1. Strome College of Business
Hampton Roads Economy
And Residential Housing Market
January 12, 2016
Professor Vinod Agarwal
Director, Economic Forecasting Project
Strome College of Business
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. Gross Domestic Product and Gross Regional Product
Presentation outline
Gross Domestic Product and Gross Regional Product
Defense Spending in Hampton Roads
Civilian Non-Farm Jobs
Performance of Hampton Roads Economy through November 2015
Residential Housing Market in Hampton Roads

3. Rate of Growth of GDP (U.S.) and GRP (Hampton Roads): 2001-2015
U.S.
Hampton Roads
Source: Bureau of Economic Analysis and the Old Dominion University Economic Forecasting Project. Data on GDP incorporates latest BEA revisions in September Real GRP for Hampton Roads is calculated by using the GDP price deflator

4. Defense Spending in
Hampton Roads

5. Caps on Department of Defense Discretionary Spending, FY 2012 to FY 2021
The legislated cap on spending increased by only $0.8B (0.15%) for FY 2015 and is now expected to increase by $26.8B (5.14%) during FY 2016 and by only 0.55% during FY 2017
Approximately $22 billion dollars each were cut in FY11 and FY12 Approximately $22 billion dollars each were cut in FY11 and FY12. Discretionary Defense spending cap increased by about $19 Billion in FY 2014 compared to FY Cap increases by only 0.15% for FY 15 and then by 0.35% in FY16; increasing by 2.4% annually thereafter
Source: BCA2011,Budget Requests for FY14, CBO Sequestration Update Report and the Old Dominion University Economic Forecasting Project.

6. Estimated Direct DOD Spending in Hampton Roads
Between 2000 and 2012, DOD spending in our region increased by an average of 5.6% annually. In 2015, it will be about 3.2% lower than its peak in 2012.
Billions of $
Cumulative annual growth rate of DOD spending from 2000 to 2012 was 5.6%. DOD spending in 2015 is expected to be 3% lower than in 2012.
Source: U.S. Department of Defense and the Old Dominion University Economic Forecasting Project. *Includes Federal Civilian and Military Personnel and Procurement

7. Hampton Road’s Gross Regional Product Attributable to DOD Spending
Mil employment in late eighties and early 90s was at about 140k and had declines to 106K in 1998 before bouncing back to 113K in 2003
Total Military compensation from 1992 to 1999 declined from about $4.9 Billion to $4.3 Billion in 1998
Source: U.S. Department of Defense , U.S. Department of Commerce, and the Old Dominion University Economic Forecasting Project

8. Cumulative Average Growth Rate
Growth in Estimated Average Compensation (Wages, Salaries and Fringe Benefits) Selected Categories
Hampton Roads: 2001, 2013, and 2014
Earnings in 2001
Earnings in 2013
Earnings in 2014
Cumulative Average Growth Rate
2001 to 2010
2010 to 2014
Percent change
2013 to 2014
Military
$47,077
$90,115
$91,503
7.2%
1.0%
1.5%
Federal Civilian Govt. Employees
$63,631
$97,800
$102,829
4.5%
2.1%
5.1%
State and Local Govt. Employees
$40,251
$56,933
$58,318
3.6%
1.3%
2.4%
Private Nonfarm
$29,415
$40,262
$41,198
2.9%
2.0%
2.3%
Source: U.S. Bureau of Economic Analysis (BEA) and the Old Dominion University Economic Forecasting Project. * BEA calls compensation as earnings.

9. Civilian Non-Farm Jobs
in Hampton Roads

10. The 2007-2009 Recession Including Virginia and Hampton Roads
% Decline in Total US Non-farm Payroll Employment from Pre-Recession Peak
Through December for USA; November 15 for VA and HR

11. Unemployment Rate in U.S., Virginia, and Hampton Roads
Source: Bureau of Labor Statistics

12. Annual Civilian Employment (Jobs) in Hampton Roads: 1999 to 2015
The HR economy added only 1,100 jobs in At the end of 2015, even with 7,000 jobs created in 2015, we will still be about 15,000 jobs below our pre- recession level.
In thousands
Source: U.S. Department of Labor CES data and the Old Dominion University Economic Forecasting Project. Not seasonally adjusted.

13. Annual Private Sector Civilian Employment (JOBS) in Hampton Roads
Our Compound Annual Growth Rate (CAGR) in the private sector jobs was percent from 1991 to 2000; it was 1.1 percent from 2000 to 2007; it has been NEGATIVE 0.5 percent since 2007.
In thousands
Source: U.S. Department of Labor CES data and the Old Dominion University Economic Forecasting Project. Not seasonally adjusted.

14. Job Gains and Loses (In Thousands)
Hampton Roads: 2007 to (YTD November)
Gainers (jobs)
Losers (jobs)
Construction
Retail and Wholesale Trade
Local Government
Information
Manufacturing
Finance
Transportation and Warehousing
Source: U.S. Department of Labor CES data and the Old Dominion University Economic Forecasting Project. Not seasonally adjusted. Data will be revised in March 2016

15. Change in Employment by Sectors in Hampton Roads
From 1st Quarter 2007 to 1st Quarter (Virginia Portion of Hampton Roads)
Aggregate of all types of ownership
Source: Virginia Employment Commission: Covered Employment and Wages by Private Ownership and the Old Dominion University Economic Forecasting Project.

