Cutbacks Mount in Real Estate Industry
Monday, August 27, 2007
Washington's real estate industry, already pinched by a slowdown in residential construction, is bracing for further retrenchment after last week's meltdown in the mortgage market.
In recent months, companies have begun cutting back in big ways and small. A Prince George's County builder laid off four workers and turned off the spigot for new projects. A four-person title company in Arlington is cutting its staff by one after watching business fall. A Fredericksburg drywaller let his 10 employees go and is struggling to keep the business afloat.
Individually the cuts are not large, but collectively they are beginning to add up across the region. Economists estimate that the real estate industry accounts for 12 to 15 percent of the jobs in the Washington area.
The sector has played a large role in the region's economic growth over the past five years, and economists are watching recent events for signs of whether the slowdown will begin to drag down consumer spending and other parts of the local economy.
Stephen S. Fuller, a professor of public policy at George Mason University and head of its Center for Regional Analysis, said in addition to the job losses, local governments already are seeing housing-related tax revenue slow. Virginia Gov. Timothy M. Kaine (D) largely blamed a housing slump in Northern Virginia for a $234 million budget shortfall.
But Fuller doubts the slowdown will affect the local economy as sharply as the telecommunications industry bust did in 2001. Construction jobs pay less than high-tech and government contracting jobs do, he said, and other industries should be able to absorb many of the low-wage service and retail jobs related to construction and housing.
"Doesn't mean it won't hurt, but much of the pain is being masked by strength elsewhere," Fuller said. "Slower federal procurement spending has a bigger impact than the slowdown in real estate."
Some of the recent job losses illustrate the reach of the slowdown.
At Key Title's Arlington office, the number of closing documents it processes each month has dropped from 100 three years ago to 35, according to Jay Eskovitz, a settlement agent. To cope with the loss of business, one of the four positions at the office will be converted to part time.
Such decisions are also being made at businesses connected to the title company.
The title searching company that Eskovitz uses to research whether a property has liens against it went from two employees to one. The title surveyor, who draws dimensions of the property and home for settlement documents, has pulled out of residential property closings.
"It doesn't just stop with us but affects so many more people," Eskovitz said.