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National, State and Regional Economy
The national unemployment rate unexpectedly dropped to 9.4 percent in December compared to 9.8 percent in November. Unfortunately, much of the decrease was due to people leaving the workforce who have given up trying to find work. The economy did create about 103,000 jobs in December, but assuming people not leaving the job market, that’s not enough to reduce the unemployment rate. The graph below from the financial blog Calculated Risk, which we’ve shown before but is now updated through December 2010, illustrates the depth of the jobs recession, and shows the slow rate of recovery in the number of jobs to date. It also shows why many economists believe the unemployment rate will remain high for years to come. Interestingly, the 2001 recession still holds the post-war record for the longest period for jobs to recover their pre-recession levels, while the 1990 recession is in 3rd place behind the current recession.
The District of Columbia’s Office of Revenue Analysis recently issued its annual publication Tax Rates and Tax Burdens: Washington Metropolitan Area 2009. (Although dated September 2010, the report was not made publicly available until January 2011.) The analysis provides comparative information for inside-the-beltway jurisdictions. The graph below was derived from information included in the study and shows the relative 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 2009.
The analysis shows that Alexandria’s tax burden ranks in the lower half of all area jurisdictions for 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 at all but the $25,000 income level, the City’s tax burden is less than that of Fairfax County. The full report is available at the District of Columbia’s Office of the Chief Financial Officer’s web site.
Alexandria's Economy and Revenues
The City’s economy is generally performing well. The graph below shows the annual change in transient lodging receipts compared to last year. Interestingly, the lodging tax and the $1 per room fee each increased by 8.1%, which given that no new hotels have opened in the last year, implies that the average room rate has not changed. The average room rate of $140.20 in November, 2010 was about the same as the average room rate of $140.79 in November, 2009. While Alexandria hotels have been successful in filling rooms, they have been unable to date to increase room rates on average. This situation provides some room for future growth in transient occupancy tax revenues.
The residential real estate market exhibited unexpected strength in December as the City’s real estate market continues its recovery from the hangover left by the end of the real estate tax credit last summer. Unusually, sales volume in December increased compared to November, and the average sales price increased by almost five percent on a three month trailing average compared to last year.
The graph below shows a sharp drop in the number of foreclosures in the City. Whether this is the beginning of sustained improvement or the result of a self-imposed banking moratorium on foreclosures due to title problems remains to be seen.
The City of Alexandria’s Calendar Year 2011 assessments were issued in January. Overall residential assessments increased by 0.87%. On average, compared to last year’s equalized assessments, the value of the average single family home appreciated by 1.4% to $617,826 while the value of the average condo decreased by 0.9% to $266,451. The graph below shows the last three real estate cycles in the City of Alexandria for single family dwellings.
Because this graph is inflation adjusted, it shows a modest decrease in the average value of a single family home compared to the previous year. From the graph, it is apparent that the downward leg of the real estate cycle is about the same length as the upward leg of the real estate cycle. If history repeats, or as in Mark Twain's words at least rhymes, the City is fairly close to the end of the downward cycle leg of the current residential real estate cycle. Adjusted for inflation, the value of the assessment of the average home has nearly doubled since 1998, when the current real estate cycle began.
The pattern is similar for condos, shown below, although the condo cycle tends to lag the single family dwelling cycle by a year or two.
Again, the inflation adjusted value of the average condo has nearly doubled since the beginning of the cycle in 1999, after having nearly trebled at the peak. This particular cycle may have been affected by the unprecedented federal government support for the housing market over the last several years. However, based on past history, it is likely then that the City shall see several more years of fairly modest changes to residential assessments. The City’s long-term assessment projections reflect a few more years of flat to modest increases in growth.
The office vacancy rate remained flat in the fourth quarter compared to the third quarter, but is down significantly compared to the fourth quarter, 2009.