DC area has highest income but largest decline in what it feels like; NPR (Arlington: middle-class)

[seiketsu]

How much are you really making?

This interactive graphic on an NPR blog lets you type in a name of a city to compare median income to what it feels like based on cost of living. The DC metro area has the highest median income of more than $44k, but cost of living makes it feel like only $35k, the largest decline in the country.

Even with cost of living factored in, the DC area still has one of the highest "feels like" median incomes. So basically, we have among the the highest quality of life but feel like we should be doing so much better, possibly to a greater extent than anyone else in America.

What's interesting about the data is that it accounts for what people actually buy in each area, and not a flat consumer price index.

[tysonsengineer]

Top two costs have gone unaddressed for too long

housing cost (lack of supply)
transportation cost (lack of options)

Pretty obvious that that more than income growth is the largest issue.

[FindingZen]

Originally Posted by tysonsengineer

Top two costs have gone unaddressed for too long

housing cost (lack of supply)
transportation cost (lack of options)

Pretty obvious that that more than income growth is the largest issue.

I'm with you on the relative lack of options in transportation. Regarding the lack of housing supply, I believe there is plenty of housing; it's just that the relatively close-in properies are priced such that options for middle-class families are fewer and/or offer fewer amenities/land. The high salaries just feed into that perpetuating cycle.

[tysonsengineer]

Originally Posted by Tone509

I'm with you on the relative lack of options in transportation. Regarding the lack of housing supply, I believe there is plenty of housing; it's just that the relatively close-in properies are priced such that options for middle-class families are fewer and/or offer fewer amenities/land. The high salaries just feed into that perpetuating cycle.

Close in is definitely problem (one reason I fight for more density in TOD areas), but its also getting to the point that the fringes can't keep up with growth.

Over 40,000 people will turn 21 this year in the DC metro area, and look for a place to live, let alone the ones who move here. We need atleast 25,000 units per year just to keep up with that growth. We are building closer to 4000 to 6000, and sadly far too much of it on prime farmland.

[NOVA_guy]

Originally Posted by tysonsengineer

Top two costs have gone unaddressed for too long

housing cost (lack of supply)
transportation cost (lack of options)

Pretty obvious that that more than income growth is the largest issue.

Absoultely.

As for what the OP is saying, I can't speak for everyone but I know for myself and many people, the salaries and benefits here make up for the few negatives. Our broker who does our insurance at work lives in Florida and every time he visits he tells us how this area really does have some of the best benefits in the country. So I'd say with all the positives we have here our quality of life is pretty good, now if only we can cut down on our commuting times!

[NC211]

Originally Posted by tysonsengineer

Close in is definitely problem (one reason I fight for more density in TOD areas), but its also getting to the point that the fringes can't keep up with growth.

Over 40,000 people will turn 21 this year in the DC metro area, and look for a place to live, let alone the ones who move here. We need atleast 25,000 units per year just to keep up with that growth. We are building closer to 4000 to 6000, and sadly far too much of it on prime farmland.

TE, I find your insight refreshing when considering all of the concern over the massive apartment pipeline for our area, which last time I checked several months ago stood around 36,000 new apartment units to be built/delivered over the next 36 months. Prior to this wave, the historical peak was around 2006 with 13,000 units in the pipeline. Little doubt on why we now have over twice the pipeline of units - apartments in Washington DC were considered to be the safest CRE bet in the country from 2009-201X, thanks to a Miami condo developer buying the Palentine in the blizzard of '10 for a sub 5% cap rate.

My curiousity on our housing/population situation is turning more towards the Obama shop than anything else. If we had a peak of 13,000 units in 2006, the boom for housing, and now a post recession pipeline of 36,000, I just have wonder why? I get the fact that we're talking about rental vs ownership for people. But when national builders can push base prices 20% in 18 months out on the edges of town for new homes/townhomes, and still can't deliver them fast enough to qualified buyers, it seems like we've got a double barrel effect here for housing options in DC. I also get the low interest rate influence on the for-sale inventory. We're no longer #1 on the lowest unemployment count in the country though. If you ask me, something just feels "off" about all of this, and I think we're seeing it a little on negative rent growth in certain submarkets that are essentially builtout, like NoMa. True, some private employers have relocated to DC for their national HQ's, but 1600 Penn Ave is still the dominate employer.

