GMU’s Fuller Predicts F.C. Set to Boom
Read between the power-points, so to speak, and renowned regional economic prognosticator Dr. Stephen Fuller is still touting condos, and if he’s right that could be very good news for the City of Falls Church.
Some policy makers have been looking slightly askance at Dr. Fuller’s skills lately since he predicted just two years ago a virtually endless explosion in the residential condominium market to feed employment growth demand throughout Northern Virginia. As everyone now knows, the condo market quickly became overbuilt, here and everywhere in the U.S. and is now at a dead standstill.
But listening to Fuller speak to a room full of business folk at the Ritz Carlton in Tysons Corner last week, hosted by First Horizon Bank, this may be only a temporary lull. It is expensive, high end housing that is suffering the greatest losses in price appreciation since the stall began a year ago, he noted.
In the context of this, with a whopping two thirds of homeowners in the Washington, D.C., metro region living in dwellings they technically can’t afford, the trend has to go in the direction of smaller, less expensive homes.
But this reality, when also paired against the continued, if softer, job growth especially in Northern Virginia, means that demand for more affordable condos will eventually resurge. Fuller predicts that more than 200,000 new jobs will be created in the region in the next four years.
Fuller, the director of the Center for Regional Analysis at George Mason University, did not say this in so many words last Thursday morning. His presentation was a more linear sequence of data charts. But when asked following his lengthy presentation if it was fair to draw such conclusions from his comments, he nodded.
Factors like location and cost will be keys, he said. But yes, in the right locations, condos will once again rule.
Falls Church, he added, in remarks made exclusively to the News-Press, will be a prime location for such a resurgence, because of its proximity to the Metro, I-66 and other swift transportation corridors, including the Beltway.
Indeed, in few if any locations, is there a residential infrastructure set up as in Falls Church so close to three major transportation arteries: the Metro, an interstate highway and the Beltway. The location is also intermediate between the region’s two largest airports.
As to the central district where the City of Falls Church hopes to build a new town center, at the intersections of Rt. 29 and Rt. 7, Fuller said it would be better if the Metro came right through there, but that it should thrive nonetheless.
Hopes for the city center plan have stalled since the condo market cooled, as the City’s plans were predicated on a veritable “condo canyon” providing the prime value needed to convince investors to pour resources into the project.
But if Fuller is right, it will be only a matter of time before that prospect returns, keener than ever. Luxury condos will be out, but livable and relatively affordable ones will be going like hot cakes again.
And it won’t take that long, either. Fuller predicts within one and a half years, the market for condos will turn back around again.
For despite the economic slowdown, driven by a cooling of real estate values, the Washington, D.C., region remains the strongest in the nation in terms of job growth and economic vitality, Fuller said. It will remain so, creating substantial net new employment and demand for all that implies.
Since 2000, job growth in Washington, D.C, and environs has outstripped the entire U.S., with 359,000 new jobs compared to 285,000 in Miami, 262,000 in Phoenix and 159,000 in Los Angeles. Regions experiencing net job loss during that span include Boston (a loss of 52,000 jobs), Chicago minus 52,000, San Francisco-Oakland minus 70,000 and Detroit minus 109,000. In the last year alone, 73,400 new jobs were created in the D.C. area, which has the lowest unemployment rate in the U.S. at 3.3%.
In the region, the bulk of new jobs are in Northern Virginia, Fuller cited. Percentage of new jobs have declined in the District and remained unchanged in Suburban Maryland. In Northern Virginia, as a percentage of total new area jobs, the number has surged to over 45%.
Federal procurement spending is the biggest single driver of the continued growth here.
In this context, housing has become increasingly unaffordable here and across the U.S. Conditions are worst in California and New York City but Washington, D.C., ranks with Miami, Seattle and Phoenix as areas with a steep divergence between the cost of new housing and median family incomes.
Growth in the value of housing in the D.C. area grew by upwards of 16% to 25% annually through 2005, while incomes grew between 1% and 5% on average. Overall, the price of housing grew 119% since 1999.
In 2006, however, the situation has begun to change dramatically, with year-over-year leaps in housing values around 25% through July 2005 falling to a minus 1.4% this July. The average number of housing units stalled on the market now is more than any year in the last decade.
But while a precipitous 22% decline in housing prices has assailed Los Angeles, that’s because the region lost 485,000. That’s not slated for here, with Fuller predicting 201,300 more jobs in the next four years.
For the next five years, Fuller predicted a “slowing to normal” trend for the regional economy, with a strong rebound in demand and value for the right kind of housing.