Annual Economic Forecast January 29, 2020 Dr. James V. Koch - - PowerPoint PPT Presentation

Welcome to 25th Annual Economic Forecast

January 29, 2020

• Dr. James V. Koch

President John Broderick Dean Jeff Tanner

3

• Dr. Mark Zandi
• Dr. Gilbert Yochum
• Dr. Vinod Agarwal
• Dr. Mohammad Najand
• Dr. Larry ‘Chip’ Filer
• Dr. Gary Wagner
• Dr. Robert McNab

Presenters at the Annual Economic Forecast Luncheon Since 1996

January 1996

January 2004

January 2020

2020 Annual Economic Forecast

Robert M. McNab and Vinod Agarwal Dragas Center for Economic Analysis and Policy Strome College of Business Old Dominion University

January 29, 2020

Agenda for Today

I will cover economic conditions in the United States and Virginia and the prospects for growth in 2020 and beyond. My colleague, Vinod Agarwal, will examine economic conditions in Hampton Roads and how the regional economy will fare in 2020. All our presentation materials can be found at our website: www.ceapodu.com

Presenting Sponsor Media Sponsor Signature Sponsor

2020 Event Sponsors

Our forecasts and commentary do not constitute official viewpoints of Old Dominion University, its President, John R. Broderick, the Board of Visitors, the Strome College of Business,

• r the generous donors who

support the activities of the Dragas Center for Economic Analysis and Policy.

The Long-Term View

Current and Historical Economic Expansions

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Expansion Duration In Months Annual Employment Growth Annual Real GDP Growth October 1949 – July 1953 45 4.4% 6.9% May 1954 – August 1957 39 2.5% 4.0% April 1958 – April 1960 24 3.6% 5.5% February 1961 – December 1969 106 3.3% 4.9% November 1970 – November 1973 36 3.4% 5.1% March 1975 – January 1980 58 3.6% 4.3% December 1982 – July 1990 91 2.8% 4.0% March 1991 – March 2001 120 2.0% 3.6% November 2001 – December 2007 73 0.9% 2.9% June 2009 – Present* 126 1.4% 2.3%

Sources: Bureau of Labor Statistics, Bureau of Economic Analysis, National Bureau of Economic Research, and Dragas Center for Economic Analysis and Policy. Real GDP in chained 2012 dollars. CAGR = Compound Annual Growth Rate. Annual Real GDP CAGR derived from quarterly series. Annual employment CAGR derived from monthly series. *Current expansion data ends in 2019 Q3 for GDP and December 2019 for US Nonfarm Payrolls. Average annual Real GDP CAGR of previous expansions = 4.5% while average annual employment CAGR from previous expansions = 2.96%.

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11,980 10,652 17,067 19,431 18,164 21,950

• 982

22,579 3,113 2,511 2,912 816

• 1,420
• 601
• 5,805

1,380

• 10,000
• 5,000

5,000 10,000 15,000 20,000 25,000 1940s 1950s 1960s 1970s 1980s 1990s 2000s 2010s Thousands of Employees

Change in Nonfarm and Manufacturing Employees (Jobs) United States, 1940 - 2019

Nonfarm Payrolls Manufacturing Payrolls

Sources: Bureau of Labor Statistics and Dragas Center for Economic Analysis and Policy. Thousands of employees. Seasonally adjusted data. Change in nonfarm employees is measured from December of the preceding decade to the end of the next decade.

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2.5% 7.4% 5.1% 3.0% 2.6% 1.8% 2.6% 6.8% 5.7% 3.1% 2.1% 1.9% 0% 1% 2% 3% 4% 5% 6% 7% 8% 1960s 1970s 1980s 1990s 2000s 2010s Average Inflation Rate

Average Inflation United States, 1960 - 2019

Inflation Core Inflation

Sources: Bureau of Labor Statistics and Dragas Center for Economic Analysis and Policy. Seasonally adjusted data. Consumer Price Index for All Urban Consumers (CPI-U) and CPI-U less food and energy. The inflation rate is the December to December change in the Consumer Price Index.

17

18.63% 8.54% 6.52% 3.60%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Interest Rate

Thirty Year Fixed Rate Conventional Mortgage United States, January 1972 – January 2019

Sources: FreddieMac and Dragas Center for Economic Analysis and Policy. Grey bars are recessionary months. Monthly averages.

