Real Deal The U.S. and Washington Area Economic Performance and Outlook

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2 Real Deal 2011 The U.S. and Washington Area Economic Performance and Outlook Stephen S. Fuller, PhD Dwight Schar Faculty Chair and University Professor Director, Center for Regional Analysis George Mason University January 25, 2011

3 Recession Recovery Patterns of GDP Past Five Recessions % Change in GDP Quarters After Trough Sources: BEA, GMU Center for Regional Analysis, (2009 Recession has 6 th Q added from GI Forecast)

4 Quarterly GDP Revisions: Global Insight Quarter July 2009 October 2010 January Q ** Q ** Q ** Q ** 2010 Q ** Q ** Q ** Q4* Q1* Q2* Q3* Q4* *Projected **Actual

U.S. Gross Domestic Product Quarterly Change: 2006 2013 % Forecast

5 U.S. Gross Domestic Product Quarterly Change: % Forecast >>>>>>> Source: Global Insight

6 Annual Change in Jobs US THOUSANDS

7 U.S. Job Change by Sector December 2007 December 2009 Ranked by Size in 2010 (000s) Total - 8,363,000 Source: BLS March 2010 Benchmark, (Seasonally Adjusted), GMU Center for Regional Analysis

8 U.S. Job Change by Sector December 2009 December 2010 Ranked by Size in 2010 (000s) Total = 1,124 Source: BLS March 2010 Benchmark, (Seasonally Adjusted), GMU Center for Regional Analysis

U.S. Unemployment Rate % 9.4 % GI Fcst 10 9.6 11 9.

9 U.S. Unemployment Rate % 9.4 % GI Fcst Source: BLS, Seasonally Adjusted

10 Consumer Confidence Expectations 100 Present Situation Source: Conference Board, GMU Center for Regional Analysis

11 Interest Rates Forecast >>>>>>

12 % Consumer Prices Forecast >>>>>> Source: BLS, Global Insight

13 $/barrel Oil Prices $ per barrel Forecast >>>>>>>> Source: Global Insight

14 % Growth in Total Consumption Outlays Forecast >>>>> Source: Global Insight, GMU Center for Regional Analysis

15 U.S. Economic Performance % Source: Global Insight

16 U.S. Economic Performance % Source: Global Insight

17 U.S. Economic Performance % Source: Global Insight

18 U.S. Economic Performance % Source: Global Insight

19 U.S. Economic Performance % Source: Global Insight

20 U.S. Economic Performance % Source: Global Insight

21 The Washington Economy

22 Washington MSA Leading Economic Index Month-Over-Year Percent Change 12-Month Moving Average

23 Washington MSA Coincident Economic Index Month-Over-Year Percent Change 12-Month Moving Average

24 000s Annual Job Change Washington MSA Annual Data Annual Month over Year Source: BLS March 2010 Benchmark, GMU Center for Regional Analysis

25 Annual Job Change District of Columbia 000s Annual Data Annual Month over Year Source: BLS March 2010 Benchmark, GMU Center for Regional Analysis

26 Annual Job Change Suburban Maryland 000s Annual Data Annual Month over Year Source: BLS March 2010 Benchmark, GMU Center for Regional Analysis

27 000s Annual Job Change Northern Virginia Annual Data Annual Month over Year Source: BLS March 2010 Benchmark, GMU Center for Regional Analysis

28 Job Change by Sector Nov 2009 Nov 2010 Washington MSA (000s) Total 49,200 Source: BLS March 2010 Benchmark, GMU Center for Regional Analysis

29 (000s) 15 Largest Job Markets Job Change Nov 09 Nov 10 Washington + 49,200 Source: BLS March 2010 Benchmark, GMU Center for Regional Analysis

30 Unemployment Rate 10.2 DC 9.3 U.S. 6.3 SMD 6.0 MSA NVA Source: BLS, Not Seasonally Adjusted

31 The Washington Area Housing Market

32 Existing and New Home Sales Washington MSA Existing (left scale) New (right scale) Source: MRIS, Hanley Woods, GMU Center for Regional Analysis

