The Washington Area Economy and Outlook Stephen S. Fuller, PhD Dwight Schar Faculty Chair and University Professor Director, Center for Regional Analysis.

The Washington Area Economy and Outlook

Stephen S. Fuller, PhDDwight Schar Faculty Chair and University Professor

Director, Center for Regional AnalysisSchool of Public Policy, George Mason University

March 30, 2006

Dulles Area Transportation AssociationDulles Corridor Rail Association

The Washington Economy:Current Performance

Annual Job Change1991 – 2005

Washington Metro

-53

-8

36 3825

4461

7592

117

41

10

5671 65

-80-60-40-20

020406080

100120140

Source: BLS, CRA

Annual Job ChangeWashington MSA

-20

0

20

40

60

80

100

120

140THOUSANDS

Jan =+66,900

Annual Change of Employed ResidentsWashington MSA

-20

0

20

40

60

80

100

120

140THOUSANDS

Dec =+98,300

Source: BLS Household Survey

Metro Comparisons Job Change 1999-2005

15 Largest Metro Areas

-120

-70-68

-53

2258

58

70

73118

155

157187

221

253369

-200 -100 0 100 200 300 400

Detroit

Chicago

SF-Oakland

Boston

Seattle

Atlanta

Minneapolis

Dallas

Philadelphia

Houston

Los Angeles

New York

Phoenix

Miami

Thousands

WASHINGTON

Northern Virginia

15 Largest Job MarketsJob Change in 2005

-20

0

20

40

60

80

100

120

New York

Los AngelesChicago

PhiladelphiaDallasBostonM

iami

HoustonAtlantaDetroitSF-OaklandM

inneapolisPhoenixSeattle

Thousands

Washington +64,700

15 Largest Job MarketsRanked by Unemployment Rate

January 2006

0123456789

Washington

Miam

iM

inneapolis - SP

SF - OaklandPhoenixSeattleBostonPhiladelphiaLos AngelesAtlantaDallas - FWNew YorkHoustonChicagoDetroit

%

U.S.5.1%

3.1

Data not seasonally adjusted

2004 - 2005 Job Change By Sector

Washington MSA (000s)

-0.7

2.7-0.9

-6.1

3.6

1.19.5

8.3

5.8

7.66.6

0.3

26.9

-10 0 10 20 30 40

Transp & Util

Wlse Trade

Mfg

Information

Financial

Other Svc

Const

Leisure & Hosp

Retail Trade

St & Loc Gov

Educ & Hlth Svc

Federal

Prof & Bus Svc

Total = 64,700(Ranked by Size of Sector)

20%

25%

30%

35%

40%

45%

50%

1970 1975 1980 1985 1990 1995 2000 2005

Share of Washington Area Economy

1970-2005

No. Virginia

Sub MD

District

% o

f G

RP

Year

What is DifferentAbout The Washington

Area Economy?

0

20

40

60

80

100

120

19831985

19871989

19911993

19951997

19992001

20032005

Total Federal SpendingWashington Metro Area

$ Billions2005 =$117.2 B, + 8.3%

Federal Spending by Type1983 - 2004

0

10

20

30

40

50

60

Procu

rem

ent

Wages & Salaries

All Other

Billions Current $2005 = $59.2 B

0

1

2

3

4

5

6

7

8

9

19801982

19841986

19881990

19921994

19961998

20002002

2004

Annual Change in Federal Procurement Spending

Washington Metro Area$ Billions

2005 =+ $6.6 B

6.1

8.0

Federal Spending in 2004:U.S. and Washington MSA

($ in billions)

AmountAmount% Chg % Chg

03-0403-04AmountAmount

% Chg % Chg

03-0403-04

U.S.U.S. $2,162.2$2,162.2 4.9%4.9% $339.7$339.7 3.8%3.8%

Washington Washington MetroMetro 108.2108.2 11.4%11.4% 52.652.6 19.0%19.0%

% Of U.S. in 04% Of U.S. in 04 5.0%5.0% 15.5%15.5%

TOTAL PROCUREMENT

68.6% of the 2003-2004 increase in Federal Procurement nationally was in the Washington MSA

Source: US Census, GMU Center for Regional Analysis

The Washington AreaHousing Market

Housing Price IndexWashington PMSA

4th Quarter Each Year

0

50

100

150

200

250

300

19771980

19831986

19891992

19951998

20012004

Source: Federal Office of Housing Enterprise Oversight, GMU Center for Regional Analysis

1995 Q1=100

1990-1997 =+ 3.7 %

1997-2005 = +153 %

Housing Price IndexAnnual % Change

Washington PMSA4th Quarter Each Year

-5

0

5

10

15

20

25

19801985

19901995

20002005

Source: Federal Office of Housing Enterprise Oversight, GMU Center for Regional Analysis

1995 Q1=100

28-Yr Average (compound rate) = 7.0%

Metro Comparisons Annual Percent Change in House Prices

2004 –2005 (3rd Quarter)

