Ahhhh..the $64,000 question, "What's the Loudoun County housing market going to do in 2009?" Well, I just got back from the 3rd annual Dulles Area Association of REALTORS Economic and Housing Forecast Summit to talk about just that. The purpose of the summit was to review current national and local Loudoun County economic and housing market conditions and hear 2009 forecasts (and beyond) from respected economists.
There were three economists who spoke at the event, each giving their own take on things. They were,
- John McClain – Center for Regional Analysis, George Mason University
- Jed Smith – Managing Directory, Quantitative Research, National Association of REALTORS
- Jack Brown – Economist, Loudoun County Government
What happened and why…
All three were pretty much in agreement with what happened and why. The usual culprits and names were brought up:
- Loose lending guidelines
- Highly leveraged economy
- Mortgage-backed securities and liquidity issues
- Weakened lending institutions
- Excessive spending and unrealistic expectations
- Decline in household wealth (housing prices, stock market, etc)
Over-supply of homes
Current economic and housing market conditions…
All three spoke about how the DC metro economy, including Loudoun County, continues to be better off than most other places in the country. They cited overall job growth in the area and that the jobs being lost were being replaced by higher paying jobs, which is better for the local economy (more household income means more money to spend on consumer goods, higher tax revenue, etc). They also agreed that the supply of homes has come down and has plateaued while demand has increased - a good thing.
Another main point they agreed on was that things could be worse. Not only are we better off than a lot of other places in the US, the numbers and overall economy were much worse during the Great Depression and other times since then. We're still at about 93 percent employment and the folks who bought their homes about 7 years ago or later should still be up in their home's value.
They also said that one reason why it's not as bad is because the Federal Government stepped in. Personally, that worries me because we're putting all of our "recovery eggs" in the "Fed basket" – one wrong move and it could all collapse right on top of us. (Hopefully, our country's leaders and economists are smart enough to know what they're doing and not let that happen)
2009 (and beyond) Loudoun County economic and housing market forecasts…
Though they agreed on a lot of things, there were some differences in their forecasts. One economist said that we're looking at a recovery beginning in the summer of 2009. Another said that it may be later in 2009. One wouldn't really comment as to when, but talked about what signs to look for to see the recovery coming.
Though the DC metro area including Loudoun County is better off than most of the rest of the country, I'd say that the summer of 2009 is an extremely optimistic outlook. Even the later part of 2009 seems a bit optimistic. In reality, we still have a bunch of foreclosure inventory to get through and I think there may me a second wave coming soon.
They all said the numbers were getting better or at least slowing their increase. This includes "sub-prime" loans, many of which have already reset. But, none of them could comment about the "Alt-A" and "Option ARMs" that are just now starting to reset and may have a similar negative effect on the housing market as "subprime" loans have over the last few years. (They said they're "working on gathering Alt-A and Option ARM data as we speak")
I'd sum up the economic and housing market summit in a few sentences,
- We may know where we are, but we're not sure exactly where we're headed nor when
- Though things are bad, they could be worse
- The economists were moderately optimistic about the Loudoun housing market in 2009 and 2010
- They should have looked at all the data before making a forecast
We'll see what happens…