16. Monthly Initial Unemployment Claims- 12 Month Moving Average
Hampton Roads: January 2004 to December 2015
Currently: 3,833
High: 7,449 (May 2010)
Previous Low: 3,974 (Dec. 2007)
Source: Virginia Employment Commission and the Old Dominion University Forecasting Project

17. Performance of
Hampton Roads Economy
through November 2015

18. Performance of Hampton Roads Economy
YTD November 2014 and YTD November 2015
YTD Nov.
YTD Nov.
% Change
2014
2015
Civilian Labor Force
845,535
838,749 -
0.80
Employment
797,284
795,886
0.18
Unemployment
48,251
42,863
11.17
Unemployment Rate
5.71%
5.11% -
Civilian Non
Farm Jobs
752,855
759,173
+0.84
Number of Jobs added since
previous December
4,200
6,500
New Auto Registrations
75,886
79,612
+4.91
Taxable Sales
$18.92B
$19.60B
+3.62

19. Performance of Hampton Roads Economy
YTD November 2014 and YTD November 2015
YTD Nov.
YTD Nov.
% Change
2014
2015
Hotel Revenue
$666.95M
$707.55M
General Cargo Tonnage
17.27M
18.39M
TEU Containers
2,189,762
2,352,231
Number of 1 Unit Housing Permits
3,470
3,698
+ 6.57
Value of 1 Unit Housing Permits
$718.44M
$780.80M
+ 8.68
Number of Existing Homes Sold**
18,700
20,595
+10.13
Distressed Homes as a percentage of all
Existing Homes Sold**
21.88
18.32
Median Price of Existing Homes Sold**
$193,205
$203,000
+5.07
** Data shown here are for YTD December 2014 and YTD December 2015.

20. Residential Housing Market in
Hampton Roads

21. Median Sale Price of Existing Residential Homes
Hampton Roads:
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%
90% increase
from
19% decrease
From
Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information deemed reliable but not guaranteed.

22. Existing Residential Homes Sold and Average Days on the Market
Hampton Roads:
Source: 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.

23. Estimated Inventory of Existing Residential Homes as Measured by Active Listings
Hampton Roads: 2007, 2010, and 2015
Average ( Jan through December 2015) = 7,914
Source: Real Estate Information Network Inc. and the Old Dominion University Economic Forecasting Project. Information deemed reliable but not guaranteed.

24. Estimated Months of Supply of All Existing Homes in Hampton Roads
Based on Average Sales in the Last 12 Months: January 1996 – December 2015
December 2015: 5.00
Peak: (November 2010)
Average (Jan December 2015) = 5.64 months
Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information deemed reliable but not guaranteed.

25. 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: 2.8 % in 2012, 2.7 % in 2013, only 1.7 % in 2014, and 5.1% in 2015.
The explanation lies in distressed market– Short sales and bank owned homes (REOs).

26. Active Listing of Distressed Homes (REO & Short Sales)
As a Percentage of Total Existing Residential Homes Listings in Hampton Roads
December 2015: 17.08%
Peak: 29.23% (December 2012)
Source: Real Estate Information Network (REIN) and the Old Dominion University Economic Forecasting Project.

27. Number of Existing Short Sale and REOs Residential Homes Sold
Hampton Roads:
Short Sales
Percent
Short
Sales 3
<1% 40
217
1.4
598
3.8
784
5.3
1,127
7.1
1,644
9.8
1,769
9.4
1,347
7.2
1,230
6.0
REO Sales
Percent REO
Sales 56
<1%
223
1.2
833
5.5
2,271
14.3
3,021
20.6
4,213
26.6
3,337
19.8
3,178
16.9
2,744
14.7
2,542
12.3
Year
All Sales
2006
22,405
2007
19,152
2008
15,047
2009
15,849
2010
14,696
2011
15,817
2012
16,856
2013
18,791
2014
18,700
2015
20,592
Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information Deemed Reliable But not Guaranteed.

28. Average Price of Existing Short Sale, REOs, and Non-Distressed Residential Homes Sold
Hampton Roads:
Short Sales
Short
Sales
Price % Non -
Distressed Price
$241,666
96.6
$237,897
90.9
$239,110
93.5
$239,913
98.4
$231,211
91.9
$212,967
90.1
$187,527
79.1
$180,001
73.4
$171,745
70.1
$174,577
69.3
REO Sales
REO Price %
Non -
Distressed
Sales
$120,817
48.3
$163,421
62.4
$184,462
72.1
$164,229
67.3
$151,612
60.3
$135,304
57.3
$134,535
56.7
$131,644
53.7
$128,242
52.4
$130,959
52.0
Year
Non -
Distressed
Sales
2006
$250,254
2007
$261,723
2008
$255,852
2009
$243,902
2010
$251,572
2011
$236,358
2012
$237,215
2013
$245,344
2014
$244,940
2015
$251,941
Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information Deemed Reliable But not Guaranteed. REOs represent Bank Owned Homes..

