Our Thoughts

Real Estate Myth #2

By Gayle Bailey

The pace of the real estate market is solely tied to interest rates.

The cost of money certainly does play a role in a real estate decision and any economy. This is stronger on the residential than the commercial side. But the real driving force is supply. If job growth is strong (and Greater Washington is one of the strongest), then the real estate market will react to support that job growth through increased real estate development. In Louisville, KY, in the early 1980’s, I sold properties at interest rates of 18%. Now they are under 4% and fixed for 30 years! Greater Washington supports an economic demographic rarely found anywhere else in the world with London being the closest competitor.

If you reflect back over the last 30 years you will find that at times when interest rates were high or rising, Greater Washington still exhibited job growth statistics greater than anywhere else in the country. Real estate sales continued because so many large employers move people in and out of the area. Although appreciation slowed, sales still took place. In the year 2000 Fairfax County attracted over 10,000 new jobs to the county. In 2010 the county brought in 154 new companies and 6,459 new jobs. And that was riding on the heels of Black October 2009. In the last four years job growth and expansion has occurred in other Virginia counties such as Loudoun and Prince William And now almost all of NoVA is experiencing significant property appreciation with Arlington County leading the pack.

Job growth and real estate appreciation in NoVA has traditionally exceeded what has been found in Montgomery and Prince Georges Counties of Maryland. There are various theories for this but predominantly it centers around increased room for real estate development, a government friendly structure for business expansion and a superior transportation structure. A good example is Prince Georges County from 2011-2012 experienced a zero gain in employment. They greatest gains were in Anne Arundel County where employment increased 3.6%. NoVA real estate appreciation feeds directly off its job growth with interest rates being equal across the Greater Washington area.

So where can you get the greatest bang for your buck with your next home? Probably along the Dulles Toll Road Corridor! Reston is skyrocketing with the coming of the Silver Line. Over the next 5-7 years as the Silver Line continues Ashburn will spike. But appreciation alone is never the sole reason to move. Family structure, work proximity, economics and personal preference are the guiding lights of personal real estate decisions.

I would be happy to shine any light on your situation. Just call me.

Gayle Bailey is the Principal Broker at The Bailey Team Real Estate and can be reached at 800-745-9398.