Washington, D.C., September 13, 2006 It seems like you can’t pick up a newspaper or turn the TV or radio on without hearing that the region's once red hot housing market is losing some of its steam. Steadily rising interest rates get most of the blame when luxury home builder, Toll Brothers, reports dreary sales and earnings forecasts and the median price of a home in Northern Virginia – once a continuously upward spike – fails to budge from $500,000 where it stood at this time last year. Undoubtedly, the housing market is experiencing a correction or "normalizing" as the experts say but, on the flip side of this news, the silhouette of tall construction cranes keep springing up across the region's skyline.

Undeniably, the D.C. region's commercial developers and builders seem completely unfazed by the woes of the area's home builders. Whether it's the steady line of concrete trucks endlessly pouring for the National's new stadium in Southeast D.C., the largest hotel project contemplated in this area at National Harbor at the foot of the new (and old) Wilson Bridge or the announcement of yet another major commercial project in the burbs or downtown (like Tishman Speyer's planned $100 million signature tower just announced for New York Ave) there's no doubt that the commercial construction market is on fire!

Why do the D.C. region's commercial builders and developers possess such unabashed optimism when the home builders spin tales of dread and doom? A pessimistic economist would tell you simply that large scale commercial projects that were planned and broke ground when economic indicators were strong, cannot be easily reversed despite a market downturn. This simplistic economic generalization while maybe useful for a macro view of a nation's economy, simply does not hold water when one closely analyzes the local economy in the nation's Capitol. Real estate is local! News flash for all of us that live here: home prices can't keep going up over 30% each year like they did in 2004 and 2005!

The fact is that while the housing market is obviously experiencing a slight correction, the area continues to add jobs and draw job seekers in droves to fill those jobs. Northern Virginia is projected to add 44,000 new jobs in 2006 and the same in 2007. The population of the D.C. region as a whole area is expected to swell by 1.2 million people in the next 5 years. People seeking jobs are also people needing homes. Therefore, while the area's homebuilders will not be able to keep ratcheting up their prices and resellers won't be able to capture as much of their "paper profits" as they once could, the D.C. housing market is bound to rebound over the long term since the long term fundamentals that drive the local economy (read: government spending!) remain strong. The commercial builders and developers in the area have figured this out as attested by the long term nature of many local projects. Besides the new stadium and the mammoth National Harbor projects (with its over 1500 hotel rooms at last count!), there's a new monster mixed use project popping up in almost every major suburb. For example, Woodbridge–based developer, National Capital Land & Development, just announced a 5-year, $800 million project in Prince William County that includes over 400,000 square feet of office combined with 526 residences. In addition, governments at all levels are on board with the major infrastructure needed to support the region's long term growth prospects as evidenced by the commitment to the new Metro stop (no tunnel!) at Tyson's Corner.

So, in summary, let's not feel too sorry for short term pain being experienced by the area's homebuilders because – as those with the big money at risk on commercial projects will tell you – it is only "short term pain for long term gain."