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0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1950 1952 1955 1957 1960 1962 1965 1967 1970 1972 1975 1977 1980 1982 1985 1987 1990 1992 1995 1997 2000 2002 2005 2007 2010 2012 2015 2017 Percent of Household Income

Sources of Household Income United States, 1950 Q1 to 2019 Q3

Wages Capital Transfers Benefits Proprietor's

Sources: Bureau of Economic Analysis, Personal Income Tables and Dragas Center for Economic Analysis and Policy.

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17.8% 9.8%

0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 5,000 10,000 15,000 20,000 25,000 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Mobility Rate Thousands of Movers

Mobility Rates and Reason for Moving United States, 1999 - 2019

Mobility Rate Family-Related Job-Related Housing-Related

Source: U.S. Census Bureau, Mortgage Bankers Association, and Dragas Center for Economic Analysis and Policy.

The Expansion

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• 8.4%

5.5% 3.5% 2.2%

• 10%
• 8%
• 6%
• 4%
• 2%

0% 2% 4% 6% 8% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annualized Change

Growth in Real Gross Domestic Product United States, 2006 Q1- 2019 Q4*

Sources: Bureau of Economic Analysis and Dragas Center for Economic Analysis and Policy. Data on GDP incorporate latest BEA revisions in January 2020. Data for 2019 Q3 are the third estimate. Data for 2019 Q4 represents our forecast.

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3.7% 1.9%

• 6%
• 4%
• 2%

0% 2% 4% 6% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Annualized Change

Growth in Real Gross Domestic Product Virginia, 2006 Q1- 2019 Q4*

Sources: Bureau of Economic Analysis and Dragas Center for Economic Analysis and Policy. Data on GDP incorporate latest BEA revisions in January 2020. Data for 2019 Q3 are the third estimate. Data for 2019 Q4 represents our forecast.

23

125.9 115.1

95 100 105 110 115 120 125 130 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Index (2006 Q1 = 100)

Index of Real Gross Domestic Product Virginia and the United States, 2006 Q1 to 2019 Q4*

United States Virginia

Sources: Bureau of Economic Analysis and Dragas Center for Economic Analysis and Policy. Data on GDP incorporate latest BEA revisions in January 2020. Data for 2019 Q3 are the third estimate. Data for 2019 Q4 represents our forecast.

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10.1% 7.0%

• 8%
• 6%
• 4%
• 2%

0% 2% 4% 6% 8% 10% 12% 1 11 21 31 41 51 61 71 81 91 101 111 121 131 141 Jobs Gained or Lost Months Since Pre-Recession Peak

Recovery from the Great Recession Measured in Total Jobs Restored, 2008-2019*

United States Virginia

Sources: Bureau of Labor Statistics and Dragas Center for Economic Analysis and Policy. Peak Pre-Recession Dates are January 2008 (United States), and April 2008 (Virginia). *Data through December 2019. US data are preliminary the last two months. Virginia data are preliminary for the last month. Seasonally adjusted data.

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4.6% 10.0% 3.5% 2.9% 7.5% 2.6%

0% 2% 4% 6% 8% 10% 12% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Unemployment Rate

Unemployment Rate (U3) United States and Virginia, January 2007 – December 2019

United States Virginia

Sources: Bureau of Labor Statistics and Dragas Center for Economic Analysis and Policy. Seasonally adjusted data.

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0.16 1.22 1.42 0.22 1.77

0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Job Openings Per Unemployed Person

Job Openings Per Unemployed Person United States and Virginia, February 2001 – September 2019

United States Virginia

Sources: Bureau of Labor Statistics and Dragas Center for Economic Analysis and Policy. Seasonally adjusted data. State level JOLTS data is an experimental product.

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Sources: Bureau of Labor Statistics and Dragas Center for Economic Analysis and Policy. Seasonally adjusted data.

61.3% 63.2% 65.9% 71.5% 69.9% 66.3%

56% 58% 60% 62% 64% 66% 68% 70% 72% 74% 1976 1981 1986 1991 1996 2001 2006 2011 2016 Labor Force Participation Rate

Civilian Labor Force Participation Rate United States and Virginia, January 1976 – December 2019

United States Virginia

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96.9 99.1

40 50 60 70 80 90 100 110 120 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Index (1966 = 100)

University of Michigan, Consumer Sentiment January 2000 – January 2020

Source: University of Michigan, Survey of Consumer Sentiment, January 2020.

