Bacon's Rebellion

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NoVa Job Creation Driving Real Estate Prices?

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James A. Bacon
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Never let it be said that I’m unwilling to ignore evidence that contradicts my pet theories, in this case my argument that speculation is driving much of the increase in Northern Virginia property values. Today’s Clarke Times-Courier quotes George Mason University regional economist Stephen Fuller to the effect that super-heated job creation in Northern Virginia accounts for the spectacular rise in real estate prices. Sayeth the Times-Courier:

Job growth is running so much stronger than last year,” Fuller said. “We are so strong it’s almost embarrassing.” The [Washington] region added a whopping 287,000 new jobs between 1999 and 2004, according to the GMU Trends Report. And that trend is continuing. Between April 2004 and April 2005, an additional 84,400 jobs were created–53,900 of them in Northern Virginia.

“There were seven times as many new jobs created in Northern Virginia as suburban Maryland,” Fuller said. “We are fat,” he added. “We are better than any market in the United States. “In fact, the Northern Virginia economy has outperformed every other metropolitan region in the country over the past five to six years, the report says. And it seems it is just going to get better.”

Last year was the best since 2000,” Fuller said, “and this year is going to be better than last year.”

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  1. Paul Avatar
    Paul

    Yup, Yup. That’s what I’ve always believed. You have too many jobs and not enough housing options. Supply and demand. Prices go up when supply can’t meet demand.

    When I say “housing options” I don’t mean to say that there aren’t enough houses. I mean that people can’t live where they want to live. They’re pinched.

    Of course, interest rates factor into this equation as well.

    Speculation? I don’t see that as a CAUSE of the bubble…more of a SIGN that the bubble exists. And most of the spectulation that I’ve seen is in new condos. People are buying these things early and selling them before they’re even completely built (the price increases that quickly). I’ve heard stories of condos passing hands 3 times before they were even inhabited.

  2. Will Vehrs Avatar
    Will Vehrs

    Both supply & demand and speculation can be the answer.

    In my job advising entrepreneurs, I am getting calls daily from people starting “real estate” businesses. It is obvious after a few questions that are just planning to “flip” properties.

    There’s high demand for move-in quality housing, so prices go up. There’s high demand for fixer-uppers from the “flippers,” so those prices are going up and fueling the “move-in” quality price rise once they are improved.

    This is not just based on current demand for housing; it’s based on a belief that the demand will keep rising. I wonder about that; maybe when the Federal budget cuts inevitably arrive, we’ll find out that we can live without thousands of government contractors providing homeland security from office parks in Fair Lakes and elsewhere.

  3. Anonymous Avatar
    Anonymous

    This is really bad news. People will make hundreds of thousands on their homes but they will also have to pay more in taxes. Why doesn’t some statewide candidate propose a way to stop this wealth creation?

  4. Anonymous Avatar
    Anonymous

    1137Anon: Well, we made a start. the GOP primary voters have clearly stated that they disfavor tax cutters in jurisdictions where personal wealth is increasing. I’m not sure what that message is all about, but the point is that elected officials who believe in and act on Reaganomics are not welcome around here. What we prefer is a more general kvetching about taxes, coupled with a general lack of discipline on spending in the General Assembly.

  5. James Atticus Bowden Avatar
    James Atticus Bowden

    Anon:The RINOs may have defended their vote to raise taxes last year, but did any of them campaign to raise more taxes? All 6 of the statewide candidates ran as tax cutters. I disagree that the primary voters stated they don’t want tax cuts.

  6. Anonymous Avatar
    Anonymous

    Mr. Bowden: I was thinking of Connaughton more than anyone else.

  7. E M Risse Avatar
    E M Risse

    Back to Jim’s original post:

    No reason to be surprised at Fullers numbers. In order to reach the job totals that he has predictied before (and which Koelemay cited in “Competing For The Creative Class,” 25 April 2005 db4.dev.baconsrebellion.com) this will have to happen every year to 2020. There is plenty of room to house these new workers if we create functinal settlement patterns and Balanced Communties as we demonstrate in “Antidotes,” 9 May 2005 db4.dev.baconsrebellion.com

    Paul is right, the problem is that citizens cannot find places to live where they would like so they are settleing for overprices places in the wrong locations. That is a perscription for a bubble.

    The failure of municipalities to provide for the creation of housing to match the jobs they are accomodating is, along with the items noted by other posts in this string causing the price to rise.

    The question is how long before the enterprises that are living off the Federal government’s drunken sailor spending find they cannot pay enough to attract the talent they need here and open new offices in Nashville and Lincoln with a sleleton staff here?

    If the Silicon Valley experience is a guide we have a ways to go, but not far.

    EMR

  8. Ray Hyde Avatar
    Ray Hyde

    From today’s WaPo “”My point of view is, hell no, I won’t go,” said Thomas F. Hafer, senior program manager of Science and Technology Associates Inc., whose work defending troops from rocket-propelled grenades is in use in Iraq. “I’ll flip hamburgers in Arlington before I have to commute or relocate over to Bethesda.””

    So much for more, bettter, jobs in urban areas.

    From EMR’s post:
    “The failure of municipalities to provide for the creation of housing to match the jobs they are accomodating is, along with the items noted by other posts in this string causing the price to rise.

    The question is how long before the enterprises that are living off the Federal government’s drunken sailor spending find they cannot pay enough to attract the talent they need here and open new offices in Nashville and Lincoln with a sleleton staff here?”

    As it stands now, an inner area contractor can’t afford to pay me enough to live there. The housing to match the jobs at this level simply cannot be housing with a fire escape for a yard. The only answer I can see is to use more space, probably in Lincoln and Nashville.

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