Region's Economic Performance Ranks High, but Housing Sector Remains a Drag
Wednesday, June 17, 2009
The Washington area ranks among the strongest regions in the nation with its rising wages and gross metropolitan product, along with relatively low unemployment. But a study to be released today suggests that economic recovery here could be slowed by the dramatic drop in housing values and a high number of bank-owned properties.
In a report by the Brookings Institution, the Washington area ranked near the top among 100 metropolitan regions in most economic indicators during the first quarter. The region had the 10th-lowest rate of employment decline and the 11th-lowest unemployment rate, and it recorded the third-smallest drop in gross metropolitan product.
"The question is whether that [positive] trend will continue and pull up jobs with it or whether the problem in the housing sector will stifle that growth trend and hold the region back in some way," said Alan Berube, research director of the Brookings's Metropolitan Policy Program, who authored the "MetroMonitor" report. "The jury is still out on whether the region is coming out of the recession or in a holding pattern."
All was not rosy in the Brookings report. Washington area housing prices dropped 8.8 percent from the first quarter of 2008 to the first quarter of this year, worse than the national average decline of 6.3 percent. That put the area near the bottom, at No. 77, when compared with other regions. The area also ranked poorly in the number of properties seized by banks, at number 89, with 6.49 of every 1,000 homes in foreclosure, compared with the U.S. average of 3.06.
With a quick run-up in prices, authors of the study say, homeowners in the region fell into the same subprime mortgage trap as their counterparts across the country. When the housing bubble burst, many homeowners were left with mortgages they could not afford. The foreclosure rates are particularly high in Prince William and Prince George's counties.
Washington is the only metropolitan area in the top 20 affected by the housing bust in such large proportions, Berube said. In such places as San Antonio, Oklahoma City and Austin, the top three regions in the Brookings rankings, "the prices never ran up like they did in this region," he said.
In line with other studies, Brookings reports that the Washington area's economy has been shielded from the full brunt of the recession because of the dominance of the federal government and contractors, which has kept employment stable.
The employment level in the Washington region fell only 0.6 percent from the third quarter of 2008 to the first quarter of 2009, according to the report. The national average dropped by 2.9 percent.
Washington's unemployment rate in March was 5.9 percent, compared with the U.S. rate of 9.0 percent, both of which are not seasonally adjusted.
The region's gross metropolitan product -- the value of all goods and services produced here -- dropped just 0.1 percent from the third quarter of last year to the first quarter of this year, rising 0.3 percent from the fourth to the first quarter. Across the country, the value of goods and services dropped 3.3 percent from the third quarter to the first quarter. It dropped 1.6 percent from the fourth to the first quarter.
Metropolitan regions ranking in the bottom 20 were mainly in Florida, California and Michigan, which either suffered through housing busts or collapse of manufacturing. They include Fresno, Tampa and Detroit.