2020: The Economic Expansion Continues

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▪ Price and wage inflation does not accelerate. ▪ Interest rates and monetary policy remain accommodative. ▪ Consumer sentiment continues to drive economic activity. ▪ The Phase I trade deal lifts short-term exports to China. ▪ Federal spending sustains moderate growth in Virginia.

Warning Signs

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13.1% 5.6% 5.5% 15.2% 1.2% 2.6%

0% 2% 4% 6% 8% 10% 12% 14% 16% 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 Percent of GDP

Federal Outlays as Percent of GDP 1968 – 2030*

Discretionary Mandatory Net Interest

Sources: Congressional Budget Office (2020), The Budget and Economic Output: 2020 to 2030 and Dragas Center for Economic Analysis and Policy. *Actual data through 2019 and forecasts through 2030.

32

$691 $687 $645 $577 $581 $560 $580 $605 $671 $685 $706 $708 $727 $742 $747 $300 $350 $400 $450 $500 $550 $600 $650 $700 $750 $800 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 FY 22 FY 23 FY 24 Billions of Nominal Dollars

Department of Defense Discretionary Budget Authority Fiscal Year 2010 – Fiscal Year 2024

Base OCO Emergency

Sources: Dragas Center for Economic Analysis and Policy, OSD (Comptroller), FY 2020 Presidential Budget, and Bipartisan Budget Agreement of 2019. Estimated outyear spending on historical allocations of national defense spending. OCO forecast from DoD budget submittal.

33

$779.0 $984.4 $356.6 $0 $200 $400 $600 $800 $1,000 $1,200 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Billions of Nominal Dollars

Cumulative U.S. Federal Government Deficit by Month January 2016 – December 2019

2016 2017 2018 2019 2020

Sources: Congressional Budget Office, U.S. Treasury, and Dragas Center for Economic Analysis and Policy. Billions of nominal dollars.

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Source: Congressional Budget Office (2020), The Budget and Economic Output: 2020 to 2030 and Dragas Center for Economic Analysis and Policy. Off-Budget includes the revenue and outlays of the Social Security Trust Funds and the net cash flow of the Postal Service. *Actual data through 2019 and projections from 2020 to 2030.

• $779
• $984 -$1,015
• $1,742
• $2,000
• $1,800
• $1,600
• $1,400
• $1,200
• $1,000
• $800
• $600
• $400
• $200

$0 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Billions of Nominal Dollars

Actual and Projected Federal Deficit United States, FY 2018 – FY 2030*

35

$376 $819

$0 $100 $200 $300 $400 $500 $600 $700 $800 $900 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Billions of Nominal Dollars

Net Interest Expenditures on Federal Debt United States, FY 2018 – FY 2030*

Source: Congressional Budget Office (2020), The Budget and Economic Output: 2020 to 2030 and Dragas Center for Economic Analysis and Policy. *Actual data through 2019, and projections from 2020 to 2030.

No Tree Grows to the Sky

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▪ DoD expects relatively flat budgets over the FYDP. ▪ SecDec Esper has targeted the “Fourth Estate” to reduce overhead. ▪ SecDef proposed cutting procurement of 5 Arleigh Burke destroyers and the retirement an additional 4 Ticonderoga-class cruisers by 2025. ▪ The Army’s recently proposed cuts, delays, or cancelations in almost 200 programs to free up resources for new initiatives. ▪ The upcoming 2021 – 2026 FYDP is likely to follow the Army’s lead.

The Outlook

The Good Place

38

▪ Trade tensions moderate with the Phase I deal. ▪ The Boeing 737 – Max reenters production in the 2nd half of 2020. ▪ The Coronavirus mirrors the SARS outbreak, with limited global mortality. ▪ Global growth accelerates in the second half of 2020. ▪ Equity and real estate markets cool, but do not have major corrections. ▪ The Presidential election does not significantly impact economic activity.

The Not-So-Good Place

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▪ The Phase I deal falls apart before it begins, leading to new tariffs. ▪ The Boeing 737 – Max remains out of service for 2020. ▪ Global growth continues to slow as international trade volumes decline. ▪ Equity and real estate markets pull back after a decade of increases. ▪ The Coronavirus outbreak trends toward the 1918 influenza pandemic. ▪ A Presidential nominee emerges and surges to a lead in the polls with promises

• f a significant expansion of government programs and taxes.

