hampton roads economy and residential housing market · general cargo tonnage** 19.98m 20.87m +...

1

Hampton Roads EconomyAnd Residential Housing Market

January 17, 2017

Professor Vinod AgarwalDirector, Economic Forecasting Project

Strome College of Business

www.odu.edu/forecasting

The views expressed in this presentation do not represent official positions on the part of Old Dominion University, the Old Dominion University Board of Visitors, or any of the sponsors of the Economic Forecasting Project. The data in this presentation may be subject to revision. To our knowledge, all data in this presentation are accurate at the time of the presentation.

2

PRESENTING SPONSOR

3

Presentation outline

A. Gross Domestic Product and Gross Regional Product

B. Defense Spending in Hampton Roads

C. Civilian Non-Farm Jobs

D. Performance of Hampton Roads Economy through

November 2016

E. Residential Housing Market in Hampton Roads

4

Rate of Growth of Real GDP (U.S.) and GRP (Hampton Roads)

Selected Time Periods from 2001 o 2016*

13.69%

10.84%

2.60% 1.59%

21.21%

0.87%

3.71%1.36%

0%

5%

10%

15%

20%

25%

2001 to 2009 2009 to 2014 2014 to 2015 2015 to 2016e

USA Hampton Roads

Source: Bureau of Economic Analysis and the Old Dominion University Economic Forecasting Project. Data on GDP incorporates latest BEA

revisions in September 2016. * numbers for 2016 are estimates.

5

Defense Spending in Hampton Roads

450

500

550

600

650

700

FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

Billio

ns o

f d

ollars

BCA 2011 Sequestration ATRA2012 BBA 2013 BA 2015

6

Caps on Department of Defense Discretionary Spending, FY 2012 to FY 2021

Source: BCA2011,Budget Requests for FY14, CBO Sequestration Update Report and the Old Dominion University Economic Forecasting Project.

The legislated cap on spending increased by $27B (5.18%) during FY 2016 and by

only $3B or 0.55% during FY 2017; is expected to be $2B less in FY 2018.

What can we expect from President Trump’s Administration?

Three Possibilities

7

450

500

550

600

650

700


Billio

ns o

f d

ollars

Sequestration ATRA2012 BBA 2013 BA 2015 forecast

8



Good times are here again!! 350 Ships; Full Rate F-35; Growing the Army

and Marine Corps. National Defense Expenditures rise by 5% annually

450

500

550

600

650

700


Billio

ns o

f d

ollars


9



Remember the Good Times? Tax Reform, Infrastructure Crowd

out Defense Spending after first year. Possibility of BRAC

including Langley Airforce base and Oceana.

450

500

550

600

650

700


Billio

ns o

f d

ollars


10



Status Quo becomes the new Normal. Tax Reform, Infrastructure and

Defense all compete for attention. Congress continues to modify BCA caps

with a two year cycle.

11Source: U.S. Department of Defense , U.S. Department of Commerce, and the Old Dominion University Economic Forecasting Project

36.7%

39.2%

45.1%

48.8%49.5%

33.5%

0%

10%

20%

30%

40%

50%

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

e

2017

f

Hampton Road’s Gross Regional Product Attributable to DOD Spending

1984-2017

Estimated Direct DOD Spending in Hampton Roads

Source: U.S. Department of Defense and the Old Dominion University Economic Forecasting Project. *Includes Federal Civilian and Military Personnel and Procurement

Bill

ion

s o

f $

12

10.0

19.618.7

19.2 19.1 19.4

$0.0

$5.0

$10.0

$15.0

$20.0

$25.0

Between 2000 and 2012, DOD spending in our region increased by an annual average of 5.8% . In 2017, it will be about 1% lower than its peak in 2012.

2000 to 2017

13

Average Military CompensationHampton Roads: 2001 to 2015

Source: Bureau of Economic Analysis and the Old Dominion University Economic Forecasting Project.

$92.9

$90.4

$91.5

$91.3

0

20

40

60

80

100

120

140

200

1

200

2

200

3

200

4

200

5

200

6

200

7

200

8

200

9

201

0

201

1

201

2

201

3

201

4

201

5

$ T

ho

us

an

ds

Average Military Compensation for the first time since 1969 declined in 2013 by 2.7%; are 1.7% lower in 2015 than its peak in 2012.

