Tracking the Negative Economic Consequences of Sequestration: Part 2

See more on EconoSTATS.org

By Wayne Winegarden and Donald Rieck, April 22, 2013

The Washington DC area (including Washington D.C., Northern Virginia, and Maryland) are disproportionately impacted by the expenditures of the federal government.  As noted in a Washington Post article, “federal spending and procurement still represent about one-third of the region’s $443 billion economy.”[1]

Washington D.C. is the figurative “canary in the coal mine” when it comes to the economic consequences from the sequester – if the sequester is going to hurt anywhere, it will hurt the most in the D.C. metropolitan area.

One way to track the actual and expected economic consequences from any policy change is to track real estate (or housing) prices.  House prices are, generally speaking, driven by local economic trends.  Furthermore, housing prices reflect both a region’s current and expected future economic prospects.  Weak income growth for local buyers, or the expectation that future buyers will experience weak income growth, is ultimately reflected in lower housing values.  Therefore, changes in housing prices are a good metric to measure changes in both a region’s current and expected future economic prospects.

Housing data will lag behind events and the sequester is only weeks old.  But, as of March 2013 there impact from the sequester is currently viewed as being mild, short-lived, or both.  In short, the economic consequences from the sequester (thus far) has been not so much.  Consider the following local trends.  As the Washington Post’s Katy Orton pointed out the other day, “Median sale price of homes in Washington, D.C., hits record high”.

March median sales price by jurisdiction

 

2013

2012

YoY

DC metro

$372,500

$345,00

8%

Falls Church

$631,000

$458,300

37.7%

Arlington

$515,000

$509,450

1.1%

Alexandria

$487,500

$391,950

24.4%

District

$460,000

$405,000

13.6%

Fairfax County

$430,000

$398,500

7.9%

Fairfax City

$392,500

$443,750

-11.5%

Montgomery County

$375,000

$345,000

8.7%

Pr. George’s County

$176,500

$158,000

11.7%

Source: RealEstate Business Intelligence

Additionally, properties coming onto the market are staying on the market for a short period of time. The median days on market fell to 15 days last month, 26 days fewer than March 2012. It is the shortest days on market for any month since September 2005.

This theme was also discussed by John Ranson over at TownHall: What Sequester? Unemployment Claims for Federal Workers Drop as D.C. Housing Values Reach “Highest Point in History”

As stated above, it is still early.  Consequently, we will periodically review the local Washington D.C. housing trends to track the economic consequences of the sequester.


[1] Haynes, V. Dion (2011) “Federal austerity could hit the region’s economy hard”  Washington Post, January 3; www.washingtonpost.com/wp-dyn/content/article/2010/12/30/AR2010123003296.html.

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