By Elizabeth Razzi and Neil Irwin
Washington Post Staff Writers
Monday, February 23, 2009
If the 21 local business and economic experts participating in the Post's Local Economy Challenge 2009 are to be believed, the Washington area is in for a year that's worse than last by almost every measure.
The lone indicator that will perform better than 2008 is the stock price of Washington-based companies, according to the median of all responses submitted by Challenge participants. Collectively, they forecast that the Washington Post-Bloomberg Regional Index will rise 4 percent this year, following last year's 41 percent decline.
But if you look more closely at their answers, you see a portrait of uncertainty, with wild swings in their predictions. Job growth for the metro area could be as great at 28,500, according to one forecaster, or the region could lose 46,000 jobs, if you believe another.
The median price of a single-family house could fall 20 percent, to $265,000 -- or rise 20 percent, to $400,000 -- compared to last year's third-quarter median single-family house price, which was $332,700. (A change in the median house price does not directly translate to the price change on any particular address. If there are more sales of inexpensive houses, including foreclosures, than of expensive houses, that will reduce the median.)
The value of local stocks, as measured by the Post-Bloomberg Regional Index, could gain 22 percent this year, according to one estimate, or follow 2008's shocking 41 percent decline with another tumble of 20 percent.
Paul Villella, chief executive of HireStrategy, an executive-recruiting firm headquartered in Reston, was the most accurate participant in last year's Challenge. This year, he's not so sure.
"I have to be honest, my confidence is shaken. In the past I've always had a better sense, a better visibility of what was coming in six to 12 months. The visibility I have now is what's right in front of me. Because of that, I worry we're all so focused on the short term, all so focused on just trying to get through, that forecasting the future is difficult."
Furthermore, he says, he thinks many of the premises people have used to base their business decisions have crumbled.
"Personally and professionally over the last 20 years I have built my personal and professional life on the basis of leverage. Credit is good. That's all out the window right now, and it's not clear how [the premise underlying business decisions] is going to reshape itself."
His predictions for 2009 rank in the middle of the pack. He expects unemployment to rise in the District, Virginia and Maryland. And though the economy will still add 11,000 jobs, that's less than half of the job growth registered in 2008. He expects house prices will decline another 5.3 percent, to $315,000.
Office vacancy will rise from the current 11.6 percent to 12.75 percent, Villella predicts. That's very close to the median prediction, 12.8 percent vacancy, forecast by all Challenge participants.
Villella says local stock prices may rise 18 percent. "I'm a perennial bull on stocks," he said.
Stephen Joel Trachtenberg, president emeritus of George Washington University and a higher-education recruiting consultant for Korn/Ferry International, is the overall most optimistic forecaster for 2009. However, in an interview, he said he saw himself still "modestly pessimistic."
He is the most bullish on jobs, forecasting no change in the unemployment rate for Maryland and Virginia, and only a slight increase, from 8 percent to 8.6 percent, for the District. He thinks the region will add 28,500 jobs, which would be 5,300 more than last year.
Trachtenberg forecasts nearly a 16 percent increase in the median house price, to $385,000. Office vacancies will rise a bit, to 12 percent. But he expects local stock prices to decline another 15 percent.
"I think we've still got a way to go before the [government] incentives being put into play can get a grip on things," he said.
"We didn't get where we are overnight, and I don't think we're going to get out of it overnight. But ultimately, I have faith in the economic soundness of the country," Trachtenberg said.
The overall most-pessimistic forecaster is Post columnist Steven Pearlstein. He expects unemployment to rise in all three jurisdictions and says the region will lose 5,000 jobs this year. House prices will continue their decline, dropping another 8.3 percent to a median of $305,000. And local stock prices will fall another 10 percent.
"This will be the year we test the proposition that Washington is recession-proof," Pearlstein said. He added that the statistics don't reflect the job losses of undocumented immigrants who have left the area.
"Their departure has been a significant drag on the economy," Pearlstein said.