14

Estimated Average Compensation (Wages, Salaries and Fringe Benefits) Selected Categories

Hampton Roads: 2014 and 2015

Source: U.S. Bureau of Economic Analysis (BEA) and the Old Dominion University Economic Forecasting Project. * BEA calls compensation as earnings. Data updated on November 17, 2016

Earnings in 2014

Earnings in 2015

Percent change

2014 to 2015

Military $91,531 $91,283 -0.27%

Federal Civilian Govt. Employees

$103,583 $107,521 3.80%

State and Local Govt. Employees

$59,150 $60,088 3.28%

Private Nonfarm $41,279 $42,185 2.19%

15

Growth(CAGR) in Estimated Average Compensation (Wages, Salaries and Fringe Benefits) Selected Categories

Hampton Roads: 2001, 2014, and 2015

Source: U.S. Bureau of Economic Analysis (BEA) and the Old Dominion University Economic Forecasting Project. BEA refers to compensation as earnings.

Compound Annual Growth

Rate

2001 to 2010

Compound Annual Growth

Rate

2010 to 2015

Percent change

2014 to 2015

Military 7.2% 0.7% -0.3%

Federal Civilian Govt. Employees

4.5% 2.6% 3.8%

State and Local Govt. Employees

3.6% 2.1% 3.3%

Private Nonfarm 2.9% 2.0% 2.2%

16

Civilian Non-Farm Jobs in Hampton Roads

The 2007-2009 Recession Including Virginia and Hampton Roads% Decline in Total US Non-farm Payroll Employment from Pre-Recession Peak

4.85%

3.83%

-1.83%

-8%

-6%

-4%

-2%

0%

2%

4%

6%0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 80 85 90 95 100105110

Dec

lin

e fr

om

Pre

-Rec

essi

on

Peak

Month After Pre-Recession Peak

USA VA HR

Pre-Recession Peak Dates:U.S.: January, 2008Virginia: April, 2008

Hampton Roads: July, 2007

Unemployment Rate in U.S., Virginia, and Hampton Roads

0

2

4

6

8

10

12

1/1/

2000

9/1/

2000

5/1/

2001

1/1/

2002

9/1/

2002

5/1/

2003

1/1/

2004

9/1/

2004

5/1/

2005

1/1/

2006

9/1/

2006

5/1/

2007

1/1/

2008

9/1/

2008

5/1/

2009

1/1/

2010

9/1/

2010

5/1/

2011

1/1/

2012

9/1/

2012

5/1/

2013

1/1/

2014

9/1/

2014

5/1/

2015

1/1/

2016

9/1/

2016

Recession US Virginia Hampton Roads

Source: Bureau of Labor Statistics

Annual Civilian Employment (Jobs) in Hampton Roads: 1999 to 2016

706.6

730.5737.5

749.9

775.5767.2

742.2 740.2746.8

765.4769.0

650

675

700

725

750

775

800

Source: U.S. Department of Labor CES data and the Old Dominion University Economic Forecasting Project. Not seasonally adjusted.

The HR economy added only 3,600 jobs in 2016. At the end of 2016, we will still be about 6,500 jobs below our pre- recession level.

In th

ousa

nds

20

Net New Civilian Jobs Gained/Lost in Selected MSA’s, Virginia, and North Carolina

2007* to 2016

-6.5

108.5

19.441.1

76.648.9

105.2

152.1186.4

-50

0

50

100

150

200

Tho

usan

ds

Source: U.S. Department of Labor CES seasonally unadjusted data and the Old Dominion University Economic Forecasting Project. * Peak employment in Raleigh, Durham, Northern Virginia, and Virginia occurred in 2008. Change for these areas is shown for 2008 through 2016. Data will be revised in March 2017

Annual Private Sector Civilian Employment (JOBS) in Hampton Roads

458.2

574.2

619.9 611.7

400

450

500

550

600

650

Source: U.S. Department of Labor CES data and the Old Dominion University Economic Forecasting Project. Not seasonally adjusted.

Compound Annual Growth Rate (CAGR) in the private sector jobs in Hampton Roads was 2.54 percent from 1991 to 2000; 1.1 percent from 2000 to 2007; it has been NEGATIVE 0.15 percent since 2007.

1990 to 2016

In t

hou

san

ds

Change in Employment by Sectors (Private Ownership) in Hampton Roads

Source: Virginia Employment Commission: Covered Employment and Wages by Private Ownership and the Old Dominion University Economic Forecasting Project.

