This means that by 2025, 7,053,000 people will live in the DC metro area – saturating an already low-inventory market. According to economist Stephen Fuller, the region would need to build 35,000 new housing units a year in order to keep up with the population growth, as opposed to 30,000 or so it is producing currently. Fuller believes a 16% population growth is a bit aggressive, but agrees that at least 750,000 people (12% increase) will be coming to the DC region by 2025. Regardless of the exact amount, it is evident that we are in for a significant growth period that we are not prepared for.
In addition to natural population growth (births), a substantial amount of the population increase will be the result of international immigration to the area. DC has long been an international city, but the past decade has created a true melting pot.
Stats per the Brookings Institution:
– 1 in every 5 persons in DC was foreign-born, with the majority being Latino and Asian.
– Just under 40% of all foreign-born immigrants are from Latin America, the majority (35%) coming from El Salvador.
– The second largest demographic for foreign immigrants is Asian, primarily from China. Though the Asian population is smaller than the Latino population, they have a higher consumer purchasing power and a larger presence in the real estate market. Per the National Association of Realtors (NAR), the Chinese remain the top foreign buyers of U.S. real estate.
Customs to Keep in Mind
When dealing with foreign buyers, it is important to keep in mind the various customs, traditions, and philosophies that play an integral role in choosing their living space.
– A Hindu buyer would prefer the main entrance to face north or east, and would want a space that they could use as a prayer room.
– For a Korean or Chinese buyer, they would be interested in feng shui (the Chinese art of placement that aims to create a harmoniously designed home).
Builders are making these subtle critiques to the traditional home in a neutral way, in order to attract the most interest without favoring one demographic over another.
Domestic (Especially Younger Buyers) – A Whole Different Strategy
The combination of low inventory and rising housing costs, is limiting the options for younger buyers. Currently DC housing costs rise an average of 7% annually, while wages are only rising 3%. Taking these statistics and adding roughly another million people, will only force market prices and rents to increase further. This will either force people to live outside of the metro area (only to increase the already congested commute traffic) or to settle for group living situations. Though this may seem troublesome, it also provides an opportunity for builders and developers to penetrate a neglected market. Whether it means creating more co-living communities within the metro, or creating affordable communities outside of the metro with easy access to public transportation. DC will always attract young, intelligent professionals to the area, it’s just satisfying their need of more accessibly priced home-owning options.
Nationally, experts are predicting the housing market to moderate and for prices to drop within the next few years, but that will not be the case in the DC metro. Record low inventories have been driving up prices, creating over-asking-price offers and minimal days on the market. Some experts have raised concerns, indicating a pricing bubble that is soon to pop. This may be just a theory, but one thing’s for certain; the DC real estate market will become increasingly more competitive in the years to come.