33 % Percent Change in Inventories of Existing Homes Month-Over-the-Year-Change , MSA Jan-May, 2006 >100 % Dec = +3.1% Source: MRIS, GMU Center for Regional Analysis

34 % Average Sales Price Annual Percent Change Washington MSA All Existing Homes Source: MRIS, GMU Center for Regional Analysis

35 % Average Sales Price Month-over-the-Year Percent Change Washington MSA All Existing Homes Source: MRIS, GMU Center for Regional Analysis

36 % Average Sales Price Percent Change Suburban Maryland All Housing Types Annual Change Annual Change by Month Source: MRIS, GMU Center for Regional Analysis

37 % Average Sales Price Percent Change Northern Virginia All Housing Types Annual Change Annual Change by Month Source: MRIS, GMU Center for Regional Analysis

38 Sales Activity and Prices by Housing Type Existing Homes Washington MSA Percent Change Sales Average Prices Single-Family Detached -1% +4% Single-Family Attached/Townhouses -6% +8% Condos -1% +1% Source: MRIS, GMU Center for Regional Analysis

39 Annual Permits by Housing Type Washington MSA Source: U.S. Census Bureau. December 2010 figures are estimates.

40 Economic Forecast

41 2010 Structure of the Greater Washington Economy Non-Local Business 12.0 % Other Federal 15.7 % Federal 34.9% Procurement 19.2% Local Serving Activities 36.6% Int l 4.3% Other: Health/Education, Media Other 8.0% Hosp. 2.2% Assn 2.0%

42 Employment Change by Sub-state Region (000s) D.C Sub. MD No. VA REGION Average Annual Change = 36,000 Source: BLS, GMU Center for Regional Analysis, based on 2010 Benchmark data from BLS

43 % Economic Outlook (GRP) 2015 Washington Area and Sub-state Portions (Annual % Change) NV MSA SM DC Source: GMU Center for Regional Analysis

44 % GDP/GRP Washington U.S. Source: Global Insight, GMU Center for Regional Analysis

45 policy-cra.gmu.org

46 I Will Survive On Behalf of The Real Deal By: Anirban Basu Sage Policy Group, Inc. January 25, 2011

47 9 to 5

48 Recession Watch as of May 2009 Source: Moody s Economy

production index measures the real output of the

49 Industrial Production January 2001 through December 2010 Source: Federal Reserve The industrial production index measures the real output of the manufacturing, mining, and electric and gas utilities industries.

50 Gross Domestic Product 1990Q1 through 2010Q3 2008Q3: -0.5% Source: Bureau of Economic Analysis

51 Recession Watch as of April 2010 Source: Moody s Economy

52 Recession Watch as of September 2010 Source: Moody s Economy

53 National Nonfarm Employment by Industry Sector Groups December 2009 v. December 2010 All told 1,124K Jobs Gained Source: Bureau of Labor Statistics

54 National Initial Unemployment Claims, 4 week moving average Seasonally adjusted January 2001 November 2010 Source: Bureau of Labor Statistics

55 Maryland Initial Unemployment Claims, 4 week moving average Not seasonally adjusted January 2002 December 2010 Source: Bureau of Labor Statistics

56 Maryland Nonfarm Employment by Industry Sector Groups (NSA) November 2009 v. November 2010 Absolute Change MD Total: +31.1K; +1.2% US Total: +912K; +0.7% Source: Bureau of Labor Statistics

57 Baltimore Towson MSA Nonfarm Employment by Industry Sector Groups (NSA) November 2009 v. November 2010 Absolute Change Baltimore Total: +17.9K; +1.4% MD Total: +31.1K; +1.2% US Total: +912K; +0.7% Source: Bureau of Labor Statistics

58 Washington, DC MSA Nonfarm Employment by Industry Sector Groups (NSA) November 2009 v. November 2010 Absolute Change DC MSA Total: +48.5K; +1.7% US Total: +912K; +0.7% Source: Bureau of Labor Statistics

