Washington, D.C., is a city of many neighborhoods. The Real Property Tax Administration officially recognizes 56 separate neighborhoods for property assessment purposes. Local real estate agents further divide many of these into three or four sub-neighborhoods. There is great disparity between the neighborhoods. Some neighborhoods have luxury housing, some are trendy and others are blighted ghettos. The desire of millennials to live in urban neighborhoods is feeding the expansion of urban renewal and gentrification that has been taking place over the last 30 years.

Market Insights

The real estate market in Washington, D.C., experienced a steady period of single-digit annual price increases from 2011 to 2016. The traditionally popular northwest section of the city has priced out young professionals who are moving to neighborhoods in the northeastern portion of D.C. Those looking for the greatest potential for price appreciation will find it in the neighborhoods next to the latest area of renewal.

Property and Transfer Taxes

Property tax is very straightforward in Washington. The tax is based on assessed value, which equals market value upon sale. The property tax is recalculated every year according to the Real Property Tax Administration’s determinations of changing market conditions. Taxes for residential properties are determined using a rate of 85 cents per $100 of value. There are no special assessments of any kind.

Taxes for commercial real estate are figured at higher tax rates. The city charges $1.65 per $100 for the first $3 million of assessed value and $1.85 per $100 for assessed value in excess of $3 million. Special rates are in place for commercial and residential properties that are considered to be vacant or blighted. Vacant properties are taxed at a rate of $5 per $100 of assessed value. Blighted properties are taxed at $10 per $100 of assessed value.

The city has two different transfer taxes. The deed transfer tax is paid by the seller, and the recordation tax is paid by the buyer. Both taxes are set at the same rate. If a property sells at a price of $399,999 or less, there are two taxes of 1.1% each. Sales of $400,000 or more are charged at the higher rate of 1.45%.

Most Expensive Neighborhoods

The most expensive neighborhood, based upon the average home sale price between February and May 2016, was Kalorama Heights with an average sales price of $2.16 million. Located just northwest of DuPont Circle, Kalorama Heights was originally a suburban neighborhood of large single-family homes on large lots. In the 1890s, public transportation in the form of streetcars came to Kalorama Heights, leading to the development of luxury apartments and row houses.

During the Great Depression, the federal government purchased a large number of mansions and converted them into an area now known as Embassy Row, which is home to more than two dozen foreign embassies. The area mixes elegant suburban atmosphere and urban flair, with Central Washington just minutes away. The housing stock ranges from small $400,000 condos to $8 million mansions.

Georgetown is only the seventh-most-expensive neighborhood based on its average sale price of $1.14 million. At $830, it is the most expensive neighborhood in terms of price per square foot. Only one other neighborhood tops $700 per square foot.

Georgetown started becoming popular in the 1950s and '60s when people such as John F. Kennedy started living there. It is known for having one of the safer commercial districts in the city, though the high real estate prices have reduced the area’s trendiness. The housing stock is a mix of apartments, condominiums and single-family homes. Some of the more popular sub-neighborhoods consist of Federal Style row houses that are either single-family residences or that have been converted into four-unit buildings. The waterfront area is highly desirable, with one 6,200-square-foot home listed at $13.95 million, as of May 17, 2016.

Top Real Estate Websites

DC.UrbanTurf.com has very thorough descriptions of all the city’s neighborhoods. CityChicRealEstate.com has concise neighborhood maps with clickable tags showing all the listings within neighborhoods. It also provides searchable listing information of all homes on the market.

WashingtonPost.com: The Guide: D.C. Neighborhoods has an easy-to-read map showing the layout of the city. The Washington Post provides a steady stream of articles about the state of the metro area’s real estate markets.

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