Why DC’s Renter Pool Is Poised To Increase

An analysis by JLL finds that the DC area’s renter pool will increase as home prices continue to rise and the time it takes to accumulate a down payment continues to lengthen.

As a result, renters today have been slower to make the jump to homeownership than they were before the recession and housing crisis, Senior Research Analyst Sara Hines writes. In DC, renters grew from 52.1% to 55.4% as ownership fell 110 basis points, while in both Northern Virginia and Suburban Maryland homeownership fell by 170 basis points with homeownership at 62.6% and 62.5%, respectively.

One reason for the decline is that the time it takes to save for a down payment is getting longer as prices rise. At the DC median income of $77,686 per year, it would take 72 months (or six years) to build a 20% down payment for a DC median-value condominium of $465,000 if that person were saving 20% of his or her income. And areas that take longer than 72 months to save for a down payment have a median sales price that is 53% higher than the Metro DC sales price. It would take, for example, 9.8 years to save a 20% down payment in Logan Circle.

Also, just saving 20% of income is increasingly difficult for many renters as 47.9% of DC renters are spending more than 30% of their monthly income on rent and 25% of renters are spending at least 50% of their household income on rent, Hines also noted.

Even though DC median condo home prices have eclipsed their pre-recession highs by 24%, Hines’ takeaway is that home prices will continue to rise. The local labor market is moving at its fastest pace in nearly a decade with 72,300 jobs created over the past 12 months, while the supply side remains tight at 2.49 months. It will take some time for demand to slow and to add supply to the market, Hines writes. “As home prices rise so does the down payment amount, likely increasing the total renter pool as the duration they rent lengthens.”