Fairfax County is short on cash. From WTOP:
"Short on money in this turbulent economy? So are local governments.I wonder how the foreclosure house shopping is going . . .
Fairfax County is telling more than 9,000 county employees to take Jan. 2 off - without pay - to save $2 million. The supervisors and their staff will also go without pay for that day.
The furlough is an unprecedented move by one of the region's more affluent counties.
Fairfax County is $60 million short for 2009 spending and could be half a billion dollars short for 2010".
The comments at WTOP:
Shortfall - Really?
by Tim S. @ 5:24pm - Mon Oct 20th, 2008
FYI there is a group of Fairfax school employees this week in Costa Rica on a conference. With the so called shortage of money they are in beautiful Costa Rica. Think this is responsible management of your tax dollars, I don't.
Doubt me? Go ahead and call the county on it.
If only...
by ricky ricardo @ 5:37pm - Mon Oct 20th, 2008
they didn't spend like drunken sailors they'd have money now. I'm glad I moved. I feel sorry for you poor suckers, because they're going to send that carpet bagging slob Connelly to the House. I guess you get what you ask for. Fairfax is the new Montgomery.
One day?
by Alan O. @ 6:26pm - Mon Oct 20th, 2008
That's not a furlough. That's a gift.
20 comments:
Harriet,
Many people chose to stay in Fairfax because of its supposedly highly rated school system. Do you have any reports on what impact this predicted $ 0.5 billion shortfall in 2010 will have on the school system?
Thanks.
Tedk,
An excellent question. One commenter at the WTOP site wrote: "Fairfax County Public Schools, which I believe take more than 50% of the county budget, are NOT affected by this furlough day...in fact they get the day off WITH PAY."
But you asked about the potential for a massive $0.5 billion shortfall -- I will keep my eyes and ears open on that one. Most of us who live here know some educators in the system.
Not to keep pounding the point... but DC is not immune from a slowdown just because of the federal government.
How do you think this sort of action affects the confidence of these 9000 employees? The $2 million this removes from the local economy isn't all that big a deal by itself, but here are 9000 more people worried about their jobs. (and they should be considering the size of the deficits the county is facing...)
I agree, leroy. Also, there are many people employed outside the Fed. govt. in the area. They will also be feeling the pinch over time -- we already know about people in construction and real estate, but also govt. contractors (easier to cut budgets to them than to cut back fed. employees), health care workers, university employees, restaurant workers, landscapers, gyms, retailers, non-profit workers and everyone else who is employed in industries that depend on a healthy loan market, or on people's ability to pay or donate, discretionary spending, etc.
I saw something in the business journal last weekend re: the shortfalls in various county budgets. Not surprisingly, Arl, Alex & DC had shortfalls of 1-2% which I think they planned to solve with hiring freezes.
The big surprise was, the biggest shortfall was not PWC or even Loudoun (something like 5-7% shortfalls), but Fairfax! If I recall correctly, their shortfall for FY 10 was something like 10%...way to go Gerry Connoly!!!
Harriet,
Thanks. I understand that the school system is not yet affected, but if the projected shortfall for 2010 holds true, that is likely to affect everything.
All,
A real estate agent I know is saying that the consensus among many agents in her office is that, though sales may be sluggish for the rest of the year, prices in FFX will be stable and start rising next year.
In the midst of a severe recession, I take that as nothing more than the standard mantra that agents repeat.
But wanted to know your thoughts.
Thanks.
"I agree, leroy. Also, there are many people employed outside the Fed. govt. in the area. "
Yep, the huge growth in this area hasn't been driven so much by the growth of federal employees, it is primarily growth in every other industry.
Over more recent years the federal government has made up a smaller and smaller percentage of the DC economy, as a result I suspect DC is now much more subject to economic cycles than it was in the past.
"Ted K said...
consensus among many agents in her office is that, sales may be sluggish for the rest of the year, prices in FFX will be stable and start rising next year."
TedK - I too take that as nothing more than the standard mantra that agents repeat. I think its possible that prices in Fairfax will stabilize in the summer or fall of 09, but unlikely before then. As to prices rising, I dont think that will happen for a while still.
Tedk, what I am hearing from my finance friends (one a Wharton School graduate) is that the federal government is trying to get us out of this housing mess via inflation. One told me that housing prices will stay flat or naturally rise due to the amount of money placed in the financial system. He said there is no way the fed government is going to approve desperate prices for future distressed sales. He said they were going to hold the line on housing prices, so we won't see another type of Prince William County bloodshed through the region. I think a lot of the vulture investors know this and that is why they are buying up property now.
He said they were going to hold the line on housing prices, so we won't see another type of Prince William County bloodshed through the region.
--------
Yep, buy now or be priced out forever.
tedk,
Sounds like the kool-aid to me. It could happen, but I'll believe it when I see it, and only then when it's gone 8 months without a decline (beyond the usual seasonal decline), otherwise, I call a dead-cat bounce.
As irvine housing blog says, it's easy to catch the bottom in housing, it'll be long slow and flat.
A.D.
