March 2024: High Interest Rates Subtly Undermine Regional Vibrancy in March, but Improvement Expected in Coming Months

The Greater Washington Region continues to weather headwinds of higher interest rates and sluggish federal government activity. However, trends suggest improvement in upcoming months.

The index declined 6.7% from the previous month to 60, mainly due to the ongoing effects of higher interest rates on real estate activity, utilization and property values. Recent reports note the impact of sharply lower office property values beginning to impair local municipal budgets. However, higher interest rates have slightly softened the region’s strong labor market, pushing the region’s unemployment rate up to a preliminary figure of 3.1% in February 2024 in comparison to 2.7% in November 2023.

A pullback in federal government spending locally and political inertia in Congress are also dampening regional vibrancy. Since peaking in July 2023, federal contracts procured within Greater Washington have declined 14.7%. Congress’ passage of bills is near its lowest level in years.

The region’s vibrancy is supported by a persistently tight labor market with a historically low unemployment rate, record-high home prices and improved mobility indicators. Over the next several months, vibrancy around the region should improve with rejuvenated residential and commercial real estate activity as well as tourism-triggered increase in mobility and hotel occupancies.

It is worth noting that the REVIVE Vibrancy Index has been enhanced and recalibrated to include a new "Mobility and Visitation" component, which helps to provide an even more comprehensive view of vibrancy indicators across the region.

While the Index has seen a decline, there are indications of improvement in the coming months, including a tight labor market, high home prices and improved mobility indicators.