59 Unemployment Rates, Largest 20 Metros(NSA) November 2010 Rank MSA UR Rank MSA UR Washington-Arlington-Alexandria, 1 DC-VA-MD-WV Seattle-Tacoma-Bellevue, WA Minneapolis-St. Paul-Bloomington, MN- WI St. Louis, MO-IL Boston-Cambridge-Quincy, MA-NH Atlanta-Sandy Springs-Marietta, GA Baltimore-Towson, MD San Francisco-Oakland-Fremont, CA Dallas-Fort Worth-Arlington, TX San Diego-Carlsbad-San Marcos, CA New York-Northern New Jersey-Long Island, NY-NJ-PA Detroit-Warren-Livonia, MI Phoenix-Mesa-Glendale, AZ Los Angeles-Long Beach-Santa Ana, CA Houston-Sugar Land-Baytown, TX Miami-Fort Lauderdale-Pompano Beach, FL Philadelphia-Camden-Wilmington, PA- NJ-DE-MD Tampa-St. Petersburg-Clearwater, FL Chicago-Joliet-Naperville, IL-IN-WI Riverside-San Bernardino-Ontario, CA 14.3 Source: Bureau of Labor Statistics

60 Unemployment Rates, U.S. States (SA) November 2010 Rank State Rate Rank State Rate Rank State Rate 1 NORTH DAKOTA ARKANSAS MISSOURI SOUTH DAKOTA ALASKA TENNESSEE NEBRASKA LOUISIANA ILLINOIS NEW HAMPSHIRE MASSACHUSETTS NORTH CAROLINA VERMONT TEXAS DISTRICT OF COLUMBIA HAWAII NEW YORK INDIANA IOWA DELAWARE OHIO WYOMING NEW MEXICO MISSISSIPPI KANSAS COLORADO GEORGIA VIRGINIA PENNSYLVANIA KENTUCKY OKLAHOMA ALABAMA OREGON MINNESOTA CONNECTICUT SOUTH CAROLINA MONTANA NEW JERSEY RHODE ISLAND MAINE WASHINGTON FLORIDA MARYLAND WEST VIRGINIA CALIFORNIA UTAH ARIZONA MICHIGAN WISCONSIN IDAHO NEVADA 14.3 Source: Bureau of Labor Statistics U.S. Unemployment Rate: November 10 =9.8%

61 MD County Unemployment Rates November 2010 Rank Jurisdiction UR Rank Jurisdiction UR 1 Howard County Talbot County Montgomery County Baltimore County Calvert County Kent County Charles County Allegany County St. Mary s County Cecil County Carroll County Wicomico County Frederick County Caroline County Queen Anne s County Washington County Anne Arundel County Somerset County Harford County Dorchester County Prince George's County Baltimore City Garrett County Worcester County 15.0 Source: Bureau of Labor Statistics

62 Maryland Jurisdiction Income Tax Revenues* FY2010 v. FY2009 ($millions) FY2009 FY2010 % Change FY2009 FY2010 % Change Washington $63.0 $ % Harford $161.4 $ % Talbot % Baltimore City % Charles % Howard % St. Mary s % Dorchester % Calvert % Anne Arundel % Prince George s % Wicomico % Carroll % Frederick % Cecil % Allegany % Queen Anne s % Garrett % Kent % Montgomery 1, , % Baltimore Caroline % County % Worcester % Total 4, , % Source: Local Maryland Jurisdictions Maryland State/Local Individual Net General Fund Income Tax Revenues in : FY2009- $6.477 billion; FY2010: $6.178 billion; -4.6% *Somerset County Data Not Available

63 Baby Come Back

64 15 Year & 30 Year Fixed Mortgage Rates January 1995 through December 2010 Source: Freddie Mac