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2018 Actual 2019 Forecast (May) 2019 Actual 2020 Forecast U.S. Real Gross Domestic Product 3.0% 2.5% 2.3% 2.2% Civilian Job Growth 1.6% 1.5% 1.4% 1.2% Unemployment Rate 3.9% 3.7% 3.5% 3.7% Consumer Price Index 2.4% 2.7% 2.3% 2.4% Core Consumer Price Index 2.1% 2.3% 2.3% 2.5% 3-month Treasury Bill 2.4% 2.5% 1.6% 1.8% 10-year Treasury Bill 2.9% 2.9% 1.9% 2.1% 30-year Treasury Bill 3.1% 3.3% 2.3% 2.5% 30-year Conventional Mortgage 4.5% 4.6% 3.8% 4.2% Federal Deficit

• $779 Billion
• $900 Billion
• $984 Billion
• $1.1 Trillion

Virginia Real GDP 2.8% 2.7% 2.2% 2.0% Virginia Employment Growth 1.1% 1.4% 1.1% 1.1% Superbowl Eagles

• Patriots

49ers

Notes: Data reflects the annual rate of growth, last month, or day business day of the year where appropriate. U.S. Treasuries are constant maturities, annual averages. Every team that has had 50+ sacks in the season and played in the Superbowl has won. The 49ers had 57 sacks (plus each time the Raiders have moved, the 49ers have won the Superbowl).

2018 Hampton Roads Economic Forecast Stagnant Growth, Improving Future? Professor Vinod Agarwal January 31, 2018 2018 Hampton Roads Economic Forecast Stagnant Growth, 2020 Hampton Roads Economic Forecast Continuing Improvements But Challenges Remain Ahead

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$61,107 $100,976 $105,308 $76,463 $91,930

$40,000 $50,000 $60,000 $70,000 $80,000 $90,000 $100,000 $110,000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Millions of Dollars

Nominal and Real Gross Domestic Product (GDP): Hampton Roads, 2002 – 2019*

Nominal GDP Real GDP

Sources: Bureau of Economic Analysis and Dragas Center for Economic Analysis and Policy. Data on GDP incorporates latest BEA revisions in December 2019. Data for 2018 for Hampton Roads are the advance estimates and for 2019 data represent our estimate. Real GDP in 2012 Chained Dollars.

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2.4%

• 3%
• 2%
• 1%

0% 1% 2% 3% 4% 5% 6%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Annual Real GDP Growth

Growth in Real Gross Domestic Product: Hampton Roads, 2002-2019*

Sources: Bureau of Economic Analysis and Dragas Center for Economic Analysis and Policy. Data on GDP incorporates latest BEA revisions in December 2019. Data for 2018 for Hampton Roads are the advance estimates and for 2019 data represent our estimate . CAGR GDP growth in horizontal bars.

4.80%

• 0.12%

1.92%

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98.0 101.3 103.7 114.7 124.4

90 95 100 105 110 115 120 125 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Index of Real GDP (2006 = 100)

Index of Annual Real GDP, 2006 – 2019*: Hampton Roads, Virginia, and the United States

Hampton Roads Virginia United States

Sources: Bureau of Economic Analysis and Dragas Center for Economic Analysis and Policy. Data on GDP incorporates latest BEA revisions in December 2019. Data for 2018 for Hampton Roads are the advance estimates and for 2019 data represents our estimate . 2019 data for US and Virginia are our estimates. Index is equal to 100 in 2006.

Defense Spending in Hampton Roads

Sources: U.S. Department of Defense and Dragas Center for Economic Analysis and Policy. Includes Federal Civilian and Military Personnel and Procurement. *Data for 2019 are estimates while 2020 is our forecast. Last updated on January 2, 2020.