They said this and you believed them? What, are they going to repeal gravity too? and redefine pi to be 3? There is no wage-price spiral, most prices are deflating not inflating. I was worried that the Fed would pick the inflate-your-way-out-of-this solution as well, but I've seen no sign of it, and hence have stopped worrying.
How is the federal government supposed to prevent "desperate" sellers from selling?
Tedk, what I am hearing from my finance friends (one a Wharton School graduate) is that the federal government is trying to get us out of this housing mess via inflation.
I keep hearing this and all I can say is that unless you have wage inflation this isn't going to work. With many qualified people being let go from their jobs, what do you think the likelihood of wage inflation is going to be? It all comes down to affordability -- if homes are not affordable, homes will continue to trend downward until they are affordable. Kind of like the stock market: you can make house prices jump, but you can't make them fly.
Anthony, Cara, etc. Long term, I think they are going to inflate their way out of the problem. However thats long term.
Short term, Cara is right, there is about zero chance of inflation, and a good chance of short term deflation. Look at the price of commodities, and the 8.4 trillion dollar losses in wealth (via the market) this last month. As I see it, all signs point toward deflation, and a healthy bout of it.
That said, I think its almost certain the govt will try to inflate their way out of the problem. Look at the way the dollar has performed against other currencies recently and the incredibly low yeild on treasuries. Its as if the world (even china) is giving the the green light to print dollars like mad.
The real question though is can the govt suceed and if so, when? In the last 3 months over 1 trillion dollars has been pumped in, or is about to be pumped in via new spending, and a lot more is on the way. Still, the price of commodites and other inflation hedges suggest inflation is a long way away.
Does this mean we are in a liquidity trap via japan in the 1990s? Personally I dont think so. However, I just see to much short term downward momentum to worry about inflation for at least another year or so.
Cara, I think your crowd would valiantly proclaim Pi as being 0 so that you vulture buyers can say it finally is an attractive time to buy housing. Just kidding :-) At least 3 is a lot closer to its actual value than zero.
By the way, you never acknowledged that Kingstowne is not dominated by working couples who each make $50,000 each.
I agree that inflation won't start to set in until Spring 2009. Let's see how easy it is to get a mortgage in the next 4 months.
Fairfax County is just one of so many counties, cities and states that face a budget crisis. I don't think you can blame Connelly for all of the county's money woes, as much as you might want to.
There is a context to these problems. A huge problem of course is the Bush administration, which has run up a HUGE budget deficit while amazingly, simultaneously neglecting the infrastructure; waged two wars without paying for them (except through emergency unaccounted for expenditures); expanded the federal workforce; woefully lacked oversight of the financial system; and overzealously promoted home ownership (see Bush's "prosperity initiative" from 2000 (nobody remembers it), which included government programs to expand homeownership to people with poor credit, including this one: "Establish the “American Dream Down Payment Fund” to provide $1 billion of matching grants to lenders over five years to help as many as 650,000 low-income families, who are not enrolled in Section 8, to become homeowners.")
For a reminder, see: http://www.ontheissues.org/Purpose.htm
A.D.
That's true, Kingstowne is not dominated by working couples each making $50k. If it were F-S station wouldn't be where Fox news does its "ask the commuters" sections at 6 AM. Or maybe that's just because it has the best "kiss and ride" to park the Fox news van in.
Everyone who is seeing massive wage inflation, raise your hands!
[crickets]
Thanks everyone for your comments.
FYI, I must say the agent said the same thing last year, but prices continued to decline. What worried me though was that in certain areas like Oakton and Mantua, very few properties got sold, many of them stayed on the market for several months, but sellers were in no mood to meaningfully reduce prices.
In that situation, the stock market crash and recession might force them to make a serious price reduction.
AD,
I would be wary of listening to advice from Finance types. After all, many Wharton MBAs were responsible for the MBS and CDS mess we are currently in.
There is a general fear among some that the government will try to inflate its way out of the problem, but the bailout's details so far haven't shown anything concrete to help with distress sales. A large portion of the bailout goes to taking equity in banks, which won't help distress sales.
Government's buying of toxic mortgage assets from banks and then redoing the mortgages to preveant foreclosures can put a floor under housing prices, but any impact from that is more than nullified by tightening credit and demand destruction from the recession.
The Fed has run out of bubbles to inflate again, so the Japanese experience of the 1990's is possible. I wouldn't rule that out. Krugman says we actually had a mini-Japanese scenario in 2003 with no amount of rate cuts helping with employment levels. Only inflating the Real Estate Bubble prevented the Japanese scenario, but that might have simply deferred it. Over the next year, the financial markets may worsen even more--with more Hedge Fund failures, credit card and auto loan defaults, and Govt actions to address such crises will worsen future inflation. So I agree with crt on long-term inflation. However, we can have inflation in many things while housing prices fall or stay flat for a long time. We saw that in the last couple of years here.
Good points Tedk. I agree about market volatility. Perhaps we'll reach some fair value or equilibrium a lot quicker. Perhaps that is due to information being passed a lot quicker (i.e, Zillow.com) as compared to how information was passed in the Depression. Also ownership of stocks is a lot greater than it was during the 1974 crash, and obviously during the 1930's.
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