"A Tale of Three Cities"-Washington, D.C.
Tuesday, March 20, 2007SUZANNE PRATT: One of the things the Federal Reserve's open market committee will be looking at during its meeting is data on the housing industry. Investors are scrutinizing it as well, since housing and housing-related industries play such a large role in the economy. This week, we're taking a close look at housing in some of America's largest communities. It's a series we call "A Tale of Three Cities" and tonight, Stephanie Dhue looks at the housing market around Washington, DC.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Joel Robinson recently bought a $1.4 million home, overlooking a golf course in Prince William County. He didn't sell his old house. Instead, he's renting it with hopes the market will turn up. Robinson works for the Army as an information technology contractor. He expects more workers to join the ranks at nearby Fort Belvoir as people are transferred from other locations.
JOEL ROBINSON, FEDERAL CONTRACTOR: So we decided to hang on to the house in the hopes that folks moving into the area will be looking for real estate in the next couple of years.
DHUE: The Federal government drives the DC area economy, which includes the District, Maryland, and northern Virginia. While the government employs only 12 percent of the regional workforce, its presence creates a multiplier effect. Last year, Uncle Sam generated 20 percent of new jobs in the region. Steven Fuller of the Center for Regional Analysis at George Mason University says that job growth will continue to fuel the area's housing market.
STEVEN FULLER, GEORGE MASON U: If we are to house all those workers, we need to build about 45,000 new housing units. We're not going to deliver 25,000 new housing units, so there's always people looking. It's like musical chairs and that will make our housing market always grow better than the national market.
DHUE: Builder Toll Brothers was seeing growth at its Dominion Valley development in northern Virginia. Home prices here nearly doubled since the 3,400-home planned community first opened in 2001. About half the development has been built and sold, but sales dropped off last year. Toll's regional VP John Elcano expects sales to reach a more normal pace this year.
JOHN ELCANO, TOLL BROTHERS: Traffic is up. We're expecting that we're going to sell more homes certainly than last year. We have good traffic. We've taken four deposits, so far, well, in the month of February, we took four deposits; converted three of the four to agreements and we are expecting, we have some more prospects on the wings, so to speak.
DHUE: Like much of the region, home prices remain under pressure here in Dominion Valley. Some homeowners who want to buy new places are struggling to sell and contract cancellations from last year have left more new homes on the market.
UNIDENTIFIED MALE: Prices have been fairly stable for us. We haven't raised prices this year. We expect that, as more demand increases, we'll return to that, but right now we're holding our pricing.
DHUE: While the DC area does enjoy a cushion from the Federal government, it's not immune to national trends, like economic downturns or tighter lending standards. Housing economist Thomas Lawler says the sub- prime meltdown could chill the local recovery.
THOMAS LAWLER: In one sense, the region won't be hit as bad as some other ones -- for example, parts of Florida, parts of Arizona and Nevada, California, certain parts of the Midwest. But I think it's going to make the spring home-selling season not quite as favorable as what it looked like it might have been just a scant six weeks ago.
DHUE: While most people expect the DC area market to rebound this year after last year's slump, the market is still in transition, with buyers and sellers negotiating prices and still questioning whether the bottom has been reached. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Woodbridge, Virginia.
