Jobs and the record unemployment rate are some of the main issues, economists said. The high number of jobs lost is having an effect on what will happen in the housing market because people who are afraid of losing their jobs are unlikely to buy a new home, said John McClain, a senior fellow at George Mason University’s Center for Regional Analysis.
The Washington area has been and will continue to benefit from federal spending and stimulus dollars, with a large proportion targeted at defense spending. “If you want to sell houses, you don’t want to do it anywhere in the U.S. except the Washington region,” McClain said.
The Washington Region
The Washington area has outperformed the U.S. economy every year since 1995, McClain said, a trend he attributed to contractors in the technology boom coming to the region, such as Nextel and AOL.
After Sept. 11, federal contracting went up, bringing federal spending to about 33.3 percent of the economy, McClain said. “But we are not immune from recessions,” he added.
In the 1991 recession, the Washington area lost 53,000 jobs. The 2002 recession did not impact the Washington area as much, but in the current recession, many residents are facing job loss. So far, the Washington region is down 37,000 jobs since September 2008, McClain said. The sectors hit the hardest during this recession have been construction sector and the retail and trade sector. Northern Virginia, in particular, is down 13,000 jobs, McClain said.
In terms of the housing market, McClain expects there to be slight increases in home sales through September 2010.
Loudoun County
With the exception of January 2009, each month this year has been behind the correlating month from 2008, said Rosemary deButts, a housing analyst with DAAR and the Virginia Association of Realtors.
While both sales volume and median prices increased dramatically from 2000 to 2005, the number of sales is down 46 percent and the median sale price is down 33 percent since 2005, deButts said.
At the current pace of monthly sales, 2009 will fall short of 2008 by 8 percent, deButts predicted.
Looking at individual parts of the county, eastern Loudoun typically accounts for about 65 percent of total countywide sales, a proportion that stayed true in 2009. Leesburg’s percentage of total sales was 25.2 percent in September 2008, but the percentage fell to 20.7 percent in September 2009. In western Loudoun, the percentage of total monthly sales grew from 9.6 percent last year to 12.6 percent this year.
Generally in the county, pricier homes are selling better compared with previous years. In the first quarter of 2009, homes priced less than $300,000 comprised about 50 percent of home sales. Since then, however, the percentage of homes sold in that price range decreased, but the amount of higher-priced homes sold has increased in the second and third quarters of 2009, deButts said.
Broken down by area, both eastern Loudoun and Leesburg saw a majority of their home sales in the less than $300,000 range, but western Loudoun had more sales in the $300,000 to $500,000 price range.
The Nation
Across the country, real estate agents are starting to see an increase in home sales and prices in 2009, a sign that the nation is headed toward recovery, said Gregg Stratton, an economist with the National Association of Realtors.
That said, people across the country have faced a decline of wealth, with a 30 percent decline in stocks and a 22 percent decline in home prices over the last two years. As a result, consumers are spending less and saving more, making them less inclined to make large purchases, including buying homes. Part of this stems from job losses, with 7.2 million jobs lost nationwide over the last 20 months, Stratton said. The delinquency rate of mortgages is four times the historical average, he added.
If the country begins to face inflation to deal with a struggling economy, it will lead to higher mortgage rates, Stratton noted.
However, with the tax credit for first time home buyers, an estimated additional 350,000 people are buying homes, Stratton said. If Congress extends the tax credit to people who are not first-time home buyers, as it recently did, the housing market may recover at a faster rate, he surmised.
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