Good news! About a week ago, the Case-Shiller housing index—the most studied of its kind—released numbers for May, and they were pretty good. Last time, I had promised to crunch these numbers; but before I do, I’d like to take some time to explain why these numbers matter less than you might think.
The Case-Shiller index is surely what all the wonks and bloggers will point you toward to help you understand the health of the housing market—the aggregated national housing market. But ours is a highly unique region. The information you need to truly understand its housing market can’t really be found in that index.
As I’ve mentioned before, the housing market is intrinsically connected to ‘the economy’ writ large—that’s why it’s often used as a general indicator, and is said to “lead us out of recessions.” But the reverse is also true: to understand our housing market, you have to understand our local economy!
So let’s talk about Northern Virginia.
To begin with, some scale. Fairfax County has over a million residents; that is, we are twice as large as Washington D.C., and the largest portion of the ‘metro’ area. Our economy, all alone, is 85 billion dollars—larger than, for instance, all of Morrocco’s!
Because of our proximity to the Pentagon, we are the only place that could be called home of the ‘Military Industrial Complex’—Northrop Grumman just moved here to join other big names like Booz-Allen and General Dynamics—as well as the CIA. This is why (helping to keep our unemployment rate at a stunning 4 percent), so much stimulus funding came to Northern Virginia.
Obviously, our location helps explain all this, but it doesn’t hurt that Virginia is consistently ranked as one of the best states for doing business. The list of companies headquartered here includes Capitol One, Rosetta Stone, Verizon, Volkswagen, Freddie Mac... the list goes on. Seven are Fortune 500. In fact, Fairfax County alone has more high-tech workers than Silicon Valley.
And all of this contributes to our extraordinary standard of living. We were the first US county to exceed a median income of $100,000, and are still the richest in the nation, besides our neighbor, Loudoun County. This helps to explain how we enjoy the highest life expectancy in the nation, and have the highest level of education attainment—56 percent have at least a bachelor’s.
These are startling statistics, especially for a county as populous and diverse as ours. (Thirty percent of us were born outside of the USA. As David Leonhardt recently noted, this has the “delicious side effect” of great ethnic cuisine!) We are the second richest county (Loudoun is number one) in the richest country in the world.
So, the new Case-Shiller is reporting 2.2 percent annualized growth in national housing prices. This growth is solid, but we won't reach pre-bubble prices anytime soon. What's important, though, is that the market seems to have "bottomed out," and that's good for the national economy.
Case-Shiller is broken down to metropolitan ares; among these, Washington D.C shines as maybe the healthiest besides Denver and Phoenix. D.C. tops economic confidence among US metropolitan areas: unemployment in this area never rose above 5 percent, and the average price of a home is $418,000. Compare that to the national statistics of 8 percent and $181,500, respectively. A house’s price is set by supply and demand like a normal commodity, and demand for housing is, for good reason, super high around here.
As long as Northern Virginia remains something of a boomtown—that is, until all those companies move headquarters to Maryland, or the Capitol relocates—our housing and employment markets will thrive. The expansion of the Metro, and subsequent revamping of Tyson’s Corner and other future Metro stops will only bolster our capacity for more and smarter growth in the future.
This is why we had one of the shallowest recessions and strongest recoveries; home prices in Fairfax are 9 percent higher than their post-bubble low. Housing prices can be fickle, but believe me, our market about as healthy and stabile as they come.
Thank you Samuel Moyer for contributing.
Realtor RE/MAX Allegiance