There are very good, solid reasons to choose either. It really depends on your current outlook.
Just in terms of cost, you might want to take a look at Trulia\’s \”Rent v. Buy index\” for DC. Washington DC is even further beneath their 15 point threshold than it was last year (at 14). This number is calculated by taking the average 2 bedroom listing price and dividing by the cost of renting a comparable 2 bedroom for a year. Ex. $200,000 / ($1500 x 12). Their advice: \”Buying a home is a better deal than renting if you plan to live in a home for at least 5 years.\” If you\’re planning to move out of the home in less than 5 years, they recommend that you stay a renter (since DC\’s index is still higher than 10). As a point of comparison, Trulia\’s indexes for Manhattan, Seattle, Portland, or San Francisco come out to 33, 35, 22, and 22, respectively. In those cities, you\’re advised to keep renting until you\’re definitely committed to a home for 15 years or more.
It has never been a better time to get a loan IF you have the credit score and the down payment to satisfy today\’s hyper lenders. Freddie Mac reports that both the 30 year mortgage rate (3.75%) and 15 year mortgage rate (2.97%) have hit all time lows. Urban Turf has a great graph which illustrates this point. Though Freddie Mac rates are reserved for only the most qualified homeowners, these rates set a low baseline. To complement this statistic, the National Association of Realtors Housing Affordability Index reached a record all time high since 1970, indicating that houses are among the most affordable they have been in 40 years!
Here is the big take away: Washington, DC is more expensive for renters than it is for buyers, so if you are looking to add to a portfolio of rental properties or looking to secure a new home, it is an excellent time to buy in this low rate environment.
However, for those who want flexibility because of a job, cash flow, are still saving up to make the necessary 20% down payment, or are looking for adventure, renting may still be the way to go.
You may be skeptically thinking, \”Why? My rents have been going up uncontrollably over the past two years!\” It is true, DC is notorious for its shortage of available apartments/condos, and except for New York City has the lowest vacancy rate in the nation at 3.8%! This low inventory allowed your landlord to raise rent prices last year and be sure that she could still attract tenants. Apartment prices in DC rose 6.8% between March 2010 and March 2011.
BUT, rent increases have slowed by more than half- 2.3% between March 2011 and 2012.
The other piece of good news for renters is the 8,000 new apartment units in DC that are planned to deliver by the third quarter of 2012. The H Street Corridor is one busy area of development, which you may want to consider as a prospect. Urban Turf\’s May 16 article on \”The Many Residential Developments on Tap for H Street\” will give you a taste of the pace and immensity of projects planned for DC over the next year. In summary, Jair Lynch plans to build 240 apartments on 6th and H St NE, Steuart Investment has designed a 215 unit project housed in a LEED building on 3rd and H NE, Valor Development and Ellisdale Construction have a 49-unit condo planned for 300 L Street NE, and just expanded a second project to 84 units on 1350 Maryland Ave, Avalon Bay is constructing a 140-unit building at 318 I street NE, Rappaport Companies wants to build 346-423 apartments between 8th and 10th NE, Capital City Real Estate wants to develop 22 units at 301 H St NE, and The Flats at Atlas District are a 257 unit apartment project due to deliver this spring on Bladensburg Rd. between Neale and K St NE.
If we do the math, that could be a total of 1430 new units in just one neighborhood alone! This new inventory may temporarily ease the mounting financial pressure on tenants. That said, demand is supposed to catch up with supply by 2014 or 2015 so it may be wise to start saving up for the long term.