$10.0 $19.8 $19.9 $21.6 $22.9

$5 $7 $9 $11 $13 $15 $17 $19 $21 $23 $25 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Billions of Dollars

Estimated Direct Department of Defense Spending Hampton Roads, 2000 to 2020*

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113.5 81.4 81.6 154 159 160 159 155 155 153 152 147 146 144 140 137 139 143 142 139 140 20 40 60 80 100 120 140 160 180

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Employees in Thousands

Military and Federal Civilian Employment Hampton Roads, 2001 - 2018

Military Federal Civilian

Sources: U.S. Bureau of Economic Analysis and Dragas Center for Economic Analysis and Policy. Last updated by BEA on November 14, 2019

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2017 2018 Change in Average Compensation Military $93,992 $96,985 3.18% Federal Civilian

• Govt. Employees

$113,883 $116,544 2.34% State and Local

• Govt. Employees

$64,279 $64,539 0.40% Private Nonfarm $42,001 $43,136 2.70%

Source: Bureau of Economic Analysis and the Old Dominion University Economic Forecasting Project. Compensation includes wages, salaries, and benefits. Data updated on November 14, 2019

Estimated Average Nominal Compensation Hampton Roads, Selected Categories

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Jobs and Employment: Slowly but Steadily Growing

• 2,581
• 572
• 420
• 295
• 279

258 388 412 492 526 836 854 3,554

• 3,500-2,500-1,500 -500

500 1,500 2,500 3,500 4,500 Retail Trade Administrative and Support Information Finance and Insurance Educational Services Real Estate, Rental and Leasing Health Care and Social Assistance Prof, Sci, and Technical Services Transportation and Warehousing Public Administration Accommodation and Food Services Construction Manufacturing

Change in Employment: Selected Industries in Hampton Roads, 2018 Q1 to 2019 Q1

Sources: Virginia Employment Commission: Covered Employment and Wages by all types of Ownership (VA part of MSA) and the Old Dominion University Economic Forecasting Project.

50

782 Jul 2007 734 Feb 2010 782 June 2017 797

700 720 740 760 780 800 820

Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19

Thousands of Jobs

Total Nonfarm Employment (Jobs) Hampton Roads, January 2007 – December 2019

Sources: Bureau of Labor Statistics and Old Dominion University Economic Forecasting Project. Seasonally adjusted data. Data for December 2019 are preliminary. Trough was February 2010. Next update: March 16, 2020. Data will also be revised in March 2020

+ 62,700 Jobs

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815: Oct. 2009 865

770 780 790 800 810 820 830 840 850 860 870 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Thousands of Individuals

Civilian Labor Force Hampton Roads, January 2007 – November 2019

Sources: Bureau of Labor Statistics and Old Dominion University Economic Forecasting Project. Seasonally adjusted data. Data for November 2019 are preliminary. Trough was October 2009. Next update: February 5, 2020. Data will be revised in March/April 2020

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+ 49,947 Individuals

755: Oct. 2009 840

700 720 740 760 780 800 820 840 860 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Thousands of Individuals

Employment of Individuals Hampton Roads, January 2007 – November 2019

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+ 84,239 Individuals

Sources: Bureau of Labor Statistics and Old Dominion University Economic Forecasting Project. Seasonally adjusted data. Data for November 2019 are preliminary. Trough was October 2009. Next update: February 5, 2020. Data will be revised in March/April 2020

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2.5% 3.2% 7.6% 4.7% 3.1%

0% 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Unemployment Rate

Average Annual Unemployment Rate: Hampton Roads, 2000 to 2019*

Sources: Bureau of Labor Statistics and the Old Dominion University Economic Forecasting Project. Annual averages based on non-seasonally adjusted data. * Data for 2019 are through November and include estimated value for December 2019 . Data will be revised in March/April 2020

▪ Good news: Increases in defense spending in FY 20 will help raise economic growth. ▪ An immediate challenge: Finding the right labor at the right time for employers. The long-term challenge: Labor force participation rates have not recovered; difficulty moving disaffected back into workforce. ▪ The opportunity: Improving collaborative efforts among cities to retain/attract businesses while defense spending is increasing. ▪ Position Hampton Roads now to win in the coming BRAC round.

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Residential Housing is Looking Up Again

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24,755 24,587 26,496 4,969 2,265 3,350

5,000 10,000 15,000 20,000 25,000 30,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Number of Homes Sold

Number of Existing and New Construction Home Sales Hampton Roads, 2002-2019

Existing Homes New Construction

Sources: 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.

