.
While some in Washington, DC may feel like the sky is falling, new data suggests rents there aren’t.
Median rents for studios to two-bedroom apartments in the nation’s capital rose 3.3% last month from the year before to $2,283, a March 19 report from Realtor.com found. That’s a contrast to the 50 largest US cities, where rents slid on an annual basis for the 19th straight month to $1,691.
Eagle-eyed real-estate observers may be surprised to see higher rents in the DC metro area, which includes Virginia cities like Arlington and Alexandria as well as the Maryland suburbs.
That’s because median home prices in Washington, DC, fell 3.3% year-over-year in February, according to Realtor.com — the exact inverse of what its rental data in the same span showed. The drop came as homeowners in the capital suddenly listed their homes, with inventory up between 48% and 56.2% in late February to early March versus last year, per the research firm.
DC’s housing market seemed to be softening at the same time that the newly formed Department of Government Efficiency, or DOGE, made major cuts to the federal workforce. Those whose jobs were eliminated may need to relocate, which could lead to a mass exodus.
However, February rental data contradicts this narrative about lower housing costs in cities with lots of federal workers, suggesting that it may be more rumor than reality — at least for now.
One possible explanation for this discrepancy is that return-to-office mandates are counteracting the DC emigration following the DOGE cuts, Realtor.com’s economists remarked. Another is that this potentially seismic shift simply hasn’t shown up yet.
“I don’t think our data is totally reflecting the reality yet,” Joel Berner, an economic researcher who co-authored Realtor.com’s rent report, recently told Business Insider. “I think it’s just a little bit behind.”
Why prices could surge in DC, and beyond
Instead of rents plunging as ex-government workers look for greener pastures, there’s reason to think apartment prices will surge in DC and several other major US cities in the coming years.
New rental inventory spiked to the highest level in five decades last summer, real-estate firm Zumper found, which is a compelling explanation for why apartment prices have been sagging.
But the pendulum may swing back, making new apartments harder to find in the late 2020s.
Less than 294,000 multi-family units in major cities got the green light for construction last year, Realtor.com found. That’s the lowest level of approvals since 2017, even including a chaotic 2020, and is down from a peak of 461,000 in 2022.
Thirty of the 50 biggest US markets saw double-digit declines in multi-family permit approvals — including 23 down by 20% or more. That includes the DC area, where approvals plunged 35%.
“The current trend of declining rents over the past 19 months and a still-sizable number of multi-family units under construction have impacted builders’ enthusiasm for new projects,” Danielle Hale, Realtor.com’s chief economist, said in a statement.
This apparent apartment-construction bust could worsen the US housing shortage, which Realtor.com estimates is already at 3.8 million units. In turn, rents could reverse higher, especially in major markets like New York, where apartments rose by a nation-leading 6.8%.
“The current trend of falling rents may not be sustained,” Hale and Berner wrote. “We expect rents to start to grow again in the coming years as the pace of new units hitting the market slows.”
Read the full article here
