- The Washington Times - Wednesday, January 10, 2007

A reader wrote to me last week, challenging some of my recent columns. I have written several times about the 2007 Washington real estate market, quoting sources who believe it will be a good year.

It surely won’t be anything like the incredible seller’s market of 2000-2005, but there are indications that this could be a healthy year for real estate.

This reader disagrees: “What things are pointing to a decent or strong 2007? What has changed that makes 2007 look better? Please report the facts and not a Realtor agenda — do you profit for writing this inaccurate column?”

Ouch.

Let’s look at some data from the George Mason University Center for Regional Analysis (www.cra-gmu.org). These folks have studied the region’s economy for years. They are good at it. And they are the ones who predict that sales volume will fall back to the level of 1998-1999, yet home prices will rise 2 to 5 percent this year.

What gives them the confidence to make such a prediction, considering how prices have fallen in recent months?

Well, they know this economy, that’s what. They know that employment is one of the most significant factors in any regional economy, and this region leads the nation in that category.

Take a look at the chart at left showing how many jobs have been added to the nation’s 15 largest metropolitan areas.

Who’s at the top? The Washington area. Those 359,000 new jobs from 2000-2005 had a lot to do with the hot real estate market during those years.

Then, take a look at the unemployment rates for those 15 markets in October 2006. Which metropolitan area has the lowest unemployment? The Washington area.

So, not only are we adding tons of jobs to our local economy, we aren’t attracting workers fast enough to fill those jobs.

Finally, I should point out that the kind of new jobs this region is generating are largely in the area of professional and business services.

Of the 65,100 new jobs created between October 2005 and October 2006, 30,000 were in this sector, where workers are well-paid. Many of those workers can afford this area’s expensive homes.

Taken together, all these bits of data tell me that we have one of the nation’s healthiest local economies. Although it will be quite a while before we see the kind of seller’s market that ended in 2005, the strength of this region’s economy means that we are likely to see an active, profitable real estate market in 2007 and beyond.

Contact Chris Sicks by e-mail ([email protected]).

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