The Washington, DC area was one of only two US Metropolitan Statistical Areas (MSAs) in which housing prices increased year-over-year according to the latest release of the S&P/Case-Shiller Home Price Indices. Single family home prices rose 4.1% in the capitol MSA; 1.7% in the San Diego MSA; and were down in all the rest of the 20 MSAs for which the index has data. The 20 MSA composite index is down 2.4%.
There's a problem here. Federal government as an industry is doing much, much better than the other industries which support the other regions of the country – and which support the government. This is NOT all about an increase in federal employees or even how much those employees are paid. The government industry also includes legions of lobbyists and lawyers – much better paid than bureaucrats – who swarm to the capitol to influence the growing share of the national economy controlled by Washington. For fiscal year 2010, federal spending is estimated at 25.55% of Gross National Product! This ratio hasn't been this high since fy 1946 as the country struggled out from the costs of the Second World War. This number doesn't take into account "tax-expenditures" (aka loopholes), which are every bit as much worth lobbying for as actual handouts and do just as much to distort the economy.
This isn't a short-term problem or a partisan problem; it didn't start with the Obama administration. Over the last 10 years the MSA with the highest housing appreciation is also Washington, DC – up 86%; runner ups are LA at 71% and NYC at 68%. The 20 region composite is up 42% but Detroit is DOWN 34% (10% in the last year alone).
We'll know we're on the road to national recovery when influencing government isn't the fastest way to wealth. When that happens, housing prices will go down in the capitol region (and maybe NYC if government-protected banking is phased out) and up in the places where value is actually created.