Housing 2020 : What is Shaping the Future of Housing in Virginia

Problems emanating from the housing market forced financial institutions to take massive write-downs on their mortgage portfolios, igniting a broader banking crisis. Amid fears about the strength of banks and severe losses of both housing and stock wealth, consumer confidence plunged 41 percent below its lowest previous trough. Households slashed their spending and—for the first time on record—cut their net borrowing. State of the Nation’s Housing 2009

Where we’ve been in the last 5 years Our housing market has been defined by the housing crash over the past 5 years. Over 100,000 homes foreclosed in Virginia Construction of new homes nearly came to a halt Sales of existing homes dipped to record lows Nearly 25% of mortgages in Virginia are underwater or near underwater The homeownership rate began to decline for the first time

After several false starts, there is reason to believe that 2012 marks the beginning of a true housing market recovery. State of the Nation’s Housing 2012

We’re beginning to hear noises that we’ve reached a major turning point in the housing market — and that, with interest rates so low, this is a rare opportunity to buy. But are such observations on target? It would be comforting if they were. Yet the unfortunate truth is that the tea leaves don’t clearly suggest any particular path for prices, either up or down. Robert Schiller, NYT, January 26, 2013

Housing 2020: Why? We need to look beyond recovery from the Housing Crash There are sweeping trends that are re-shaping housing in seismic ways. Our housing markets and products will be widely affected. Understanding these trends and their impacts will help us prepare our communities.

THINK BIG: What is shaping the future of housing in Virginia in the next decade?

Demographics Economics Finance Green/Sustainable

Part 2: Economics Housing 2020

Economics What does Recovery from the “Great Recession” look like in Virginia? The role of the housing industry in recovery Job and income growth are keys to housing Regional variations exist in economic health Student debt has soared, affecting housing choice Loss of home equity creates challenges

Economics Christine Chmura at Chmura Economics Chris is the President and Chief Economist for Chmura Economics & Analytics, a quantitative research and economic development and workforce consulting firm Chris is a quoted source on regional and national trends in the media throughout the Mid-Atlantic and Southeast, as well as national publications such as the Wall Street Journal.

Prospects for economic growth in Virginia

Housing Virginia Video Presentations “Economic Growth in the State” by Chris Chmurra Click to view videoClick to view video - Internet connection is required.

More highly educated workforce keeps VA unemployment < U.S.

Virginia still off 30,000 jobs from peak

Federal Government far outpaced private sector in VA in job creation

Over 170,000 Federal Government employees work in Virginia in 2011

Top ten federal contract recipients by state: Contract AwardsNumber of Contracts Virginia $59,460,984, ,334 California $52,793,263, ,209 Texas $40,368,000, ,244 Maryland $25,905,877, ,504 Pennsylvania $19,237,808, ,548 District of Columbia $19,120,499, ,886 Massachusetts $16,690,889,232 96,379 Florida $16,317,630, ,951 Arizona $14,439,124,750 52,126 Connecticut $12,886,986,080 35,046

RankMetropolitan Statistical AreaContract Awards Number of Contracts 1Washington-Arlington-Alexandria, DC-VA-MD-WV $ 78,563,551, ,500 2Northern Virginia, VA $ 44,738,513, ,546 3Dallas-Fort Worth-Arlington, TX $ 23,268,279,292 45,516 4Los Angeles-Long Beach-Santa Ana, CA $ 16,239,863,641 90,039 5Boston-Cambridge-Quincy, MA-NH $ 14,690,207,829 85,379 6Philadelphia-Camden-Wilmington, PA-NJ-DE-MD $ 12,217,193, ,293 7 New York-Northern New Jersey-Long Island,NY-NJ- PA $ 11,726,190, ,996 8San Diego-Carlsbad-San Marcos, CA $ 11,493,944,115 48,847 9Virginia Beach-Norfolk-Newport News, VA-NC $ 10,728,828,530 57,198 Top federal contract recipients by metropolitan area:

Where will we see growth? The crescent

Housing and the economy: How important is housing to economic growth in VA?

Housing Virginia Video Presentations “Housing Market and the State Economy” by Chris Chmurra Click to view videoClick to view video - Internet connection is required.

SF building permits still well below peak

Single-family building permits: Percent change from Sept 2011

Housing is NOT Leading Us out of the Great Recession

The future of the housing economy:

Housing Virginia Video Presentations “Future of the Housing Economy” by Chris Chmurra Click to view videoClick to view video - Internet connection is required.

Where will prices go? Virginia Association of REALTORS

Are recent price increases sustainable?

Housing Virginia Video Presentations “Recent Rise in Home Prices” by Chris Chmurra Click to view videoClick to view video - Internet connection is required.

The decline in home ownership in Virginia – will it be reversed?

Housing Virginia Video Presentations “Decline in Home Ownership” by Chris Chmurra Click to view videoClick to view video - Internet connection is required.

Millennials and the economy. The unemployment rate for Millennials is 12% - over 17% when discouraged workers are included.

Impact of the housing crash “They’re more risk averse… because of this, they won’t invest as much — into the stock market, housing or any one job.”

Growth in student debt is

Virginia’s students are debt burdened from the start While there are variations, generally more than half of VA grads have student debt Institute for College Access

Student debt…the growing burden

Housing Virginia Video Presentations “Effect of Student Loan Debt on New Homebuyers” by Chris Chmurra Click to view videoClick to view video - Internet connection is required.

Student debt levels will affect loan qualification Student debt + car loan + credit card New QM rules – 43% back end ratio

Decline in home values also acts as a brake on the market.

Housing Virginia Video Presentations “Impact of the Decline in Home Value” by Chris Chmurra Click to view videoClick to view video - Internet connection is required.

What can we expect in terms of income growth?

Factors driving growth in household income in Virginia

Housing Virginia Video Presentations “Factors Driving Growth of HH Income” by Chris Chmurra Click to view videoClick to view video - Internet connection is required.

Lender response

Houses more affordable but credit tougher to get

Housing Virginia Video Presentations “Recession’s Effect on Bank Underwriting” by Chris Chmurra Click to view videoClick to view video - Internet connection is required.

Prospects for homeownership: Is owning a home still a goal?

Housing Virginia Video Presentations “Economic Growth in the State Part 2” by Chris Chmurra Click to view videoClick to view video - Internet connection is required.

Takeaways: Economics Virginia’s economy is recovering but regional variances are large Strong dependence on federal spending is a concern Housing contributes to economic growth / must be a part of the recovery Student debt is now a major factor in housing choice Loss of home equity / refi challenges limit trade ups and consumer spending Millennials are facing employment challenges Price recovery / construction will be slow & uneven

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