The Washington area is experiencing changing workforce demographics and a structural shift in its economy that will have a long-term effect on the housing market, said Lisa Sturtevant, an associate professor of economics at George Mason University's Center for Regional Analysis.
Federal jobs are going away and jobs in education, health care and technology are increasing as the region begins to look more like the rest of the country. Overall wages are coming down as jobs are being filled by younger workers, who are coming into the housing market with debt and taking longer to start families.
"There will be a demand for smaller houses, less home ownership and a more urban lifestyle as echo boomers and baby boomers compete for the same properties," she said.
Metro areas growing faster than D.C. area
Metro areas growing slower than D.C. area
|From 2008 to 2010, Washington was the only metro area in the nation seeing growth, with 80,000 to 100,000 new households entering the region every year. That rate is slowing.|
|"We're right in the middle," said Lisa Sturtevant, an associate professor of economics at George Mason University's Center for Regional Analysis. Data from the Bureau of Labor Statistics on the 15 largest metro areas show seven areas are growing faster than Washington, including New York, Detroit and Houston, and seven areas growing more slowly from November 2011 through December 2012.|
|New York, Los Angeles, Chicago, Houston, Dallas, Atlanta, Boston|
|Seattle, Phoenix, San Francisco/Oakland, Philadelphia, Minneapolis, Detroit, Miami|
The estimated 80 million echo boomers, children of baby boomers born from 1982 to 1995, are taking longer to start families and 50 percent have college debt, Sturtevant said. Over the past five years, many recent college graduates have come into a market that offers poorer job prospects, and they have taken lower-paying positions.
"Where you start has to do with where you end up," Sturtevant said. "They have to make choices about where to live and whether to have a mortgage or not. All of a sudden you need two $60,000 salaries to afford a house. They don't have a lot of financial resources and that doesn't bode well for home ownership."
Baby boomers, meanwhile, are working longer and delaying retirement. "Their 401(k)s are in the tank and they like working," Sturtevant said.
Suburban Maryland is expected to see an increase in lower-paying jobs in education and health care while Northern Virginia is well-positioned for job growth in the private sector.
"Northern Virginia and suburban Maryland are on divergent paths," she said. "Northern Virginia led us out of the recession and will continue growing much faster than suburban Maryland. The growth will be focused on higher-paying tech and private-sector jobs. It's a more diversified economy."
Northern Virginia, therefore, is expected to have more demand in its housing market.
Federal jobs are disappearing and are not being backfilled. Jobs that are being filled have been reclassified at lower salaries.
"We've lost federal jobs since mid-2011 and there has been no backfilling," Sturtevant said. "We will continue to see more of this" regardless of what happens with the steep spending cuts slated to take effect in March unless Congress acts, she said.
"Most companies are diversifying their offerings to be competitive outside of federal contracts," said Robyn Burdett, a Re/Max vice president who serves on the Fairfax County Economic Advisory Commission.
Wage compression also is an issue, as Sturtevant noted area wages fell 1 percent in 2011. "We're gaining jobs at lower wages. This appears to be the trend," she said.
"There is still a cost-of-living increase for the metro D.C. area that will keep the jobs here competitive or they will lose the workers," Burdett added.