Experts Describe Local, National Economic and Legislative Landscape at Briefing 

OUR REGION'S ECONOMY: THE BIG PICTURE
Calling 2014 a “rough year” for our area’s economy, David Versel, Senior Research Associate with George Mason University’s Center for Regional Analysis, described the lingering effects of the Great Recession and how our local economy is evolving in this, the fifth year of the recovery. 

The shrinking federal sector is the key factor, Versel noted. This has a ripple effect causing a loss of jobs in the industries that subcontract with the federal government. Attrition has also played a role. As highly-paid federal workers retire, their jobs are either being abolished or reclassified and filled by lower-paid workers. Versel noted:
• In 2010, 40 percent of our area’s GDP was dependent on the federal government
• In 2017, the federal government is expected to be 29.2 percent of the GDP
• Over the last three-and-a-half years, our region has lost more than 22,000 federal jobs 
• During that same period, federal procurement spending decreased by $11 billion. 

“Our area, is starting to resemble a normal city and not the federal government’s company town.”

In the long run, Versel believes that a more diversified local economy will be a good thing. “Our area,” he says, “is starting to resemble a normal city and not the federal government’s company town.”

In the short run, however, the private sector has not been able to take up the slack. “We’re just not adding jobs except for lower-paid health services,” Versel says.

A net growth of 60,000 jobs is expected this year, Versel reported. Next year the local economy should add 66,000 more jobs with 50,000-plus jobs that may be added annually through 2018.

Versel explained that the housing market is still strong but he noted these concerns: 
• There is more demand than supply. 
• Mortgage interest rates will increase in 2014 and the rate will increase to 6 or 7 percent by 2017. 
• Homes for middle class people are missing in action 
• The only room for new housing in Fairfax County is infill development, which comes with a  higher price tag and are used for high-end projects. 
• Half of the housing units in Fairfax County are owned by baby boomers. Many are empty-nesters who want to sell but have nowhere to go.

STATUS OF THE 2014 CONGRESS
Jerry Giovaniello, NAR Senior Vice President of Government Affairs, explained that the challenge today is to get members of Congress to look beyond the deficit and understand that the fundamental questions are, “Who gets to own a home in the future?” and “Who gets to invest in real estate in the future?”

Republican Dave Camp, chair of the House Ways & Means Committee, proposed a major tax reform plan that Giovaniello said could erode the foundations of homeownership in America. If this legislation passes, Geovaniello warned, there “will not be much of a difference between owning a home and renting one.”
The plan: 
• Eliminates deductibility of state and local taxes. 
• Caps Mortgage Interest Deduction (MID) at $500,000
• Allows charitable deductions when greater than 2 percent  of AGI (adjusted gross income)
• Doubles the standard deduction

The Senate and House have introduced radically different legislation regarding the future of Fannie Mae and Freddie Mac, said Giovaniello. 

In the Senate, a bill has been introduced to replace them with a new agency, the Federal Mortgage Insurance Corporation. The FMIC would insure mortgages, with the government serving as a backstop. It retains the $625,000 high–cost area loan limit and calls for a 3.5 percent down-payment for first-time homebuyers and a 5 percent down-payment for repeat buyers.

In the House, the proposed Protecting American Taxpayers and Homeowners Act would eliminate Fannie Mae and Freddie Mac without creating a federal mortgage guarantee. The PATH Act is currently stalled in the House, Giovaniello said. 

VIRGINIA GENERAL ASSEMBLY WRAP-UP
Highlights of the 2014 General Assembly session include a first-time homebuyers’ savings account, explained Mary Beth Coya, NVAR Senior Vice President of Government Affairs. 

Starting on July 1, prospective first-time homebuyers living in Virginia will be able to deposit up to $50,000 in cash or other investments into designated first-time homebuyer savings plan accounts. The earnings on those accounts will be free of state taxes. The funds can be used for down payments and closing costs on first homes, according to Coya.

To read a detailed summary of the General Assembly’s actions on this and other Realtor®- supported legislation, see page 11.