03/20/2007 Northern Virginia Housing Supply Still Lags Jobs Market
John McClain, a senior fellow at George Mason University’s Center for Regional Analysis, discusses the state of the local real estate market.
Northern Virginia has built tens of thousands fewer housing units than needed to supply its burgeoning job market, a local economist told Northern Virginia Association of Realtors (NVAR) members during a March 15 forum at the group's service center in Herndon.
As a result, employees are moving to outlying areas and driving long distances to work, which clogs local roads, said John McClain, a senior fellow at George Mason University's Center for Regional Analysis. “Fairfax County is right at the threshold,” he said. “It will have to build higher densities and smaller units in order to have affordable housing.”
Bolstered by federal military and homeland-security spending - $112 billion in 2005 alone - Northern Virginia created 157,000 jobs in the past five years. This equals 73 percent of all new jobs in Virginia, McClain said.
“And we can't get any new roads,” McClain said, alluding to the ongoing transportation-financing struggle among state leaders in Richmond. NVAR Chairman Luis Lamas agreed with McClain's assessment.
“Certain localities don't want officials to authorize higher densities,” he said. “But sooner or later they'll have to face that. The population is growing day by day.”
Northern Virginia's real estate market is showing signs of improvement after last year's slump, McClain said.
Average housing prices in the Washington metropolitan area rose 2 percent in January and February, compared with those same months last year, he said.
In Northern Virginia, the news wasn't quite as good, with housing prices up 1 percent in January and down 1 percent in February.
Suburban Maryland's housing prices are faring better, because there is not as much new product on the market, McClain said. Prince George's County, Md., especially is doing well, with prices up 12 percent over February 2006, he said.
(But Maryland is playing catch-up with Virginia, as housing values in most suburban Maryland communities didn't rise as quickly as those in Northern Virginia during the 2000-05 housing booom).
McClain predicted Northern Virginia housing prices would likely not rise an average of more than 5 percent this year, and approach historically normal 7-percent increases in 2008 and 2009. During the height of the real estate boom, many homeowners saw successive annual increases of more than 20 percent.
Sales volumes likely will drop to 1998 and 1999 levels, he said.
McClain said he was not worried about the increased use in recent years of sub-prime mortgages, which are given to people with less-than-stellar qualifications. As of the third quarter of 2006, the Washington, D.C., region was experiencing only eight foreclosures per 10,000 mortgages - the lowest in the United States, where the average is 28.
Mary Beth Coya, NVAR's vice president of public and government affairs, said local real estate agents are hoping the market picks up this spring. “People will have to keep their prices reasonable and show their houses well,” she said.
Linda Knowles of Coldwell Banker in McLean said the market is beginning to stabilize, but buyers still are leery of paying too much.
“Everybody's at a hold-off, staring each other down,” she said. “You tell them the facts. It's still a buyer's market.”
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