Factors like limited inventory and high income earnings in areas like Washington D.C., as well as Raleigh and Charlotte, N.C. tend to insulate housing markets against the fallen home values seen in the rest of the country. These factors could protect values even against potential negative repercussions that could result from what the Obama Administration is calling “sequestration” spending cuts. This is according to Brian Coester, chief executive officer of CoesterVMS, who addressed this topic using Washington, D.C. as an example on Feb. 24 as a guest on the Washington Business Report, the business news program that precedes This Week with George Stephanopolous.
“Home values are regional, even though they are often referenced as a whole across the U.S.,” said Coester. “There aren’t any trends that impact every housing market to roughly the same degree. Certain variables make some housing markets more resistant to the country’s economic ups and downs than others. In those markets, issues like the government’s impending spending cuts won’t impact home values the way they can compromise home values in other markets.”
“The DC area is kind of an anomaly. You’ve got a very defined geographical area [and] you’ve got a huge number of high income earners,” Coester stated on Washington Business Report. “So the DC [area] never really had a huge downturn. If you look at areas like Vegas, a house was worth $600,000 and now it’s worth 100 [thousand]. In DC, [if] it was worth 600 [thousand], it’s now worth 500 [thousand].”
Washington isn’t the only geographic area that has demonstrated this level of resilience. “Raleigh and Charlotte, North Carolina are experiencing the same phenomenon,” Coester added. “Values have stayed comparatively stable, and we’re seeing steady appreciation since 2009. With these two areas, again, you have a distinctly defined area combined with high income earners.”
Another factor protecting housing markets against tumbling values is an increased demand from homebuyers who are now ready to purchase in the area. “We’ve got [mortgage lender] clients who are seeing a huge increase in purchase demands [and] a huge amount of increases in inquiries for purchases [in certain markets],” Coester said, explaining that this demand is the result of individuals who have been waiting “on the sideline” for the past three or four years. “There are a lot of reasons that some individuals are ready to enter the market at this time. Maybe they had some financial difficulties during the recession and they’re back on their feet. Maybe they have spent the last few years rebuilding their credit to be in a position to get a mortgage.”