Confirming in spades the dreary economic outlook for the region presented by Falls Church City Manager Wyatt Shields to a budget visioning work session earlier this month attended by members of the Falls Church City Council, Planning Commission and School Board, the renowned Dr. Stephen Fuller, director of the Center for Regional Analysis at George Mason University, painted a grim picture for the D.C. Metro area including Northern Virginia for the next five years going forward in a two-hour talk to the Northern Virginia Association of Realtors in Merrifield Tuesday.
Without citing the origin of the phrase, being an ancient Chinese curse, Dr. Fuller began his remarks by saying, “We are living in interesting times, and they’re going to get more interesting.”
The sudden downturn in the regional economy has seen the D.C. region’s gross regional economy shrink two years in a row beginning in 2013, more than during the Great Recession, due to the lingering impacts of that recession, federal government “sequestration,” a significant decline in government contracts, and ongoing insecurity about where the broken government in Washington, D.C. will be going from here.
Though still one of the richest regions in the U.S. overall, average wages in Northern Virginia have been declining and so has average household incomes. The result is that Virginia has plunged to 48th place among the U.S. states in its gross regional product rate, followed by Maryland at 49th and the District of Columbia at 51st.
New uncertainties include the impact of the sudden dramatic decline in oil prices and the eventual necessity by the Federal Reserve to begin allow interest rates to rise.
Although not discussed by Fuller this week, other analysts are privately fearing the D.C. region could be further hit by the ability of major government agencies to operate, by the benefits of the Internet age, from a distance, permitting relocation to less expensive digs in the Midwest, for example.
“Think of the D.C. region as a company town where the company (the federal government) has gotten 15 percent smaller,” Fuller said.
Things are get tougher for local governments for the next four or five years, he said, as tax revenues shrink.
Downsizing and repositioning are watchwords, he said. “We are facing the need for a substantial reduction in things not important.”
“There is a lot of volatility in the housing market, with household formation slowing in 2014 to levels much lower than in 2013,” he said. “There has been lower wage growth, slower immigration, low marriage rates, limited access to credit, degraded mobility, student loan burdens, uncertainty in global markets, and changing general values and preferences” are all both a consequence of and contributing to the stagnant economy.
“The economy here has stalled, it has not collapsed,” he added.
Therefore he predicted that single family housing prices will slow down with sales of high end expensive homes stalling out, being routinely overpriced, and a lot more people renting than buying.
He noted the challenges further into the future as by 2029 all the “baby boomer” generation will be over 65 years of age. The challenges that will present for housing, health care, senior services and employment. That’s only 15 years from now.
Fuller, who says he plans to retire, himself, next year, having worked into his mid-70s, has been known over the years for sunny forecasts for this region, saying that even when the national economy was in trouble, the D.C. area could be expected to perform better than the nation.
That standard forecast he was so well known for is simply no longer true.
He said a lot more updated data will inform his perspective when he gives his next public talk on Jan. 15 in Tysons Corner.