When we moved to North Carolina from Northern Virginia four years ago the real estate market here in the Winston-Salem area was one of the few in the U.S. that wasn't experiencing the bubble that the rest of the country was enjoying. At the same time the real estate market in Northern Virginia was one of the most over-heated markets in the country. Of course this worked in our favor at the time, but it's been interesting to examine the differences between the two markets during the current mortgage meltdown.
In general both areas are down, but since Winston-Salem already had depressed real estate prices relative to the rest of the country it didn't have as far to fall as the DC area. Still, I think in the near future DC has much brighter prospects than we have here in the Piedmont Triad area of North Carolina and two news items I read this week helped mold my thinking.
First, I was reading an article about Obama's surprising success in Virginia and in the article was this paragraph:
are watching neighbors head into foreclosure at a record pace. Nearly
one in 20 mortgages is in foreclosure there, the highest rate in
Virginia, according to the Virginia Housing Development Authority.
Prince William County is where we lived for the last eight years before we moved to North Carolina, and I can tell you that it's absolutely not surprising that it is experiencing such a bump in mortgage delinquencies. In the early '00s houses were exploding in value but much of that was due to the fact that money was so cheap; any fool could get a loan with incredibly low ARMs. That made it possible for someone who could only qualify to buy a $200,000 home in the late '90s to qualify for a home in the $350,000 range just a few years later. Well, guess what happened when those adjustable rates re-set?
On top of the cheap money Prince William also had the distinction of being an ex-urb that was more affordable than the suburbs closer to DC. Add to that a set of political leaders whose governing philosophy can best be described as "build, baby, build" and you had the recipe for a massive real estate bubble. Thank God we got out when we did.
Unfortunately for Winston-Salem it's still been a painful year despite not having as far to fall. Just this morning the Journal reported that foreclosure filings in September were up 55% over September 07. This area has seen hard times for years so relatively speaking the change in Prince William seems starker than the changes here. Believe me, when we left Northern Virginia that area felt like Northern California must have during the Gold Rush of 1849. Housing developments sprang up seemingly overnight. Traffic clogged every highway, and often many neighborhood roads. People bought houses and flipped them months later for a tidy profit. Heck it got so crazy that they tore down a prison and built townhouses, houses and a high school in its place. So when prices started to fall, it must have felt like Armageddon.
All that being said, the prospects for Prince William are probably much better than they are here, at least in the near to medium term. DC's economy is historically insulated from experiencing the worst of economic downturns because of the recession-proof industry known as the federal government and government contracting. Once the home prices have settled to a normal level there will be buyers because unemployment will likely be lower there than in the rest of the country. And of course jobs will attract more people and eventually the housing glut will be filled, there will be a shortage of available homes and new homes will need to be built. It might take a few years but mark my words that unless something truly catastrophic happens the DC area will see home prices rise before much of the rest of the country.
Here in Winston-Salem things will take longer. Yes our housing prices didn't have as far to fall, but we still saw lots of building that happened thanks primarily to cheap money over the last few years. Consequently we have a rather large housing inventory. Unfortunately we're also bleeding jobs, a continuation of the decline of the textile, furniture and tobacco industries that started well over a decade ago and an impending decline in jobs related to the current economic meltdown. The region is actively pursuing new industries, but it's going to take a while for them to get rooted and growing. In other words even as the housing prices settle we're not going to have a lot of buyers in the near term so the lower housing prices are likely to be with us for a longer period of time than in other parts of the country.
You might think that I regret the move. Well, that couldn't be further from the truth. Life is a marathon, not a sprint, and I'd take the environment here over the DC region any day. Our standard of living is quite high with little traffic, affordable housing (obviously), easy access to the mountains, the beaches only a couple of hours away, a decent education system, easy access to the I-40 and I-85 highways, a leading private university (Wake Forest), two state universities (University of NC School of the Arts and Winston-Salem State University), one of the oldest colleges in the country (Salem College) and a well run local government. Eventually there will be a lot of companies that will discover the benefits of this area and I'm confident that within the next twenty years this will be a very strong economy. Honestly you can't lose the majority of your industrial base and expect to replace it overnight, but when you have as many positives as we have it's only a matter of time before you see the positive effects.
The timing should be just about right for us. We'll be able to make a killing on our house and then I can buy that Winnebago and Celeste and I can see the country in our old age. I'm sure she can hardly wait.