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During the 3rd quarter of 2009, the U.S. economy expanded for the first time in five quarters. The Bureau of Labor Statistics' estimate is that the economy grew at an annualized rate of 2.8%. That's a little less than the long-term average increase (since 1947) of 3.3%. Most of the growth was driven by government spending and one time programs such as “Cash for Clunkers.” For a sustainable recovery, it will be important for the private sector to expand if government stimulus wanes as expected in 2010.
Nationally, in October the unemployment rate reached 10.2%, its highest level since 1983. The national economy continues to shed jobs, albeit at a slower pace. Moody’s Analytics, a leading economic forecasting firm, expects the jobless rate to peak at close to 11% in 2010. Nationally, Moody’s does not expect the number of jobs to reach pre-recession levels until at least 2012. Virginia and Alexandria are a different story, however. In October, the non-seasonally adjusted unemployment rate in Virginia dipped to 6.3%; in Alexandria, the rate in September was just 4.8%. From September 2008 to September 2009, job losses in the Metro DC area totaled 1.2%, the lowest rate by far of any metro area in the U.S.
Many of the problems that helped to cause the recession such as the overleveraged American consumer and the undercapitalized banking system have not gone away. The graph below shows delinquency rates on residential and commercial real estate and credit cards.
The good news is that for the 3rd quarter of 2009, credit card delinquency rates flattened compared to the 2nd quarter of 2009. However, the national residential real estate delinquency rate continued to increase and reached a level almost three times its previous high in 1991. Commercial real estate delinquency rates are also rising quickly but to date remain well below the previous highs of the early 1990’s. Through Thanksgiving this year, there were 124 bank failures, the highest number of failures since 1992.
Alexandria's Economy and Revenues
Alexandria’s economy is performing relatively well compared to the national economy. Economically sensitive revenues such as sales tax are making a slow recovery.
The graph shown above shows that year over year retail numbers continue to improve from their lows earlier this year. It should be noted that the year over year comparisons are becoming easier in part because the economy took a steep downturn last fall. However, Alexandria’s relatively low rate of unemployment is producing some strength in discretionary expenditures.
Data are showing a mixed to slightly negative picture in the residential real estate market. Real estate sales for the year to date through October increased by 3.5%, and were especially strong in October as borrowers rushed to close on their purchases before the expiration of the first time home buyer’s tax credit on November 30. That credit has since been extended and expanded, but it will be interesting to see how much housing demand the credit pulled from the future. The average sales price price of a home decreased by 5.7% year to date through October. A three month trailing average of foreclosures in October was 28, about the same as September, but down substantially from last year. By one measure at least, the number of months’ worth of housing inventory, the market in October 2009 was much stronger than October 2008.
The commercial real estate market is also trending downwards as the Washington, DC area experiences its most serious commercial downturn in two decades. The Urban Land Institute’s recent published report, Emerging Trends in Real Estate 2010, predicts that nationally in 2010, “Transaction markets will begin to thaw and value declines ultimately will average more than 40 percent off mid-2007 pricing peaks. These property market reversals likely will be the worst registered since the Great Depression, eclipsing the industry debacle of the early 1990’s.” However, the report also states, “Count on it – the nation’s capital always ranks number one in Emerging Trends market surveys during a recession. Its dominant employer-the federal government-never shrinks and often expands in bad times." But even in Washington, DC, “supply/demand fundamentals will weaken into 2010.”