$116,900 $223,000 $180,000 $234,000

$0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Median Sales Price

Median Sales Price of Existing Homes: Hampton Roads, 2002-2019

(+4.0%)

Sources: Real Estate Information Network and Old Dominion University Economic Forecasting Project. Information deemed reliable but not guaranteed. 2002-2007 = 91% increase. 2007-2011 a 19% decrease; 2011-2018 is a 30% increase.

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59

24,755 14,703 26,496 28 102 53

20 40 60 80 100 120 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 2017 2018 2019 Market Time Number of Sales

Existing Residential Homes Sold and Average Days on the Market, Hampton Roads: 2000-2019

Homes Sold Average Days on Market

Sources: 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.

Distribution of Sales by Selected Categories of Sale Price of Existing Residential Homes for Hampton Roads, 2017, 2018, and 2019 Sale Price Categories 2017 2018 2019

Under $250,000 62.6% 60.3% 57.2% $250,001 to $350,000 21.0% 22.2% 23.9% $350,001 to $450,000 9.3% 9.7% 10.7% $450,001 to $540,000 3.0% 3.4% 3.8% $540,001 to $1,000,000 3.6% 3.9% 3.9% Over $1,000,000 0.5% 0.5% 0.5% All Homes Sold 23,492 24,587 26,496

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

60

Median Sales Price by Selected Categories of Sale Price of Existing Residential Homes for Hampton Roads, 2017, 2018, and 2019 Sale Price Categories 2017 2018 2019

Under $250,000 $168,000 $170,400 $179,000 $250,001 to $350,000 $292,500 $291,850 $292,000 $350,001 to $450,000 $390,250 $390,000 $390,000 $450,001 to $540,000 $487,500 $490,000 $485,000 $540,001 to $1,000,000 $640,000 $637,500 $649,900 Over $1,000,000 $1,333,750 $1,275,000 $1,300,000 All Homes $219,000 $225,000 $234,000

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

61

62

14.5% 34.2% 33.5% 13.4%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Distribution of Existing Home Sales by Type of Financing: Hampton Roads, 1995-2019

FHA VA Conventional Cash

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

Percent

63

393 3,224 : Oct 2010 420

500 1,000 1,500 2,000 2,500 3,000 3,500

Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19

Number of Listings Axis Title

Number of Active Listings of Distressed Homes: Hampton Roads, January 2008 to December 2019

Sources: Real Estate Information Network and the old Dominion University Economic Forecasting Project. Information deemed reliable but not guaranteed. Distressed properties are short-sales or bank-owned .

0.2% 1.4% 7.1% 2.0% 1.2% 5.5% 26.6% 4.7%

0% 5% 10% 15% 20% 25% 30% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Short Sales REO Sales

Short Sales and Bank-Owned Sales as Percent of Existing Home Sales: Hampton Roads, 2007-2019

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

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Percent of Sales

65

2,791 13,788 7,555

2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Inventory of Existing Homes

Inventory of Existing Residential Homes on June 30 of Each Year: Hampton Roads, 1995 – 2019

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

66

$1,164 $1,553 $1,598 $1,325

$800 $900 $1,000 $1,100 $1,200 $1,300 $1,400 $1,500 $1,600 $1,700 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Monthly Payment Median Monthly Rent Monthly PI&T Payment

Estimated House Rental and Principal, Interest, and Taxes for a House Payment, Hampton Roads: 2004-2019

Sources: 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; for 2016 it is 3.65 percent; for 2017 it is 4.00 percent; for 2018 it is 4.54 percent and for 2019 it is 3.93 percent

Observations on the Existing Homes Market since 2011

• Inventories continue to decrease.
• Days on market have also decreased.
• Number of homes sold has steadily increased.
• Estimated months of supply have declined substantially.
• Mortgage rates continue to be at historically low levels.
• Distressed Sales Market appears to be clearing.
• As a result expect median home prices to increase at a

faster pace in 2020.

67

Hotel Industry Growth Continues

$708 $711 $839 $898 $342 $342 $351

$0 $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Millions of Dollars

Nominal and Real (Inflation-Adjusted) Hotel Revenue Hampton Roads, 2001-2019

Revenue Real Revenue

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Sources: STR Trend Reports January 2017 and January 2020, Bureau of Labor Statistics (base year is chained; 1982-84=100), and the Old Dominion University Economic Forecasting Project.

