Posted By HR Partnership on July 23, 2009

It’s no secret that it’s a buyer’s market for housing, but a turnaround may be at hand, at least on the Peninsula portion of “Military Bastion” region Hampton Roads, Virginia. The third quarter Regional Economic Forecast and Analysis by Old Dominion University shows there are four times as many homes for sale now as there were five years ago, when sellers got multiple offers. (the full report overview follows)

The Virginia Peninsula Association of Realtors says the market is starting to stabilize in Hampton, Newport News (also a “Patchwork Nation” Boom Town) and York County (also a “Patchwork Nation” Minority Central community). The group says second-quarter sales were up more than 32% from a year ago.

“The $8,000 tax credit has helped, interest rates were really good and still are really good in the low fives,” says Patty Finein with Rose and Womble. New homes moving the fastest are in the $260,000-$300,000 range.

On July 20th, ODU’s Economic Forecasting Team released the Hampton Roads MSA Regional Economic Forecast and Analysis for Third Quarter of 2009. The forecast is as follows:

Serious financial and structural problems within the national and global economies have spread to Hampton Roads and when combined with economic issues peculiar to Hampton Roads, have negatively affected the region’s economic well-being. As a result, in 2009 the region is expected to experience negative economic growth. Hampton Roads’ Gross Regional Product (GRP) is expected to decline by a modest 0.3%.

As in the past with national recessions, the effect on the Hampton Roads region in 2009 will be tempered by the large military presence and the increased funding of U.S. Department of Defense (DoD) procurement and military operations. The DoD direct spending in Hampton Roads in 2009 is expected to reach $18.9 billion, a 4% increase over 2008.

Employment (Non-Agricultural Civilian Employment -0.6%)

Unemployment Rate (Civilian Labor Force 7.1%)

DoD spending notwithstanding, the economic downturn in the national economy as well as the lagged effect of the Ford plant closing (2007) and implementation of the Base Realignment and Closure (BRAC) directive has led to continuously declining employment in Hampton Roads throughout 2008.

Like their national counterparts, Hampton Roads employers struggled with declining demand for services and products, rising inventory and a significant tightening of credit availability. Employment losses in the region’s economy have continued into 2009 although the rate of decline in those losses is likely to taper off.

The overall level of job losses is expected to fall in 2009 as the economy begins to claw its way out of recession over the second half of 2009 and as the performance of the national economy, global trade and the economic stimulus package begin to have a positive effect on Hampton Roads’ output.

The latest data obtained from the Bureau of Labor Statistics shows that Hampton Roads’ economy so far has done relatively better than the Commonwealth of Virginia as a whole. YTD May 2009 data comparison with the same period in 2008 indicates that the Commonwealth lost about 2.4% of civilian jobs compared to a loss of only 0.8% in Hampton Roads.

These data also show that in Hampton Roads the job losses were concentrated in retail trade, construction, manufacturing, information, and financial services sectors. During this period, jobs were gained primarily in health care, professional and business services and government. The combination of job losses as well as the job search difficulties faced by new entrants into the region’s labor force is reflected in a rising Hampton Roads unemployment rate.

Retail Sales (Taxable Sales -5.8%)

Hampton Roads retailers and automobile dealers continue to face a difficult business environment. We estimate that Hampton Roads’ household income rose by about 3% in 2008 and is expected to remain relatively stable in 2009. However, Hampton Roads retail sales declined by approximately 6% during January through May 2009 compared to the same period in 2008.

New auto registrations declined even more dramatically over the period, falling by 30.7%. Much of the decline in both retail and auto sales continues due to declining household wealth, a significant tightening of credit availability and increased household savings.

Tourism (Hotel Room Revenue -3.6%)

Regional tourism has not escaped the national and local economic downturn. Hampton Roads’ hotel revenue declined by an estimated 5.5% during January through May 2009 compared to the same period in 2008. As grim as these data seem, regional tourism fared much better than that of the nation where, hotel revenue dropped by an estimated 16.1% over the same period.

Although Hampton Roads in general appears to have done much better than the nation in garnering hotel revenue during the recent economic downturn, the same cannot be said for some Hampton Roads sub-markets where changes in the growth rate of hotel revenue were spread unevenly. In particular, hotel revenue in the Williamsburg market declined by 18% during first five months of 2009 compared to the same time period in 2008.

Port (General Cargo Tonnage -20.2%)

Throughout 2008, the port of Hampton Roads experienced a modest increase of .6% in its general cargo tonnage. However, this number obscures the fact that cargo tonnage fell dramatically from October to December of 2008 as international trade throughout the world turned seriously negative and this trend has continued in 2009.

Cargo tonnage declined by 23.3% during January through May 2009 compared to the same period in 2008. However, somewhat offsetting the global economic slowdown is a likely gain in cargo tonnage from an increase in vessel calls from CMA CGM and Maersk. Their new service to the port, called the “Columbus Loop Service” became operational during the last week of May 2009.

Housing (Value of Single-Family Housing Permits -28.9%)

The Hampton Roads’ housing market in 2009 is in the process of a wrenching adjustment that features falling prices, past overbuilding and excessive housing inventory. Hampton Roads’ existing residential home inventory as of June 2009 has more than quadrupled since June 2004 while the inventory of new homes has more than tripled over the same period.

Even though home prices have fallen, this price decline has not been enough to reduce inventory significantly. However, the price decline has played an important role in reversing the inventory increase that had gained momentum between 2004 and 2008. Latest data on residential sales and on the active listings of unsold homes indicate that at the current pace of residential sales, it will take approximately 9 to 10 months to exhaust the active residential listings of real estate agents.

The region’s large housing inventory has influenced the behavior of local home builders. Home builders have reacted to the relatively large increase in 2006’s new home inventory with a reduction in construction and continue to do so. Since 2006, the year-over-year reduction in new home construction has continued through 2009 at a pace of more than 1,200 less new homes per year.

The continued excess supply and subsequent disequilibrium in the region’s housing market means that house prices are very likely to continue to decline throughout 2009. Additional symptoms of disequilibrium include declining sales and an extended market time for sales. Year-to-date June 2009 existing home sales have declined by 12.1% while days on the market has risen by 12.3% to 91 days over the same period in 2008.

The Hampton Roads MSA (formally the Virginia Beach-Norfolk-Newport News MSA) includes Currituck County, Gloucester County, Isle of Wight County, James City County, Mathews County, York County, Chesapeake, Hampton, Newport News, Norfolk, Poquoson, Portsmouth, Surry County, Suffolk, Virginia Beach and Williamsburg.

A post by “Patchwork Nation” project director Dante Chinni about our “Hardship Index,” a short term barometer of the economic hardship faced by communities prompted this research.

Additional information provided by Velma Scaife WVEC-TV13 ABC, Peninsula Bureau
Photo credit, WVEC

Categories: Economy
Tags: Economy