City of Alexandria, VA
Online Reference 1: The Economy
NOTE: Click on any highlighted text to view a chart containing additional data.
National, State and Regional Economy
The national economy continues to expand sluggishly. December 2009 national retail sales rose by 5.5 percent above their level of a year earlier (at the height of the financial crisis), but were still below their level in 2006. Much of the increase was due to higher gasoline prices. Non-store national retail sales increased 10.3 percent from December 2008 to December 2009 and made up 7.3 percent of all retail sales in December. (Since internet sales are not subject to sales tax, it is likely that they are taking an increasing bite out of the City’s sales tax revenues.) A more negative indicator is the fact that from November to December 2009, seasonally adjusted national retail sales dropped by 0.3 percent. While the 4th quarter Gross Domestic Product (GDP) number is likely to be positive, since the national economy is highly dependent upon consumer spending, a sustained recovery will depend on significant increases in personal spending.
The year-over-year consumer price index increased by 2.7 percent from December 2008 to December 2009. The national unemployment rate remained at 10.0 percent in December, while the number of payroll jobs decreased by 85,000 in December after increasing slightly in November. The increase in payroll jobs in November was the first in two years.
The District of Columbia’s Office of Revenue Analysis recently issued its annual publication Tax Rates and Tax Burdens: Washington Metropolitan Area 2008. (Although dated September 2009, the report was not made available until January 2010.) The analysis provides comparative information for the inside-the-beltway jurisdictions. The graph below was derived from information included in the study and shows the relative state and local tax burdens for a family of three at different income levels in six local jurisdictions including Alexandria, the District of Columbia, Arlington County, Fairfax County, Montgomery County, and Prince George’s County in 2008.
The analysis shows that Alexandria’s tax burden ranks near the bottom at all income levels except the $25,000 level. At all income levels, the City’s tax burden is less than that of Arlington County, and in all but the $25,000 income level, the City’s tax burden is less than that of Fairfax County. The Virginia jurisdictions tend to have lower tax burdens than the Maryland jurisdictions in large part because the levels of income tax and sales tax are higher in Maryland, except at the $25,000 income level. Table 2 of the report shows their calculations in detail.
The duality between Alexandria’s economy, which is performing relatively well, and the national economy continues. According to the blog Calculated Risk, which tracks occupancy and revenue numbers, the national travel industry faced its worst year since the Great Depression. However, in Alexandria, during the period between September and November 2009, the number of rooms rented in the City rose by 14 percent compared to 2008. Most of the increase was due to new hotel space, but according to the Finance Department, the City’s overall occupancy rate increased slightly compared to last year.
Alexandria hotels are luring travelers with lower hotel room rates. The chart below shows the seasonally adjusted average hotel room rate from November 2007 to November 2009. The average rate has dropped approximately 10 percent since last November despite the increase in the number of the City’s high end hotel rooms in the last year. The effect of the inauguration on room rates is also readily apparent from the chart. In January 2009, the average room rate reached its highest level ever.
In November, the City’s unemployment rate fell to a rate of 4.5 percent. That rate is less than half the national average. Last November, the unemployment rate in the City was 3.1 percent.
The residential real estate market is trending downwards, though there are some early indications of strength. Below is a graph that shows the year-over-year change in the average sales value of attached homes in Alexandria, Fairfax County, and Prince William County. The source is the Metropolitan Regional Information System (MRIS).
The graph highlights the degree to which the real estate market has recovered, particularly in Prince William County, and also the relative strength of the market in Alexandria. In December 2009, the average sales price in Prince William was more than 10 percent above the year earlier, after plunging by more than 40 percent in December 2008 and almost 20 percent in December 2007. Fairfax County follows much the same pattern, although the declines weren’t as pronounced and the recovery has been more significant. In Alexandria, the decline was more modest still, although the recovery has been relatively shallow.
The graph below shows a similar pattern in condominium sales prices, though the recovery has been less substantial than in attached home sales. Only in Alexandria is there a year-over-year increase.
It is important to note that the residential real estate market has been massively supported by the U.S. government through a variety of programs, many of which are scheduled to come to an end over the next six months. Recently, the FHA tightened its guidelines slightly. According to MRIS, 32 percent of purchases in Alexandria in December were financed with FHA loans, compared to 18 percent a year ago and just 3.3 percent in December 2007.
The commercial real estate market is trending downwards. However, there are indications that the decline in the office market may be moderating. During the fourth quarter, the office vacancy rate in Alexandria rose to 16.3 percent, a slight increase from 16.2 percent in the second quarter. The asking rent for Class A office property in Alexandria decreased slightly from $37.91 per square foot to $37.75 per square foot.
Calendar Year 2010 residential and commercial assessment summary information will be released on February 9, at the same time as the City Manager’s Proposed FY 2011 budget.