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Economy improving but threats still lurk
The good news: The financial markets are improving, the rise in unemployment has slowed, and home sales nationwide have picked up. The bad news: Inflation remains a threat, and the commercial real estate market is the next shoe to drop.
Economists and analysts came to those conclusions Oct. 30 at the Dulles Area Association of Realtors' Economic Summit in Ashburn.
National Association of Realtors economist Greg Stratton cited a 2,500-point improvement on the Dow Jones Industrial Average from March to October this year as an indicator that the financial sector is improving.
He said nationally, the economy has grown in part due to increased consumer spending and investment. In 2009, the economy contracted 6 percent in the first quarter, but only 2 percent in the second quarter. Stratton said the third quarter showed a 3.5 percent growth, thanks to federal stimulus packages such as the Cash for Clunkers program and the $8,000 first-time home buyers tax credit.
He projects the fourth quarter to increase 2 percent – at a lesser rate than the third quarter because the stimulus packages will have expired.
The unemployment rate in the Washington, D.C., metro area is on the decline, he said. Currently, the unemployment rate is at 5.2 percent, well below the national average of 9.8 percent in September, the most current numbers available. Nationally, the rise in the unemployment rate has decelerated. At its height, job losses were in the 700,000 range per month. While job losses continue, it is at a slower rate, with 263,000 jobs lost in September.
In the real estate market, the first-time home-buyer tax credit fueled a slight recovery nationwide. Stratton said the first quarter of 2009 showed dismal existing-home sales, but the second quarter showed improvement. Existing-home sale prices also have risen this year. At its low in February, the average sale price was $336,000. That number rose to $370,000 in September.
However, concerns over the financing of the commercial real estate market, the federal government deficit and the possibility of inflation remain the top economic issues in our area and nationwide, he said.
Unlike residential mortgage loans, commercial property loans reset every five to 10 years. Normally, it would be relatively easy to refinance commercial properties, but given the down economy, banks are hesitant to provide long-term loans. This is forcing property owners into delinquency.
Fueling the fire is the federal government deficit. It will total $1.6 trillion in 2009, which could overstimulate demand and precipitate inflation, Stratton said.
Contact the writer at hhager@timespapers.com
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