There was a tremendous flurry of activity at the end of the year as business owners, property owners, and investors worked to get repositioned in anticipation of higher tax rates. Concerns remain about how the economy will be impacted in 2013 by the fiscal cliff negotiations and the implementation of Dodd-Frank and the Affordable Care Act. Although these policies may impact growth rates, we expect to see growth in Washington County in 2013.
Our local economy is significantly impacted by what is happening in the housing sector. Until recently, the recovery has moved forward in spite of lagging residential real estate markets. Over the past 18 months, residential real estate turned the corner and is now a significant contributor to our local and national economy. The significant change is driven by demographics.
Demand is very strong for housing. Our population locally and nationally continued to grow through the recession, although at a slower rate. College graduates and newlyweds were only willing to live with their parents for so long. They are now living in apartments or are becoming first time home buyers. In addition, large numbers of second home buyers who thought prices had increased in 2005-2009 to the point where a second home was unaffordable are now realizing the good deals are gone and they are buying.
The result of this increase in demand is that the number of homes for sale is falling, discounts are shrinking, and prices are rising (see inset charts). New construction is up 50% year-over-year, and buyers are finding it very difficult to find a bank owned property or short sale that aren’t already under contract.
New housing activity is generating income in construction, mortgage, title, brokerage, and other related fields that have struggled significantly over the past four years. The natural impact of the recovery in the residential housing market is additional disposable income and new investment.
This growth is catching many by surprise. We expect our local economy to continue to strengthen through 2013 with the beginning of a virtuous cycle where increased housing activity and rising home prices results in increased disposable income. Increased disposable income will help all sectors by accelerating the economic recovery.