65 U.S. New Home Sales January 1999 through November 2010 Source: Economy.com, Census Bureau

66 U.S. Housing Starts January 1999 through November 2010 Source: Economy.com

67 Maryland County Housing Permits 2010YTD v. 2009YTD YEAR TO DATE November 2010 YEAR TO DATE November 2009 SINGLE-FAMILY UNITS TOTAL HOUSING UNITS SINGLE SINGLE CHANGE CHANGE JURISDICTION TOTAL FAMILY TOTAL FAMILY NET PERCENT NET PERCENT MARYLAND 11,401 7,840 9,396 7, % 2, % MONTGOMERY 1, % 1, % WASHINGTON % % ANNE ARUNDEL 1, , % % BALTIMORE COUNTY 1, % % BALTIMORE CITY (20) 15.50% % FREDERICK % % CECIL % % QUEEN ANNE'S % % HARFORD % % CARROLL % % WICOMICO % (10) 7.04% HOWARD 1, , % (120) 10.02% CALVERT (26) 10.97% (24) 10.13% ST. MARY'S (52) 13.79% (42) 11.02% WORCESTER (7) 8.24% (18) 18.75% CHARLES % (135) 20.33% PRINCE GEORGE'S (143) 17.83% (312) 31.61% Source U.S. Census Bureau, Maryland Department of Planning *Complete data not available for Allegany, Caroline, Dorchester, Kent, Somerset, and Talbot counties.

68 Housing Inventory by Baltimore MSA Jurisdiction December 2009 v. December 2010 Source: Maryland Association of Realtors Maryland = Dec. 09: 9.9 months; Dec. 10: 9.9 months

69 Housing Inventory by Suburban MD December 2009 vs. December 2010 Source: Maryland Association of Realtors Maryland = Dec. 09: 9.9 months; Dec. 10: 9.9 months

70 Mortgage Banker s Association Mortgage Applications Purchase Index January 2006 through December 2010 Source: Economy.com

71 Maryland Jurisdiction Property Tax Revenues* FY2010 v. FY2009 ($millions) FY2009 FY2010 % Change FY2009 FY2010 % Change Kent $25.3 $ % Garrett $42.1 $ % Baltimore Montgomery 1, , % County % Prince George s % Howard % Queen Anne s % Anne Arundel % Calvert % Cecil % St. Mary s % Dorchester % Carroll % Harford % Caroline % Washington % Frederick % Wicomico % Charles % Worcester % Baltimore City % Talbot % Allegany % Total 6, , % Source: Local Maryland Jurisdictions *Somerset County Data Not Available

72 Commercial Real Estate Cap Rates First Half 2010 Office Class A Class B Class C Area Stabilized Value Add Stabilized Value Add Stabilized Value Add Baltimore CBD 8.25% 9.00% 9.75% 10.50% 9.50% 10.50% 10.50% 12.00% 11.00% 12.00% 14.00% 15.00% Baltimore Suburbs 8.00% 8.75% 9.50% 10.50% 9.25% 9.75% 10.50% 11.50% 12.00% 13.00% 14.00% 15.00% Washington DC CBD 5.50% 6.50% 6.50% 7.50% 6.50% 7.25% 7.00% 8.00% NA NA Washington Suburbs 7.00% 8.25% 8.00% 9.00% 7.50% 8.75% 8.00% 10.00% NA NA Multi Housing Class A Class B Class C Area Stabilized Value Add Stabilized Value Add Stabilized Value Add Baltimore 5.75% 6.25% 5.75% 6.25% 6.25% 7.00% 6.25% 7.25% 7.25% 9.50% 7.25% 9.50% Washington DC 5.50% 6.00% 5.75% 6.25% 6.25% 7.00% 6.25% 7.00% 7.00% 9.00% 7.00% 9.00% Industrial Class A Class B Class C Area Stabilized Value Add Stabilized Value Add Stabilized Value Add Baltimore 7.50% 8.00% 8.00% 8.50% 8.25% 8.75% 9.00% 9.50% 9.75% 10.50% 10.50% 12.00% Washington DC 7.25% 7.75% 8.75% 9.25% 7.75% 8.25% 9.50% 10.00% 8.75% 9.50% 10.00% 11.00% Source: CBRE