33,787 39,608 36,600 22,107: 2007 20,309: 2013 22,644 23,263

15,000 20,000 25,000 30,000 35,000 40,000 45,000

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Number of Rooms

Available Occupied

Number of Available and Occupied Hotel Rooms in Hampton Roads: 2001-2019

70

Sources: STR Trend Reports January 24, 2017 and January 23, 2020, and the Old Dominion University Economic Forecasting Project.

3.0% 2.0% 2.4% 0.9% 1.6% 2.9%

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5% 4.0% United States Virginia Hampton Roads

Revenue RevPAR

Growth in Hotel Revenue and Revenue Per Available Room: United States, Virginia, and Hampton Roads, 2018-2019

Sources: STR Trend January 23, 2020 and the Old Dominion University Economic Forecasting Project.

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Percent

The Port of Virginia: Moderate Growth Amid Capacity Expansion, Tariffs

17.83 18.84 21.98 21.94

5 10 15 20 25 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Millions of Tons

General Cargo Tonnage Port of Virginia, 2000-2019

Sources: Virginia Port Authority and Old Dominion University Economic Forecasting Project. Cargo Tonnage growth in 2019 declined by 0.16% from 2018. In 2018, tonnage increased by 0.1% from 2017.

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1.35 2.13 1.75 2.22 2.86 2.94

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Millions Of TEUs

Twenty Foot Equivalent Container Units (TEUs) Port of Virginia, 2000-2019

(+2.9%)

Sources: Virginia Port Authority and Old Dominion University Economic Forecasting Project. TEUs increased by 2.9% in 2019. In 2018, TEUs had increased by 0.5%.

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Shares of Total Loaded TEUs for Selected East Coast Ports, 2006-2019*

Sources: American Association of Port Authorities, websites of ports and the Old Dominion University Economic Forecasting Project. Market shares are based on TEUs for Baltimore, Boston, Charleston, Virginia, New York/New Jersey, and Savannah. * 2019 data are through October 2019

22.6% 26.1% 18.3% 17.6% 16.5% 12.3% 13.4% 40.0% 37.0%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

Savannah Virginia Charleston New York/NJ

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Percent of TEUs

Shares of Outbound Loaded TEUs for Selected East Coast Ports, 2006-2019* 18.8% 21.5% 19.5% 19.1%

0% 5% 10% 15% 20% 25% 30% 35% 40%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

Savannah Virginia Charleston New York/NJ Percent of TEUs

Sources: American Association of Port Authorities, websites of ports and the Old Dominion University Economic Forecasting Project. Market shares are based on TEUs for Baltimore, Boston, Charleston, Virginia, New York/New Jersey, and Savannah. * 2019 data are through October 2019

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2020: Accelerating Growth in Hampton Roads

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▪ Regional GDP growth in 2020 is forecasted to be greater than the growth

• bserved in 2019 and 2018.

▪ Defense, port, health-care industries, and tourism are likely to help the region’s moderate economic expansion in 2020. ▪ Single-family home prices in 2020 are likely to increase at a moderate pace. Months of supply of existing homes are lower than their historic average and the distressed housing market segment appears to be clearing. ▪ Going forward, uncertainty in Washington will continue to be a major concern.

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2019 Forecast 2019 Actual 2020 Forecast Hampton Roads Real Gross Domestic Product 2.4%

• 2.6%

Civilian Job Growth 0.8% 0.5% 0.7% Unemployment Rate 3.1% 3.1% 3.0% Taxable Sales 3.3% 4.8% 4.2% Hotel Revenue 3.8% 2.4% 2.7% General Cargo Tonnage 2.0%

• 0.2%

1.0% General Cargo TEUs 3.6% 2.9% 3.9% One Unit Housing Permit Value 2.0% 2.7% 2.0%

Source: 2019 data reflects the annual rate of growth. Data for December 2019 include our forecast.

▪ If you would like to receive economic updates from the Dragas Center for Economic Analysis and Policy and to have immediate access to our reports, please leave your card with us. ▪ You may also text CEAPODU to 66866 to join our email list. ▪ Follow DragasCenterODU on Facebook, LinkedIn, and Twitter for up-to-date information to help you understand new economic developments. ▪ You’ll receive absolutely up-to-date economic information the same day it is released by the Bureau of Labor Statistics, the Bureau

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• ur website:

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