As the clock ticks on the latest federal budget impasse, it appears that austerity measures may take effect as of March 1, unless Congress and The White House can agree on an alternative. If unabated, the sequester would cause 1.2 trillion dollars in automatic spending cuts. We’re going to take a brief look at what the sequester could mean for Metro DC real estate.
Possible Impact of Sequester on D.C. Area Employment
Half of the automatic spending cuts impact the Department of Defense, and the balance of the cuts affect domestic spending. To simplify a rather broad and complex economic picture, the concerns for our area involve the prospects of civilian employee layoffs and government employee furloughs.
According to a March 2012 article in Forbes, federal spending accounts for one-third of our region’s economy. Over the past 10 years, 50,000 government-related jobs have been created in the DC Metro area.
Some economists have speculated that the sequester could impact over 700,000 jobs nationally, potentially rising unemployment by one-quarter of one percent. A fair number of the cuts would be felt in our area. They would not occur overnight, however, and there is much speculation about how and where the cuts would be implemented.
Sequester’s Potential Impact to Chevy Chase and Bethesda Real Estate
TransUnion reports that Maryland and the District of Columbia hold some of the highest rates of mortgage delinquencies in the nation. As of the third quarter of 2012, Maryland mortgage delinquencies stood at 6.86% of all active mortgages. DC’s mortgage delinquencies stood at 6.10%. Nationally, mortgage delinquency rates stood at 5.41% for the same period.
Meanwhile, the DC Metro economy saw job growth of about 2.8% during much of 2012, suggesting that the mortgage delinquency rate may be a matter of debt load rather than lack of income. According to TransUnion, Maryland and the District of Columbia were among the highest mortgage debt states, sharing company with Hawaii and California.
If the sequester is allowed to occur, any related income losses in the DC Metro Area could cause an increased risk of additional mortgage defaults. In turn, this could cause distressed homes to play a larger role in our housing market. This scenario could soften home prices if inventory exceeds absorption rates.
Your Real Estate Expert for All Market Conditions
Please remember that this information is offered as a point of discussion only. We have been at the brink of the “Fiscal Cliff” and other budget stalemates before; but the sky did not fall, and our real estate market held momentum. Homes are bought and sold throughout all market conditions. Having an experienced real estate professional on your side makes all the difference!
When you have questions about buying or selling a home in Chevy Chase, Bethesda, or the DC Metro area, contact me for the reliable market guidance you can trust!
Melinda Estridge
The Estridge Group-Long & Foster Real Estate, Inc.
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