73 Area Office Market Statistics Fourth Quarter 2010 Area Inventory SF Vacancy Rate % 2010 Net Absorption SF Under Construct ion SF Avg Asking Dir Lse Rate ($/SF/YR) Baltimore CBD 12,461, % 172,892 0 $23.12 Baltimore City (Non CBD) 8,129, % 341,446 0 $21.83 Lower Suburban Baltimore 23,223, % 30, ,853 $23.75 Upper Suburban Baltimore 19,471, % 85, ,100 $20.53 Frederick County 4,402, % 37, ,000 $24.65 Montgomery County 56,895, % 175, ,440 $30.07 Prince George s County 18,241, % 12, ,144 $21.57 Washington, DC CBD 38,631, % 627, ,038 $52.24 Washington, DC (Total) 124,059, % 4,307,774 1,410,112 $51.19 Source: CBRE

74 Take the Money and Run

75 Commercial Bank Deposits January 2001 through November 2010 Source: Federal Reserve Board

10 % change from Nov. 09 Total Consumer Credit 2,403.0 0.7% -2.

76 Consumer Credit January 2001 through November 2010 Type of Consumer Credit Nov. 10 value ($Billions) % change from Oct. 10 % change from Nov. 09 Total Consumer Credit 2, % -2.2% Revolving Credit % -8.9% Nonrevolving Credit 1, % 1.5% Source: Federal Reserve

77 U.S. Retail & Food Services Sales January 2001 through December 2010 Source: Census

78 U.S. Chain Store Sales Growth by Type of Store November 2009 v. November 2010 Source: Economy.com

79 National Vehicle Sales January 2004 through December 2010 (SAAR) Source: Autodata Corp/

80 U.S. Federal Budget Deficit * Source: Congressional Budget Office * data are projections

81 Projected State Budget Shortfalls for FY 2012 As Percentage of FY 2011 Budget Rank State % Rank State % Rank State % 1 Illinois 50.9% 18 Missouri 14.4% 35 Massachusetts 6.4% 2 New Jersey 37.4% 19 Mississippi 14.1% 36 Iowa 5.6% 3 Nevada 37.1% 20 Wisconsin 12.8% 37 West Virginia 4.1% 4 South Carolina 26.6% 21 Idaho 12.6% Hawaii NA 5 Oregon 25.0% 22 Maryland 12.2% Oklahoma NA 6 Minnesota 24.5% 23 Ohio 11.0% Tennessee NA 7 Texas 22.3% 24 Florida 10.4% States Total 18.9% 8 California 22.2% 25 Vermont 10.4% 9 Louisiana 22.0% 26 Georgia 10.3% 10 Connecticut 20.8% 27 Rhode Island 9.9% 11 North Carolina 20.0% 28 Pennsylvania 9.7% 12 Washington 18.5% 29 Nebraska 9.2% 13 New York 16.9% 30 Kentucky 9.1% 14 Arizona 16.6% 31 Kansas 8.8% 15 Maine 16.1% 32 Montana 8.3% 16 Colorado 15.3% 33 New Mexico 7.6% 17 Virginia 14.8% 34 Michigan 6.5% Source: Center on Budget and Policy Priorities Alabama, Alaska, Arkansas, Delaware, D.C, Indiana, New Hampshire, North Dakota, South Dakota, and Wyoming are not projected to have budget shortfalls in Note: Kentucky and Virginia have two-year budgets. They closed their FY2012 shortfalls when they enacted their budgets for the FY2011-FY2012 biennium. Combined gaps of $113 billion for 2012.

82 Stairway to Heaven Stimulus, stimulus, stimulus; We ve seen the worst of it from a broader economic perspective; Too soon to tell if broad inflation domestically or globally will be problematic; Election results will be good for economy because gridlock is desirable, at least to a certain extent; Global economy on the mend for now; Commodity price surges remain a threat; 2011: GDP 3.0% 3.5%; 1.6M jobs; US UE stays above 9%; MD adds more than 40k jobs; 2012????

83 Thank You You can always reach me at If you appreciate this type of information and would like regular updates, please see our newsletter service at Also, if you need us in a hurry, we are at ( SAGE) Please contact us when you require economic research & policy analysis.

Gorfine, Schiller, & Gardyn, P.A. Real Deal Seminar

Gorfine, Schiller, & Gardyn, P.A. Real Deal Seminar The U.S. and Washington Economies: Current Performance and Near Term Outlook Stephen S. Fuller, PhD Dwight Schar Faculty Chair and University Professor