As a lender, I can tell you that every committee in the country, when evaluating a new apartment project deal, is thinking the same thing. The feeling is that DC needs to put on the brakes on apartments for a while and let absorption catch up. Today's new Class A project can't become tomorrow's Class B in just 4 years time. This is the main reason why you don't have roughly 2,000 new luxury apartment units under construction at the end of your street near the Ritz.

[LakeLifePA]

I agree with the original study, but for a government worker this is a good place to spend the waning years of my career if for nothing else my retirement will be that much more lucrative. Therefore, the higher DC salary will be a benefit for me for the rest of my life versus just the time I'm living here. Now multiple me with the numbers of gov workers in the area, and you'll understand why people are here.

[tysonsengineer]

@NC211

A lot of what you said is absolutely true, but I will put it in this context.

1) The sequester has meant a loss of 25k jobs in Virginia from peak (2008). That is less 1% of the jobs in the DC area. In the mean time we have seen private job growth that compensated for it, which is why Fairfax's unemployment rate still has stayed low despite the growing population.

2) The population to housing is lag based. During the 80s to 2000s the govt grew, Fairfax grew insanely fast, and those people had kids, and now those kids are graduating college and those 1st gen transplants are nearing retirement. Many of them will move to "florida" freeing up housing, but some of them will remain. At the same time, an equivalent amount of people will be looking at job markets, and while DC's growth in jobs has slowed, the overall number has not, especially in terms of entry jobs and retail sector. These industries are the basis for renters (20 somethings) which is why you are seeing stagnant growth in outer housing (its not larger families moving to the area anymore, its entry/graduates), while increased demand on apartments. That is evident by the fact that even the luxury units coming online are able to hit their general pricing, enough atleast to maintain a profit.

Those two trends is why there is a resurgence in urban living vs suburban, its demographics and economic reality.

3) 36,000 in the pipeline 36month, vs 13,000 peak in 1 year, is 1000 less per year. If you are having a population increase of 20 somethings of 40,000 per year which we still are because of the shuffle out of retirees and shuffle in of millenials, you need to atleast create 20,000 units (assuming a 2br average). Now some of those people won't want to live in high rises, some will rent 3br townhomes among 3 in older or further out (and less expensive) places. But there is still a solid 50% - 60% that will need apartments.

4) At the same time, while some 30 somethings do still do the traditional move out to the burbs, Arlington has experienced (as is evident by their over pop in schools) a retention among that demographic they didn't anticipate. So the shuffle has become at a minimum delayed. Where there would be a natural progression from apt(20-30) -> 1st th or house(30-35) -> older further out/dream home (35-55) its become apt (20-35) -> inner burb walkable (35-45) -> older further out/dream home (45-55). Thats all very general but its the trend, more people are staying closer in for longer than prior generations, which is having a major effect on apartment pricing because now there is this luxury group inner burb for larger 2-3br downtown and high end walkable townhomes.

lastly

I totally agree that jobs ultimately will reflect how many people live here or not, so you are correct that if we keep up a prolonged 15K per year growth rate in apartments/condos, that eventually there will be a higher vacancy rate. That isn't the worst thing in the world. This area is SO expensive, a little downward pressure is exactly what new consumers need, and is a healthy component of actually growing jobs here because companies will not as high of a COL to pay employees, which means more hiring. And people won't have such sticker shock, so they will be more likely to choose a solid and stable job market like we have.

In my opinion we should keep the pedal down for atleast a couple more years until we start seeing a supply impact on COL so that housing can return to a healthier 25-30% of median income which right now it isn't for inner markets where 1st timers and entry levels are wanting to live.

^ all opinion, I'm not an economist