Fiscal Cliff scaring home buyers in Northern VA? (Arlington, Fairfax: home sales, job market)

[CaliTerp07]

Originally Posted by Future Home Seller

I know quite a few people who said that when they bought their homes in 2006 just at the peak of the market and now are upside down.

Not a big deal, unless they are currently trying to leave the area. If I had thought that there was a chance we'd be leaving NoVA, we would not have purchased a place.

Oh shoot, that was a boring answer.

YOU'RE RIGHT, OMG, WE'RE ALL GOING TO DIE AND OUR HOUSES ARE GOING TO BE WORTH PENNIES AND WE'LL ALL BE SO SORRY WE DIDN'T SELL THIS YEAR! Please give me your realtor information ASAP because they obviously have a crystal ball with all the answers! Thank goodness for them!

If you have the opportunity to leave the area now, and you want to, great! Do it! There are more than enough people moving here in droves to find you a buyer.

[Future Home Seller]

The financial experts in Fairfax County Government are already very worried about the impact of reduced federal government spending will have on the home prices and sales tax revenue in the county and are planning a 5% drop in revenue starting next fiscal year.

Sure the actual cliff may not occur but they are working behind the scenes to decrease spending and even a 5% decrease will have a major impact on Northern Va Real Estate and it's job market. We may not be a true one industry town anymore but won't you admit that if the federal government cuts back we get a bad cold?

Won't you admit that in the next five years the spending by the Federal Government will have to drop? Current spending is not sustainable. Northern VA will be hurt bad.

[OrangeFish]

Originally Posted by Future Home Seller

Won't you admit that in the next five years the spending by the Federal Government will have to drop? Current spending is not sustainable. Northern VA will be hurt bad.

Hardly.

[Carlingtonian]

I work for DoD, and if the defense budget isn't decreased after drawing down two wars, something is very wrong.

Will such a reductoin make a difference in home sales? Eh--maybe. Hopefully the reduction will be gradual. OTOH, if history is a guide, there will be no reduction at all--only (perhaps) slower growth. (Since when has federal spending ever decreased, with either political party in the White House?)

[LynchburgLover]

Keep in mind, too, the sequestration cuts that will impact all the defense contractors and their suppliers could be a huge force in the NoVa (and Norfolk) housing markets. Obama has told them not to send the WARN notices required by law because they would go out right before the election. He has said OMB (that means us taxpayers) will pay if vendors had to close plants or lay off workers. Politico explains it in more detail.

Feds: Taxpayers could cover layoff costs under sequester - Philip Ewing - POLITICO.com

[CAVA1990]

Originally Posted by Carlingtonian

I work for DoD, and if the defense budget isn't decreased after drawing down two wars, something is very wrong.

That doesn't mean it will be decreased here. I think we'll be more likely to see drawdowns out in the field as well as reductions in weapons systems manufactured in other places. Cyber-warfare is cranking up, which is good for the IT folks around here.

[Carlingtonian]

Originally Posted by CAVA1990

That doesn't mean it will be decreased here. I think we'll be more likely to see drawdowns out in the field as well as reductions in weapons systems manufactured in other places. Cyber-warfare is cranking up, which is good for the IT folks around here.

I don't disagree with that; I meant the overall DoD budget. But yeah, the OCO budget should obviously be shrunk way, way down. I'm all for beefing up cyber, given that growing threat.

[shamrock847]

Of course a major reduction in federal spending would be detrimental to the area, but possibly not as bad as many people think. The HQ of any agency are probably the last thing that will be reduced. Even a lot of the cuts to DoD contractors may impact the areas where the planes, ships, electronics etc. are actually made more than they would impact this area.

I don't think this is having any impact on the area right now. If anything is hurting home sales right now it is the lack of decent inventory.

[IndiaLimaDelta]

Although the rhetoric of a "fiscal cliff" is over-blown, there IS a danger that the spending cuts, tax increases and any further economic destabilization in Europe and economic downturn in East Asia could severely damage the recovery and result in a prolonged stagnation or even a relapse into recession.

We have been much too "fat, happy and dumb" in this region because we have been shielded from the devastating recession, housing bust and a jobless recovery by a variety of fortunate factors. There is nothing magical about this region and one can never be lucky forever. If the above scenario pans out, this region could also experience a significant economic downturn. I hope that does not happen and most likely it won't, but I don't dismiss it casually out of a misplaced sense of optimism either.

About two weeks ago, I liquidated many of my positions in the market and cashed in on the sizable gains of the past year or so (with the exception of certain long-term positions that relate to specific technologies). I am a fairly risk-averse investor and don't like the uncertainly of the current situation, including the election prospects. And this is from someone who invested heavily in 2008-2010 and fortunately made extraordinary gains during that time (thank you, Netflix, for the retirement nest egg, which did 800% gain upside and about half as much again on the downside for me).

[IndiaLimaDelta]

One thing to keep in mind is that both housing and the economy in general in an area that depends on government spending are very sensitive to marginal changes in the said spending. So much of economic condition is a product of mass psychology. When an area that is thought be recession-resistant or even -proof suffers even a small, unexpected decline, the psychological impact can be tremendous. The problem is that that impact can almost never be predicted accurately. Sometimes we have thump and people aren't bothered. Sometimes there is a whimper and people run like sheep on panic.

Black swans happen far more frequently than we admit.