The economy isn’t as bad as we think it is or as the media portrays it to be…especially in our Washington Metro Area. Dr. Stephen Fuller from GMU’s Center for Regional Analysis spoke to our office today regarding the current economy in our area including unemployment and the state of the housing market…and of course his forecasts for the future.
The future is uncertain. It always has been and as it should be. We can only predict so much. So Dr. Fuller believes that in 2010 and 2011 the housing market in the Washington Metro area is going to be out of control good or in his words it’ll go “gangbutsters”! That’s pretty optimistic considering the last batch of Alt-A loans (5/1 and 7/1 ARMS) are due to adjust in 2011, but he did say to that end that the majority of those loans have already gone into foreclosure.
Unemployment in our area is down. It’s up around the rest of the nation and according to Dr. Fuller will go up to 10.2 nationally by April of next year before we see it start to come down again. As of this last month, there is a 3.5 point gap between the national unemployment figure and the figure in our region. He noted that as a country we are losing 200,000 jobs per month and in order to keep employment where it is currently, we would have to accrue 100,000 jobs per month – again, we are losing 200,000 per month. Employment won’t return to pre-recession numbers until 2014. That’s a heck of a lot of jobs! And half of those job losses are in the retail sector. Thanks to amazon.com and all of the other internet retailers that offer goods for discounted prices. Store front retailers can’t keep up, end up in bankruptcy and leave buildings and strip malls vacant along with any customer service that might have been associated with it. Big box retail shopping centers may get rezoned to accommodate housing short fall – stay tuned.
Dr. Fuller did comment on inflation and whether or not it will happen in the near future due to all of the spending our government has been doing lately. Will we have to endure a hard inflation period to “pay it all back”? His answer is not likely. Unemployment is a major factor affecting our economy, but it’s not enough to put pressure on the economy to spark inflation. He noted that manufacturers are not struggling as hard as they would be during an inflationary period. This is in large part because of all the products you can purchase online. They costs of not having a physical store, employees, etc. allows for the lower cost product and thus more profit in the long run. Therefore, if they continue to produce the goods, they continue to sell, then inflation shouldn’t occur…but that doesn’t mean another recession won’t occur. Dr. Fuller said another recession is inevitable, but when is the question.
A recession is defined as a period of an economic contraction, sometimes limited in scope or duration or as Wikipedia says it’s when the GDP falls or when we have negative growth. We have experienced this negative growth for the past 18 months and things are finally looking upward. As is the housing market!
The real estate market in the Washington Metro area is hot and soon to get hotter! At Gateway our sales are up 4% over last year, but our volume is down by 5%, thus showing that prices have come down quite a bit from last year. Dr. Fuller predicted that builders will start building more spec homes about springtime of next year. He commented that we need to have 25,000 new homes (not resales) to accommodate just the new residents in the Northern Virginia area, compared to 1 million nationally. Currently in our Northern Virginia market, inventory is slowing decreasing. This week we see 5,984 active listings on the market…that’s down 56% from this time last year. Just goes to show it’s a great time to sell and with the $8,000 first time home buyer tax credit and low interest rates, it’s also a great time to buy.