City of Alexandria, VA
Online Reference 1: The Economy
National, State and Regional Economy
On October 20, the Federal Reserve issued the Beige Book, which anecdotally surveys business conditions in the 12 Federal Reserve Districts around the country. According to the Beige Book, reports suggested that “on balance, national economic activity continued to rise, albeit at a modest pace, during the reporting period from September to early October.” It’s interesting to compare the language used in this October’s Beige Book to the language included in last October’s Beige Book that “reports from the 12 Federal Reserve Districts indicated either stabilization or modest improvements in many sectors since the last report, albeit from depressed levels.” The language is remarkably similar and indicates continuing modest growth.
The core year-over-year change in the consumer price index, which excludes food and energy prices, has dropped below 1 percent. The Federal Reserve is concerned that inflation has dropped below its target rate of 2 percent, so interest rates are not likely to rise any time soon. There are beginning to be signs of inflation in the commodities market, however, due to the dollar’s weakness against other currencies.
One manifestation of the economy’s health is the level of delinquencies among key types of loans from commercial banks. As the graph below shows, through the 2nd quarter of 2010, the most recent period available, residential delinquencies have continued to rise. Commercial real estate delinquencies have plateaued at a high level last seen in the mid-1990’s, and credit card delinquencies, while still elevated, are shifting down toward their normal range.
At last year’s budget retreat, City Staff presented several possible scenarios for an economic recovery. So far, the recovery most closely resembles the sluggish U-shaped recovery described at the retreat. The table below shows how closely some of this year’s key economic indicators resemble last year’s indicators at this time.
Some of the City’s economically sensitive economic indicators have improved significantly, however, in part due to strengthening in the travel and hospitality sector. Sales tax shows continuing weakness, though it should be noted that the most recent month’s sales tax collections for August (not the three month trailing average shown in the chart) increased 0.1 percent compared to August 2009.
In the wake of the expiration of the home buyer’s tax credit in June, the data continue to show a mixed picture in the housing market. The story since the end of June is significantly decreasing sales and modestly higher home sales prices. The average sales price of a home in Alexandria during the period from July through September was 2.7 percent higher than one year earlier. While some of the national indexes of real estate values are exhibiting renewed declines, no such trend is visible in Alexandria, although increases, if any, are likely to be modest.
However, a three month moving average of sales volumes is down by 18 percent compared to 2009. The number of home sales in September was the fewest for any September in at least a decade.
The months’ worth of inventory (inventory divided by sales) has also risen steadily since the expiration of the tax credit. It is generally considered a buyers’ market when months’ worth of inventory exceeds six months. That’s currently the case for both condos and single family homes.
The commercial real estate market is showing some signs of life, particularly in the multi-family sector. The City issued its preliminary estimate of CY 11 real estate assessments at the October 18 Council work session, anticipating an increase of approximately 2.7 percent in total commercial property assessments, including a rise of over 5 percent in multi-family properties.
The Urban Land Institute recently issued the 2011 edition of its annual publication, Emerging Trends in Real Estate, which described the Washington, DC area market. “Never far from the top, the nation’s capital will hold onto its number-one Emerging Trends ranking as long as the economy labors. The federal government never downsizes, while lobbyists and consultants swarm legislators and agencies hoping to influence or stop regulatory changes…In the survey , the District and environs also rank as the top development and homebuilding market, the top retail buy location, the third-best buy for office and hotels, and fourth best buy for apartments.”
On the other hand, a three month average of foreclosures rose to its highest level since May. The 43 foreclosures in September was the highest single monthly level since September 2008.