29. Estimated House Rental and Principal, Interest, and Taxes for a House Payment
Hampton Roads:
Year
Median 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
2008
1,247
1,507
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
1.40
2015
1,530
1,154
1.33
Source: 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.

30. 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 2015
Mortgage rates were 4.17 for 2014
Source: The Old Dominion University Economic Forecasting Project. We utilize a 30-year mortgage rate of 3.85 Percent for 2015.

31. Number of New Construction Residential Homes Sold
Hampton Roads:
Year
Number Sold
Percent change year to year
2002
4,969
2.8%
2003
4,757
-4.3%
2004
4,587
-3.6%
2005
4,379
-4.5%
2006
4,327
-1.2%
2007
3,912
-9.6%
2008
3,178
-18.8%
2009
2,673
-15.9%
2010
2,265
-15.3%
2011
2,366
4.5%
2012
2,664
12.6%
2013
2,878
8.0%
2014
2,485
-13.7%
2015
2,954
18.9%
54% decrease
From
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.

32. Median Sale Price of New Construction Residential Homes
Hampton Roads:
Year
Median Price
Percent change year to year
2002
$186,415
9.1%
2003
$220,490
18.3%
2004
$260,000
17.9%
2005
$333,280
28.2%
2006
$349,900
5.0%
2007
$335,348
-4.2%
2008
$299,900
-10.6%
2009
$283,615
-5.4%
2010
$289,900
2.2%
2011
$276,755
-4.5%
2012
$273,950
-1.0%
2013
$286,218
4.5%
2014
$291,830
2.0%
2015
$300,143
2.9%
22% decrease
From
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

33. Estimated Months of Supply of New Construction Homes in Hampton Roads
Based on Average Sales in the Last 12 Months: January 1996 – December 2015
Average (Jan December 2015) = 6.85 months
Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information deemed reliable but not guaranteed.

34. 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 2016
Single-family home prices in 2016 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.

36. Number of Existing Residential Homes Sold
Hampton Roads:
Year
Number Sold
Percent change year to year
2002
19,869
5.0%
2003
21,421
7.8%
2004
23,548
9.9%
2005
24,755
5.1%
2006
22,405
-9.5%
2007
19,154
-14.5%
2008
15,046
-21.5%
2009
15,851
5.4%
2010
14,703
-7.2%
2011
15,818
7.6%
2012
16,856
6.6%
2013
18,791
11.5%
2014
18,700
-0.5%
2015
20,595
10.1%
39% decline
from
Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information deemed reliable but not guaranteed.

37. Number of Existing and New Construction Homes Sold
Hampton Roads:
Year
Existing Homes Sold
New 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%
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.

38. Median Sale Price of Existing Residential Homes
Selected Cities in Hampton Roads: 2002 and 2007
City
Median Price
2002
2007
% change
Chesapeake
$134,900
$250,100
85.4%
Norfolk
$ 93,200
$195,000
109.2%
Portsmouth
$ 80,300
$165,500
106.1%
Suffolk**
$139,900
$257,500
84.1%
Virginia Beach
$125,000
$245,000
96.0%
Hampton
$ 92,900
$180,000
93.8%
Newport News
$105,000
$199,250
89.8%
Williamsburg*
$157,325
$284,450
80.8%
Hampton Roads
$116,900
$223,000
90.8%
Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information Deemed Reliable But not Guaranteed. * Williamsburg represents Williamsburg, James City County, York County and Gloucester County. ** Median price in Suffolk peaked in 2006 at $263,950

39. Median Sale Price of Existing Residential Homes
Selected Cities in Hampton Roads: 2007 and 2014
City
Median Price
2007
2014
% change
Chesapeake
$250,100
$219,000
-12.4%
Norfolk
$195,000
$157,038
-19.5%
Portsmouth
$165,500
$115,500
-30.2%
Suffolk**
$257,500
$207,900
-19.3%
Virginia Beach
$245,000
$229,000
-6.5%
Hampton
$180,000
$139,900
-22.3%
Newport News
$199,250
$157,900
-20.8%
Williamsburg*
$284,450
$257,250
-9.6%
Hampton Roads
$223,000
$193,205
-14.8%
Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information Deemed Reliable But not Guaranteed. * Williamsburg represents Williamsburg, James City County, York County and Gloucester County. ** Median price in Suffolk peaked in 2006 at $263,950

40. Median Sale Price of Existing Residential Homes
Selected Cities in Hampton Roads: 2013 and 2014
City
Median Price
2013
2014
% change
Chesapeake
$215,000
$219,000
-1.9%
Norfolk
$157,500
$157,038
-0.3%
Portsmouth
$108,500
$115,500
6.45%
Suffolk
$207,000
$207,900
0.43%
Virginia Beach
$223,000
$229,000
2.69%
Hampton
$131,000
$139,900
6.79%
Newport News
$153,000
$157,900
3.20%
Williamsburg*
$263,450
$257,250
-2.35%
Hampton Roads
$190,000
$193,205
1.69%
Source: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information Deemed Reliable But not Guaranteed. * Williamsburg represents Williamsburg, James City County, York County and Gloucester County.