Sprawl in the Metro-DC area has all but stopped. The deflating housing bubble, price inflation and the economic downturn accomplished (at least temporarily) what slow-growth advocates were achieving at best, very slowly. New developments in the fringe suburbs have ground to a stop. However, the the housing market meltdown and accompanying problems in the finance markets are not the entire story with suburban DC housing.
In fact, economic growth in the region remains relatively strong. The Washington area started 2008 with the nation’s lowest unemployment rate among major metro areas (3.5 percent in January, `08) Job creation, while falling back a bit from the vertical growth curve of the past few years is still humming along with 27,600 new jobs in January, which is good for the eighth-highest total among major metro areas. Significantly, the downturn has not affected housing prices in the close-in to DC counties such as Fairfax, VA and Montgomery, MD nearly as much as the outer counties. No question, this is partly due to the mortgage finance dynamics that fueled the sprawl. For folks looking to buy during the boom, the rule of thumb was, “you just drive out until you qualify.” Folks with the shakiest financing were most likely to drive the furthest to qualify for that sub-prime loan.
Now, there is another market force coming into play. High gas prices make long commutes less attractive to potential home buyers. Those houses that that seemed like a deal two years ago, look a little expensive now that gas is headed toward $4 a gallon. So, the conventional received wisdom that its cheaper to live (both own and rent) further out from the core of the region is being challenged by those who would live there. Folks working closer in to DC aren’t so eager to move out to Asphalt, VA. Consequently, houses in DC, and closer in are keeping their value, and then some. I live about 2 miles North of the White House, and my house has gone up in value about 8% in the last two years (a far cry from the double digit annual increases of the past 3-5 years, but…)
People are beginning to take into account the cost of getting to and from work, and more generally the need to drive around a lot. With the cost of fuel on the rise again, how much of your income goes to transportation – in theory, is largely a matter of where you live. Compact communities (aka high density) typically offer a larger variety of amenities like shopping and transit alternatives because the larger population makes them more economically viable; so, less need to drive. In suburbs, the choice is often limited to driving or biking/walking long distances to find anything you need, much less get to and from work – which mostly occurs at the inconvenient time of rush-hour. The median household expenditure or transportation in the U.S. is 19.1percent of its budget. But that goes up when you hit the suburbs, and for, 3.5 million Americans who now commute by car more than three hours a day, it is reported that they spend 40% of their income on transportation.
There is a interactive web-based index available from the Center for Neighborhood Technology to help folks sort out the cost variables of housing finance and transportation in 52 metro areas across the US. By selecting variables one can view the relative cost of living in different places according to housing cost, transportation cost, and the two combined. Planners, lenders, and most consumers traditionally measure housing affordability as 30 percent or less of income. The Housing + Transportation Affordability Index, in contrast, takes into account not just the cost of housing, but also the intrinsic value of place, as quantified through transportation costs. As with any model, the assumptions used to generate the algorythems are essential to understanding the results. A general description of the methodology used to develop the H+T Index is provided on the wedsite.
There is more bad news in store for commuters. While the area economy grows, and more folks move in, transit trauma awaits commuters with the steep decline in transportation funding in the Metro DC area. And with the price of cement, asphalt and steel rising rapidly as well, there is even more of a crunch felt in the region’s three DOTs. Virginia lawmakers’ failure to address funding for transportation improvements is resulting in a 44 percent reduction in statewide spending for roads over six years. Transit funding would be cut 10 percent. Fairfax County’s share is slashed nearly 50% to $54 million over six years. Gerald E. Connolly (D), chairman of the Fairfax County Board of Supervisors said “Fifty-four million dollars is like half an interchange.” Did I mention this tends to prop up the value of housing closer-in?
The sitting administration in Washington favors privatizing highways, figuring the market will take care of any congestion problems. An approach being piloted on HWY 395 into DC and on the beltway around DC is variably priced toll lanes linked to traffic congestion. The existing high occupancy vehicle (HOV) lanes will remain open to HOV-3 for free, but then allow all others to pay for their use. The rationale for this approach thus far has been to use the balance of funds after operation to pay for other transit improvements such as amped up bus service, which would also be able to travel on the toll lane. Regardless, while this might help ease congestion for folks willing to pay or take transit, it will not make living in the hinterlands of DC any less expensive.