Rent vs. Buy: Penn Quarter

• February 4th 2010

by Michele Lerner

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Plenty of rent-versus-own calculators are available online to do a purely numbers-driven evaluation of whether you should buy a home or rent one. (The New York Times has a particularly good one.) But, as most buyers in search of a new home know, the decision to buy a home is not purely financial. It requires a long-term commitment to a property and a neighborhood.

UrbanTurf is working its way through the neighborhoods of the city to gather estimates of rent and home prices as well as the distinctive characteristics of each community. This week, we visit Penn Quarter.

The Neighborhood

Once a part of town that mainly attracted tourists to the Museum of American Art and the National Portrait Gallery, Penn Quarter’s revival began in the 1990’s through the efforts of the Pennsylvania Avenue Development Corporation and was given an extra push in 1997 with the opening of the Verizon Center (then called the MCI Center). In little more than a decade, this northwest DC neighborhood has been transformed into an area known for its restaurants, nightlife, theaters, and of course, art galleries and museums.

Roughly bordered by Pennsylvania Avenue, New York Avenue, Massachusetts Avenue and 7th to 12th Streets, Penn Quarter’s housing inventory consists of about 15 high-rise condominium and apartment buildings. Jesse Kaye of Prudential Carruthers Realtors says that Penn Quarter attracts not only young singles, but also a high proportion of empty nesters.

“Generally, Penn Quarter’s residents are about 5 to 8 years older than the population in a neighborhood like Logan Circle,” says Kaye. “The area attracts a little more sophisticated crowd who like the proximity to cultural amenities as well as being near government offices.”

He noted that the one drawback to living here is the lack of a convenient grocery store. (The nearest store is a Safeway at 490 L Street NW.) Rumors of a store coming to Penn Quarter crop up occasionally, but nothing is confirmed at the moment.

To Buy…

Kaye says that one-bedroom condos typically range from the mid $300,000’s to the low $500,000’s, with condo fees ranging from $300 to $500 per month. Two-bedroom condos are on the higher end for DC, typically selling from the mid-$600,000’s to over $1 million, with condo fees ranging from $500 to $1,000 per month.

…Or To Rent?

Based on an analysis of Craigslist apartment rentals from the past ten days, a one-bedroom apartment in the neighborhood rents for approximately $1,900 to $3,200. Two-bedroom rentals were rather hard to find and had particularly high rents, ranging from $3,500 to $8,100 for a penthouse apartment.

To put these numbers in perspective from a buy-versus-rent standpoint, we look at a one-bedroom unit and a two-bedroom unit for sale in the area.

On the lower end, we found a one-bedroom condo at 616 E Street NW, listed at $399,900. This 800-square foot condo has a renovated kitchen and a balcony overlooking 7th and E Streets, and the building has a 24/7 concierge, fitness center and rooftop pool. Assuming a 20 percent down payment, monthly costs are estimated at $2,300 including mortgage principal and interest at 5.1 percent, taxes, mortgage insurance, and condo fees.

There is a two-bedroom on the market at The Residences of Gallery Place for $649,900. The 1,380 square-foot space has a den and an office space in addition to the two bedrooms. The original owner also put in $60,000 worth of upgrades. Even with 20 percent down, monthly payments top out at over $5,000 for this unit largely because of a very high condo fee.

The Verdict

Unless you get very lucky, you are going to pay a premium to live in the Penn Quarter whether you buy or rent. However based on the analysis above, it seems to make more sense to buy (if you have the money saved for a big down payment) instead of renting because the rental rates are notably high for the DC area and are on par with what you would pay in mortgage payments. Also, the central location of the Penn Quarter will likely enhance the resale value of the home five or ten years down the road.

This article originally published at http://dc.urbanturf.production.logicbrush.com/articles/blog/rent_vs._buy_penn_quarter/1748.