From 1st Quarter 2007 to 1st Quarter 2016 (Virginia Portion of Hampton Roads)

-19,409-12,087

-6,731-5,962

8891,508

3,94118,399

-25,000 -20,000 -15,000 -10,000 -5,000 0 5,000 10,000 15,000 20,000 25,000

Mining, Quarrying, and Oil and Gas Extraction

Transportation and Warehousing

Educational Services

Arts, Entertainment, and Recreation

Management of Companies and Enterprises

Professional, Scientific, and Technical Servi

Accommodation and Food Services

Health Care and Social Assistance

Agriculture, Forestry, Fishing and Hunting

Utilities

Finance and Insurance

Administrative and Support and Waste Management

Real Estate and Rental and Leasing

Wholesale Trade

Manufacturing

Information

Retail Trade

Construction

Total, All industries

Losers (jobs) Gainers (jobs)

Other Services (except Public Administration)

23

Monthly Initial Unemployment Claims- 12 Month Moving Average

Hampton Roads: January 2004 to December 2016

Source: Virginia Employment Commission and the Old Dominion University Forecasting Project

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Currently: 3,493High: 7,449 (May 2010)Pre-Recession Low: 3,974 (Dec. 2007)

24

Performance of Hampton Roads Economy through November 2016

25

Performance of Hampton Roads Economy

YTD November 2015 and YTD November 2016

YTD Nov.2015

% Change

Civilian Labor Force 839,982 831,126 - 1.05

Employment 798,238 792,996 - 0.66

Unemployment 41,744 38,130 --8.66

Unemployment Rate 4.97% 4.59%

Civilian Non-Farm Jobs 764,782 768,918 + 0.54

New Auto Registrations 79,612 80,131 + 0.65

Taxable Sales $19.60B $19.98B + 1.91

YTD Nov.2016

26** Data shown here are for YTD December 2015 and YTD December 2016.

YTD Nov.

2015

YTD Nov.

2016% Change

Hotel Revenue $705.35M $754.58M + 6.98

General Cargo Tonnage** 19.98M 20.87M + 4.46

TEU Containers** 2,549,270 2,655,704 + 4.18

Number of 1 Unit Housing Permits 3,781 3,645 - 3.60

Value of 1 Unit Housing Permits $763.86M $777.20M + 6.98

Number of Existing Homes Sold** 20,595 22,456 +9.04

Distressed Homes as a percentage of all Existing Homes Sold**

18.32 14.68

Median Price of Existing Homes Sold** $203,000 $210,000 +3.45

Performance of Hampton Roads EconomyYTD November 2015 and YTD November 2016

27

Residential Housing Market in Hampton Roads

28

Number of Existing and New Construction Homes Sold

Hampton Roads: 2002-2016

Year Existing Homes SoldNew Construction

Homes Sold

Percent New

Construction

2002 19,869 4,969 20.0%

2003 21,421 4,757 18.2%

2004 23,548 4,587 16.3%

2005 24,755 4,379 15.0%

2006 22,405 4,327 16.2%

2007 19,154 3,912 17.0%

2008 15,046 3,178 17.4%

2009 15,851 2,673 14.4%

2010 14,703 2,265 13.4%

2011 15,818 2,366 13.0%

2012 16,856 2,664 13.6%

2013 18,791 2,878 13.3%

2014 18,700 2,485 11.7%

2015 20,595 2,954 12.5%

2016 22,456 3,219 12.5%

Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information Deemed Reliable But not

Guaranteed. Figures reported here represent only those properties that are listed through REIN by REIN members and may not represent all new

construction activity in our region.

41% decline

in sale of existing homes

from 2005 to 2010

29

Median Sale Price of Existing Residential Homes


Year Median Price Percent change year to year

2002 $116,900 7.3%

2003 $130,000 11.2%

2004 $156,500 20.4%

2005 $192,000 22.7%

2006 $214,900 11.9%

2007 $223,000 3.8%

2008 $219,000 -1.8%

2009 $207,000 -5.5%

2010 $203,900 -1.5%

2011 $180,000 -11.7%

2012 $185,000 +2.78%

2013 $190,000 +2.70%

2014 $193,205 +1.70%

2015* $203,000 +5.07%Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information deemed reliable but not guaranteed.

