D.C. Region Job Market Has Look Of a Boom

In the year ended in March, the median price for Washington area homes rose 19 percent, according to the National Association of Realtors, a rise partly attributable to rock-bottom mortgage rates. That led to a boom in residential construction; local governments issued permits for 38,696 new units of housing in the Washington area in 2003, about the same as in the boom year of 2000 and well above the levels of the late 1990s.

"Housing is clearly the biggest piece of the employment gains" in the construction industry, said Kenneth D. Simonson, chief economist of the Associated General Contractors, a construction trade group in Alexandria.

That is why it has been hard for Michael Schlegel to find enough new workers. Schlegel, the president of Greenbelt-based Bozzuto Construction., increased his crew of project managers and superintendents to 70 people from 45 a year ago, and plans to keep growing at that pace. "It used to be I'd get maybe one request a year to build a condo project," he said. "Now I get practically a call a week."

Mechanical, plumbing and electrical contractors are stretched thin, Schlegel said. "We're busier than we were in the late 1990s."

Less clear is how long the good times will last. A stronger local economy supports the housing market. But with the national economy growing robustly and inflation starting to emerge, economists say the Fed will probably begin raising interest rates, perhaps as early as next month. Already the rate on a 30-year, fixed-rate mortgage is up from 5.38 percent in March to 6.34 percent last week, which would increase the monthly payment on a $300,000 mortgage by about $184.

"I do worry about the direction of interest rates," Schlegel said. "I don't know what effect it will have when they start rising, but we are concerned about the housing market."

Construction is not the only industry to benefit from low interest rates. Retailers, especially in interest-rate-sensitive industries, are hiring in large numbers. There were 1,200 more jobs in building-supply stores in March than a year earlier, for example, a 7.4 percent jump.

"The housing market is doing phenomenally well, and that's what drives our demand for additional people," said Jeff Kmiec, a vice president of 84 Lumber Co., which has 18 building-supply stores in the Washington suburbs. On Aug. 1, the company plans to open a new store in Manassas, which will employ 20 people and which it anticipates will have the highest sales of any store in the nationwide chain within a year.

Kmiec said he is confident that if mortgage rates increase, it would be sufficiently gradual as to not disrupt the remarkable pace of housing construction in Washington.

Other retailers benefit less directly from low interest rates. Low mortgage rates and rising home prices have created a mortgage refinancing boom that Economy.com estimates saved Washington area consumers $5.2 billion in 2002 and a similar amount in 2003.