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Why Military Towns Could Be Hit the Hardest by the Fiscal Cliff

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Military Towns Could Be Hit the Hardest by the Fiscal Cliff

As lawmakers in Washington, D.C. continue to argue over the federal budget, homeowners across the country are watching and waiting, wondering if the looming fiscal cliff will affect their property values. In an effort to balance the budget, politicians are trying to determine if they should extend Bush-era tax cuts or let them expire. They’re also fighting over automatic spending cuts that are set to take place next month. If they don't act soon, the country's economy and housing markets could collapse quickly.

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But what housing markets in particular would be hit the hardest?

Financial experts say communities that are located near military bases might be among those affected the most. Why? If you've been paying close attention to the budget talks, you may have heard the term “sequestration” but aren't sure what it means. Simply put, sequestration is the implementation of automatic, across-the-board spending cuts in an effort to balance the budget. In other words, each department and program of the federal government would have budget cuts, including the Department of Defense. This would not only affect the various branches of the military, but subcontractors as well, many of whom survive by securing and working on Department of Defense-funded federal contracts. It's believed by many that service leaders would try to not cut active-duty resources, but instead find ways to eliminate spending in the National Guard and reserves. What does all of this mean? Basically, any community that is located near a military base could see a major dropoff in the housing market. With fewer federal contract jobs available, contractors are likely to move elsewhere to find work, meaning there could be less demand for rental housing. Also, unemployment rates in these communities would rise, causing homeowners to get behind in mortgage payments, and perhaps, lose their homes due to foreclosure.

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So, which states and cities would be hit the hardest?

According to data released by the Center for Security Policy earlier this year, towns and cities in Florida, Maryland, Virginia, California, Texas, and North Carolina. Virginia and Maryland both have multiple military bases, and border the beltline, so any decisions made by lawmakers within the nation's capital could doubly affect these two surrounding states. Not only would military personnel be affected, but also contract employees who work for federal agencies in Washington, D.C. could feel the sting if their positions are eliminated by the cuts. In North Carolina, cities like Fayetteville, which is home to Fort Bragg, could suffer the most. That entire community revolves around and survives on the military base, so if cuts occur there, the affects would be felt both on base and beyond its outer gates. Businesses owned by civilians that surround the base could see a dropoff in income, causing some stores to shut down and some homeowners to lose their job, and eventually, their homes. The same goes for many towns in Florida that surround military bases. And, even in Texas, where parts of the state seem to be recession-proof, the cuts in military funding could hurt the housing market. It's hard to believe that home prices could drop, foreclosures could rise, and the inventory of homes for sale could increase in towns like Killeen, TX (home to Ft. Hood), but that cities three hours away like Houston could be immune from feeling the effects.

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But that's exactly what could happen if the fiscal cliff isn't addressed soon. So, what does this all mean if you're looking to buy or sell a home in the coming months?

Well, the housing market in many cities and towns across the country could be affected by the federal budget crisis, but military communities are expected to be hit the hardest. So, if you own a home in one of these areas and are looking to sell, the sooner you put the home on the market, the better. The budget cuts will likely create a lack of demand for homes, so your listing price may suffer. Also, there will be more competition since more homes will be on the market if a recession occurs. Meanwhile, if you're a buyer, this might be the best news possible for you. Less competition and less demand for homeownership in these communities means you may have more bargaining room in a military community than you will elsewhere.


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