90% increase from 2002-07

19% decreaseFrom 2007-11

Existing Residential Homes Sold and Average Days on the Market


30Source: Real Estate Information Network Inc. and the Old Dominion University Economic Forecasting Project. Information deemed reliable but not guaranteed. Days on Market is calculated from the date listed to the date under contract date for existing homes sold.

17,058

18,924

24,755

19,154

15,046

14,703

18,791

20,595

22,456

6761

27 28

65

83

102

8884

75

0

20

40

60

80

100

120

0

5,000

10,000

15,000

20,000

25,000

30,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Homes Sold Average Days on Market

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2007 2010 2015 2016

31

Estimated Inventory of Existing Residential Homes as Measured by Active Listings

Hampton Roads: 2007, 2010, 2015, and 2016

Source: Real Estate Information Network Inc. and the Old Dominion University Economic Forecasting Project. Information deemed reliable but not guaranteed.

Average ( Jan. 1996 through December 2016) = 8,037

0

2

4

6

8

10

12

Estimated Months of Supply of All Existing Homes in Hampton Roads

Based on Average Sales in the Last 12 Months: January 1996 – December 2016

32Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information deemed reliable but not guaranteed.

Average (Jan 1996- December 2016) = 5.66 months

December 2016: 4.33Peak: 10.24 (November 2010)

33

Summary on Existing Homes

• Inventories have decreased substantially since 2010.

• Days on Market have also decreased.

• Sales volume of Homes have increased.

• Supply of homes currently is at 5 months, lower than historic average of 5.64 months.

• But the median price of homes have increased only slightly:

• The explanation lies in distressed market– Short sales and bank owned homes (REOs).

606

0

500

1,000

1,500

2,000

2,500

3,000

3,500

Jun

-08

Sep

-08

Dec

-08

Mar

-09

Jun

-09

Sep

-09

Dec

-09

Mar

-10

Jun

-10

Sep

-10

Dec

-10

Mar

-11

Jun

-11

Sep

-11

Dec

-11

Mar

-12

Jun

-12

Sep

-12

Dec

-12

Mar

-13

Jun

-13

Sep

-13

Dec

-13

Mar

-14

Jun

-14

Sep

-14

Dec

-14

Mar

-15

Jun

-15

Sep

-15

Dec

-15

Mar

-16

Jun

-16

Sep

-16

Dec

-16

Number of Active Listing of Distressed Homes (REO & Short Sales)

Hampton Roads: June 2008 to December 2016

34Source: Real Estate Information Network (REIN) and the Old Dominion University Economic Forecasting Project.

December 2016: 1,229Peak: 3,224 (November 2010)

Number of Existing Short Sale and REOs Residential Homes Sold

Hampton Roads: 2006- 2016

35Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information Deemed Reliable But not Guaranteed.

Year All Sales Short SalesPercent

Short SalesREO Sales

Percent

REO Sales

2006 22,405 3 <1% 56 <1%

2007 19,152 40 <1% 223 1.2

2008 15,047 217 1.4 833 5.5

2009 15,849 598 3.8 2,271 14.3

2010 14,696 784 5.3 3,021 20.6

2011 15,817 1,127 7.1 4,213 26.62012 16,856 1,644 9.8 3,337 19.8

2013 18,791 1,769 9.4 3,178 16.9

2014 18,700 1,347 7.2 2,744 14.7

2015 20,592 1,230 6.0 2,542 12.3

2016 22,456 1,002 4.5 2,294 10.2

Average Price of Existing Non-Distressed, Short Sale, and REOs Residential Homes Sold


36Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information Deemed Reliable But not Guaranteed.REOs represent Bank Owned Homes.

YearNon-Distressed

Sales Short Sales

Short Sales

Price % Non-

Distressed

Price

REO Sales

REO Price %

Non-Distressed

Sales

2006 $250,254 $241,666 96.6 $120,817 48.3

2007 $261,723 $237,897 90.9 $163,421 62.4

2008 $255,852 $239,110 93.5 $184,462 72.1

2009 $243,902 $239,913 98.4 $164,229 67.3

2010 $251,572 $231,211 91.9 $151,612 60.3

2011 $236,358 $212,967 90.1 $135,304 57.3

2012 $237,215 $187,527 79.1 $134,535 56.7

2013 $245,344 $180,001 73.4 $131,644 53.7

2014 $244,940 $171,745 70.1 $128,242 52.4

2015 $251,941 $174,577 69.3 $130,959 52.0

2016 $254,815 $171,432 67.3 $131,143 51.5

Housing Affordability and Foreclosures

37

38

Hampton Roads Residential Foreclosure Fillings

2006 to 2016

Source: ATTOM Data Solutions formerly known as RealtyTrac and the Old Dominion University Economic Forecasting Project. NTS and REO

644

2,111

6,521

9,785

12,800

6,9698,245

7,604

5,9866,565 6,396

0

5000

10000

15000

Foreclosure filings in Hampton Roads decreased by 2.6% in 2016; these are now 50% below their peak in 2010.

