When The Bubble Bursts Where Will We Be?
Welcome to the world of the "unreal". Others just call it supply and demand.
With a continued heavy demand for housing throughout the greater metro DC market, the artificial constraints placed by local governments on the development pipeline throughout the region, and a frenzy of buying opportunities for every spectrum of the housing market, what Frederick County has and is experiencing will continue unabated until one of the three factors reverses or the bubble bursts.
A bubble has been built and is growing larger, don't know when, but it is sure to come unglued at some point. The first indications are in the non-residential real estate area where small business cannot afford the current land prices. This is being mirrored by small businesses that "need population growth" to sustain their enterprises. If the rate of growth is not going to be there, neither are they.
Perhaps it is a signs of the times; perhaps it is the first indicator that something is going to happen.
Beginning several years ago, a number of development support businesses shut down or drastically reduced their Frederick operations and moved North and West. Currently, with a relatively flat growth rate, so are so other businesses. Is this an early indicator of an economic "bubble" about to burst? Don't really know, but could be.
When you add the change demographics of who is buying these expensive houses, ($200,000 for a townhouse and almost $300,000 for single family detached), marginal medium size firms are contemplating their options as buying patterns have and are shifting. Witness the change in a number of stores in the Rt. 85 corridor. If these demographic changes continue, certain segments of national chain stores may begin to marginalize their staying as well.
On top of all that, consider the very base of small and medium size businesses for their work force. Many of the businesses we have attracted in the past decade depend on entry-level jobs. As housing rates soar, so do rents. What happens next is that we get "apartment sharing" or mass exodus as these entry level positions find it harder to rent or own housing in the county. At what point do these businesses begin to consider their options for remaining or leaving?
Apartment sharing, as used here, is not always two or three families living in a three bedroom apartment, but rather eight to 10 wage earners who come in on Sunday night to go to work in the area, then beat it out of town on Friday evening to go home. North and West.
Every politician touts the idea that the high tech businesses they are attracting are what the county needs. Yet an underlying fallacy is that if it is all you attract, at some point you have only $400,000-plus houses being occupied by people who historically do not "shop," but rather recreate or eat out. Witness the rise in the number of restaurants in and around Frederick City, yet very few new other types of stores. (Don't forget we need to add the small stores that went belly up, even in new "malls" because they were either victims of changing demographics or bad market plans even as our population grows.)
A correlation to this shift in services is the number of $35,000+ cars being placed on the dealers lots in relation to the affordable "family" car.
Now where can all the entry-level employees and non-$100,000 a year household incomes afford to live? North and West.
I recently heard of an individual who spent months trying to find a home here in Frederick County. Even with low interest rates and a reasonably good family income, all they could find was very small "fixer-uppers." So, like many now, they bit the bullet and got the house they wanted on 2 acres near Clear Spring, MD, 12 miles west of Hagerstown or roughly a 45-minute commute back to Frederick.
As a final note, several weeks ago I had to travel to Mercersburg, PA, about a good hour away from Frederick. Near the town on the left side of Route 16 was a Dan Ryan development, until recently a big builder here in the county. So where are people going? North and West.
At some point we need to take stock of where we are headed and what we have done to ourselves as a county. Perhaps as we watch this bubble grow, we need to ask ourselves what can we do to minimize the fallout when it bursts.