3.0

4.14.5

5.4

7.27.4

8.7

11.4

13.313.5

14.9

18.018.3

20.6

25.334.4

0 10 20 30 40

Detroit

Dallas

Houston

Atlanta

Boston

Minneapolis

Chicago

San Diego

N Y

Philly

Seattle

L A

SF-Oakland

Miami

Phoenix

Percent

WASHINGTON

Source: Office of Federal Housing Enterprise Oversight, GMU Center for Regional Analysis

ConformingMortgages Only

Metro Comparisons Ratio of Median Value of New Housing to

Median Family Income – Q3 2005

2.0

2.52.7

2.7

3.13.3

3.4

4.2

4.34.6

4.7

5.06.7

7.6

7.88.8

0 2 4 6 8 10

Detroit

Atlanta

Houston

Dallas

Minneapolis

Philly

Chicago

Phoenix

Seattle

Miami

Boston

New York

SF-Oakland

San Diego

L A

WASHINGTON

Source: NAHB/Wells Fargo, GMU Center for Regional Analysis

In 2000 Washingtonwas 2.8

Average Sales PriceAll Housing TypesWashington Metro

207,000 219,000242,000

275,000313,000

373,000

454,000

0

100,000

200,000

300,000

400,000

500,000

1999 2000 2001 2002 2003 2004 2005Source: MRIS, GMU Center for Regional Analysis

$+ 119%Since 1999

+5.8% +10.5% +13.6% +13.8% +20.1% +21.7%

Average Sales Price Percent ChangeMonth-over-the-year, All types

2004-2005-2006Washington MSA

22.2

28.125.5 25.0

22.919.8

23.425.0 23.9

20.3

16.618.1

12.49.1

0

5

10

15

20

25

30%

Average Days on the Market ChangeMonth-over-the-year, All Types

2004-2005-2006Washington MSA

-4-7

-5-1

-3

0 0 13

6 7 7

15

26

-10

-5

0

5

10

15

20

25

30

37 21 59

Total Unit Sales ChangeMonth-over-the-year, All Types

2004-2005-2006Washington MSA

8.510.9

5.31.4

7.5

-1.1

-6.5

-1.6-5.6

-15.9

-22.6-20.5

-23.1

-18.3-25

-20

-15

-10

-5

0

5

10

15%

MSA Total Housing Unit Permits1980 - 2005

0

10

20

30

40

50

60Average =

31,400/Year

Year

ProjectedDemand2005-2007

Dulles Corridor - FairfaxEmployment & Household

Forecast Growth, 2005 - 2030

4558

155

0

20

40

60

80

100

120

140

160

180

Employment Households HH Elsewhere

THOUSANDS

Source: COG Round 7, CRA

Dulles Corridor - Loudoun Employment & Household

Forecast Growth, 2005 - 2030

41

24

98

0

20

40

60

80

100

120

Employment Households HH Elsewhere

THOUSANDS

Source: COG Round 7, CRA

Dulles Corridor - Fairfax& Loudoun

Employment & Household Forecast Growth, 2005 - 2030

86 82

253

0

50

100

150

200

250

300

Employment Households HH Elsewhere

THOUSANDS

Source: COG Round 7, CRA

Looking Ahead

Economic Outlook (GRP) – 2010Washington Area and Sub-state Portions

(Annual % Change)

-1

0

1

2

3

4

5

6

7%

DCSM

MSANV

Employment Change bySub-state Region (000s)

10-Yr10-Yr

Avg.(1)Avg.(1)2005 2006 2007 2008 2009

D.C.D.C. 3.93.9 7.57.5 8.08.0 7.57.5 6.06.0 4.04.0

S. MDS. MD 16.016.0 13.513.5 17.017.0 15.015.0 13.513.5 12.012.0

No. VANo. VA 34.9 43.3 41.5 38.5 35.0 31.5

REGION 54.854.8 64.364.3 65.565.5 59.559.5 53.553.5 47.547.5

2.1%2.1% 2.3%2.3% 2.2%2.2% 2.0%2.0% 1.8%1.8% 1.5%1.5%

(1) 1995-2005

Housing Outlook for 2006 and 2007

Market will continue to cool – Market will continue to cool – returning to “more Normal’: returning to “more Normal’:

• 2006 Prices will increase in the 2006 Prices will increase in the range of 6% – 12% compared with range of 6% – 12% compared with 20+% in 200520+% in 2005

• Sales volume will drop back to Sales volume will drop back to 2002-2003 levels (98-100,000 2002-2003 levels (98-100,000 transactions)transactions)

• Days on Market rising to 45-55 Days on Market rising to 45-55 average average

Local Threatsto the Forecast

Local Threats to the Forecast

• Global / National Forces Global / National Forces • Labor Force Availability, Quality and CostLabor Force Availability, Quality and Cost• Transportation Cost / CongestionTransportation Cost / Congestion• Federal Spending and Procurement PolicyFederal Spending and Procurement Policy• BRACBRAC• Housing Affordability and SupplyHousing Affordability and Supply

www.cra-gmu.org