39

30 year Average Fixed Rate MortgageJuly 7, 2016 to January 12, 2017

3.413.47

4.32

4.12

https://fred.stlouisfed.org/graph/?g=coqq

https://fred.stlouisfed.org/graph/?g=coqq

40

Housing Affordability: Monthly Payment for a Median Price Resale House as a Percent of Median Household Monthly Income

Hampton Roads and the U.S. : 1979 to 2016

38.336.3

28.0

34.4

27.3

21.5

19.0

22.8 22.5

36.0

31.1

20.6

30.6

27.8

22.2

18.4 19.5 19.3

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

45.00

1979 1989 1999 2006 2008 2010 2012 2014 2016

Pe

rce

nt

U.S.

Hampton Roads

Source: The Old Dominion University Economic Forecasting Project. Prevailing 30 year average mortgage rate is used for each year. For example rate used for 2015 is 3.85 percent and for 2016 it is 3.65 percent

41

Estimated House Rental and Principal, Interest, and Taxes for a House Payment


YearMedian Monthly Rent for

a Three Bedroom House

PI&T Monthly for a

Median Priced

Existing House

Ratio of Monthly Rent

to PI&T

2002 911 861 1.06

2003 1,037 890 1.16

2004 1,044 1,073 0.97

2005 1,087 1,315 0.83

2006 1,118 1,533 0.73

2007 1,164 1,598 0.73

2008 1,247 1,507 0.83

2009 1,236 1,307 0.95

2010 1,277 1,233 1.04

2011 1,319 1,071 1.23

2012 1,454 1,015 1.43

2013 1,570 1,080 1.45

2014 1,562 1,118 1.40

2015 1,530 1,154 1.33

2016 1,601 1,163 1.38Source: H.U.D. and the Old Dominion University Economic Forecasting Project. It is assumed that real estate tax rate is 1% and the tax reduction received by home owners would compensate for home owners insurance and maintenance expenditures. Prevailing 30 year average mortgage rate is used for each year. For example rate used for 2015 is 3.85 percent and for 2016 it is 3.65 percent

42

2016 Regional Summary

• Look for regional economic growth to be below its half-century annual average of 3.1 percent and below that of the nation.

• Port, health-care industries, and tourism are likely to help the region’s economic expansion in 2017

• Single-family home prices in 2017 are likely to continue to increase at a moderate pace.

– Inventories, sale volume, and days-on-market are all moving in the right direction. Months of supply of existing homes are below their historic average.

• Lingering distressed volume continues to remain a concern

– REOs appear to be one of the driving forces behind a moderate growth in home prices.

• If you would like to receive economic updates from the Center If you would like to receive economic updates from the Center If you would like to receive economic updates from the Center for Economic Analysis and Policy and have immediate access to for Economic Analysis and Policy and have immediate access to our reports, please visit our website at for Economic Analysis and Policy and have immediate access to for Economic Analysis and Policy and have immediate access to our reports, please visit our website at our reports, please visit our website at www.ceapodu.comwww.ceapodu.comwww.ceapodu.com

• To join our email list from your smartphone, text the keyword To join our email list from your smartphone, text the keyword To join our email list from your smartphone, text the keyword CEAPODU to 66866. Our reports and press releases will be CEAPODU to 66866. Our reports and press releases will be directly to your Inbox.

• Follow CEAPODU on Facebook and Twitter for upFollow CEAPODU on Facebook and Twitter for up-Follow CEAPODU on Facebook and Twitter for up-tototo-toto-date Follow CEAPODU on Facebook and Twitter for upFollow CEAPODU on Facebook and Twitter for upFollow CEAPODU on Facebook and Twitter for upFollow CEAPODU on Facebook and Twitter for up tototototo date information to help you understand new economic information to help you understand new economic developments.

http://www.ceapodu.com/

hampton roads economy and residential housing market · general cargo tonnage** 19.98m 20.87m +...

Documents