Five Factors will effect the market. Real Estate is a long term investment and all real estate markets are set within a larger social and economic environments. There are 5 major factors in the decade ahead which will affect the way Northern Virginia’s real estate market unfolds. A summary of observations made by David Versel, a long time research economist with the George Mason University’s Center for Regional Analysis, are distilled from a multi-year study of the metropolitan area and are presented below.
1. The 2016 Election
Between 2010 and 2014 the metro area lost more than 25,000 federal jobs and $11 Billion in federal contracting activity. The 2016 election was the most transformative since 1968 and could produce a new political order that will have a strong influence on the shape and size of federal employment and contracting. Since the federal government is Northern Virginia’s largest employer, it could dramatically alter the area’s economy and the housing market.
2. Regional Cooperation on Economic Development
In recent decades, most of the regions competing against Washington, such as Denver, Dallas, Atlanta and Charlotte, have overcome historic parochial interests to form regional partnerships. The Washington area’s dependence on the federal government has kept it locked in its historic pattern of fierce competition for jobs and investments among states, counties and cities. If the Washington region hopes to resume strong economic growth, a greater level of cooperation will be needed, not only among the region’s state and local governments but also between governments and the private sector.
3. Investment (Or Lack Thereof) in Transportation
Residential growth in Northern Virginia was shaped by the mantra of “drive ’til you qualify.” The search for less expensive single-family housing pushed the suburban frontier further and further west. With the region’s major transportation network at capacity, its outward expansion has likely peaked. This is increasing the pressure for infill development around existing road and transit infrastructure, which is further straining an overburdened system.
Future growth prospects in Northern Virginia will thus depend more than ever on the region’s ability to improve its roads, bridges, trains and buses. The inability of public and private leaders to come together around this issue will likely reduce the region’s appeal to businesses and residents, lowering demand for both residential and commercial real estate.
4. What Will Baby Boomers Do?
The oldest Baby Boomers will be turning 70 in 2016. Although many Boomers are past the traditional retirement age of 65, they still own half of the single-family homes in the region. Until large numbers of Boomers start to sell their houses, much of the area’s potential inventory of homes remains unavailable. This factor plays a strong role in limiting the supply of units that are affordable for most entry level homebuyers.
Because Boomers continue to dominate the existing housing stock in Northern Virginia, they will play an important role in determining what happens in the regional housing market during the next decade If most Boomers choose to age in place, the supply of single-family housing will continue to be limited, forcing most young families to rent, purchase smaller homes, or move further away from Washington. Alternatively, if more Boomers choose to trade down or move away, it will increase opportunities for first-time homebuyers in the area.
5. Local Land Use and Development Policies
Even if the stars align for Northern Virginia’s economy, and demand for new development comes roaring back, the local market may still be hampered by resistance to higher density development. Local politics are often dominated by the interests of current homeowners, many of whom are opposed to infill or redevelopment.
There is reason for optimism, however, as major revitalization efforts are occurring regionally. Areas such as the Rosslyn-Ballston corridor, the Alexandria waterfront, Potomac Yard, Tysons, and the Mosaic District represent some of the most innovative efforts in the U.S.
Still, these developments have largely been limited to areas that had been established for intensive commercial uses, and resistance to higher densities persists in most of the region’s residential neighborhoods. This factor, perhaps more than anything else, is likely to limit the scale of development that can occur in Northern Virginia during the next decade.
This is probably how things will take place over the next ten years. Your home is often your most valuable asset. Thinking about when to move, buy or sell, to enhance and protect this asset will be influenced by these factors. When thinking about real estate, seeking out a Realtor who has a long view of geographic location development and the market will help you make good decisions protecting your investment.