Virginias regional economy remains more entrepreneurial and bests the national average in terms of job growth and economic productivity, according to Alexandria resident, Dr. Stephen Fuller, Director of George Masons Center for Regional Analysis. In particular, Dr. Fuller cited Fairfax Countys forecasted lead in jobs growth over the coming years as a good harbinger for home values. As salaries increase and jobs grow, the micro dynamic is always a one-to-one ratio, according to Fuller. No job growth translates into no price growth in home sales. That is not the forecast for northern Virginia for the next five-plus years. According to Dr. Fuller, the DC metro area not only has the most job growth, we also have the best jobs.
Of the four largest metropolitan areas, Northern Virginia ranks fourth in size of employment base in the country (behind New York, Los Angeles, and Chicago); however, Northern Virginia ranks second largest in terms of job growth. While regional job growth is leveling off, the emerging economy is anticipated to be one of sustained normalizing growth patterns. Fuller stressed the need to keep a perspective of what we are comparing current market trends to the hottest real estate market in history for this region, fueled by a spike in highly-valued government procurement contract jobs for a highly trained job pool. His forecast for this region is for a predictable, solid base of job growth. In jobs, as in real estate values, Dr. Fuller envisages a return to normal patterns.
In remarks to The Alexandria Times, Dr. Fuller stated that homes are still a better long-term investment than stocks, because the costs are leveraged over time. Using a down payment as a base for rate of return, home ownership has averaged a 7 percent gain on investment over the thirty years records have been kept, according to Fuller. Stocks, on the other hand, have a capital gains tax at 15 percent over a shorter hold time, while holders of home mortgages are able to write off interest payments on taxes over the 30-year term of the average mortgage. This frees up cash to reinvest, leveraging the rate of overall return further.
He acknowledged that current average sales price changes in month-over-the-year calculations showed a negative one percent price range a trend that began in July of 2006. In single family detached homes in northern Virginia, the change in average sales prices since last year stands at a seven percent decline. On the surface, this may seem daunting, but perspective tells a friendlier story; these numbers are based on market performance following the hottest market in history during the 2004-2005 sales period.
Those in our region who have a five-year home ownership interest have realized a 50 percent appreciation over the course of the investment, according to Fuller, while normal appreciation rates over time would have been half of that. Fuller foresees appreciation rates going forward at a more normal rate. The sales dynamic in our region centers around resale versus new home sales, according to Fuller, and he predicts it will take another year for new home sales inventories to get back in line. Fuller noted that inside the beltway, the new home market sales were not a competitive factor vis-a-vis existing home sales, but that this was very much the case in areas outside the beltway.
For sellers, Dr. Fuller advises, know your competition, distinguish your product, and consult a real estate professional on what is selling, and what the recent comparative sales prices are. We would add that homes priced to the market sell at a better market value and move quicker than overpriced listings that grow stale and loose buyer interest.
Jeni Upchurch provides a regular update on the real estate market. She is a full-service Realtor affiliated with McEnearney Associates Old Town, Alexandria office, and her practice includes Northern Virginia and the District of Columbia. For a consultation, she can be reached directly at 571-216-6701.