ODU Economic Forecasting Team Releases Hampton Roads Regional Economic Forecast and Analysis for Second Quarter Of 2012
May 17, 2012
The forecast is as follows:
Real Gross Domestic Product, according to the advance estimates released by the Bureau of Economic Analysis, increased at an annual rate of 2.2 percent in the first quarter of 2012. This increase, however, was lower than the 3.0 percent increase observed for the fourth quarter of 2011. The national economy also added 688,000 jobs during the first quarter of 2012, or an average of 230,000 per month. Preliminary estimates provided by the Bureau of Labor Statistics indicate that job growth slowed in the month of April 2012 when the economy added only 115,000 jobs. The unemployment rate for the national economy has also decreased, from 8.5 percent in December 2011 to 8.1 percent in April 2012. These measures indicate that the national economy continues to improve, but at a slow pace.
For Hampton Roads we continue to expect Real Gross Regional Product to grow by about 2 percent in 2012. Bureau of Labor Statistics revised data in March 2012 indicate that the regional economy actually added 1,600 jobs in 2012 rather than a loss of 2,200 jobs as previously estimated.
Year-to-date economic data through March 2012 for Hampton Roads continue to show a steady improvement. The regional economy has added about 4,700 jobs and the unemployment rate has declined from 7.2 percent to 6.7 percent during first quarter of 2012, when compared with the first quarter of 2011. Taxable sales during the same time period have increased by 6.8 percent, indicating that consumers have gained confidence in the economic improvement of the region. New car and truck registrations during the first four months of 2012 have also increased by 5.6 percent when compared to the same time period in 2011.
Improvements in the national economy and its effect on the regional economy can also be seen in the performance of both the hotel industry and the port activity. During the first quarter of 2012, hotel revenue increased by 3.6 percent and cargo tonnage at the port increased by 6.4 percent, when compared to the same time period in 2011. Finally, value of 1-unit residential building permits saw an increase of 7.5 percent during the first quarter of 2012.
In summary, year-to-date economic data through March 2012 indicate that the regional economy has begun to improve. These improvements are expected to continue for the remainder of the year.
Employment (Non-Agricultural Civilian Employment +0.65%)
Unemployment Rate (Civilian Labor Force 6.3%)
Employment is expected to increase in the second quarter at about the same rate as observed for the first quarter. The region's unemployment rate will continue to fall and remain considerably below the national level.
Retail Sales (Taxable Sales +3.5%)
As the regional economy begins to recover, we expect that taxable sales will continue to increase.
Tourism (Hotel Room Revenue +1.9%)
An anticipated recovery in the national and tourist market areas' economy should lead to an increase in hotel revenue for the second quarter.
Port (General Cargo Tonnage +2.6%)
The strong performance of the port during the first three months of 2012, during which cargo tonnage increased by 6.4 percent, provides good news for the region's economy. We expect this trend in cargo tonnage to continue during the second quarter, but at a reduced rate.
Housing (Value of 1-Unit Family Housing Permits -3.2%)
The number of housing permits issued for 1-unit residential homes during the first quarter of 2012 increased by 11.8 percent compared to the first quarter in 2011, and the value of these permits increased by 7.5 percent. This growth is indicative of the builders' confidence in the regional economy. However, we expect that the value of these permits will decrease slightly during the second quarter.
The Hampton Roads housing market in 2012 continues to be in the process of a wrenching adjustment that features falling prices and homeowner's equity, substantial distressed sales and excessive housing inventory. Distressed (bank-owned homes and short sales) inventory as of April 2012 represents 25.1 percent of total existing residential homes inventory; this percentage, incidentally, had peaked at 27.4 percent in December 2011. In addition, 34 percent of all existing homes sold year-to-date April 2012 were represented by distressed sales. This high percentage of distressed homes sold in the market continues to have a negative impact on median prices of all existing homes sold. Data on existing residential homes sold indicate that year-to-date April 2012, the median price of these homes declined by 2 percent compared to the median price observed for the same time period in 2011.
However, despite the presence of significant distressed sales activity, recent data on median prices and current inventory are somewhat encouraging. Year-over-year monthly median price declines have continued to decrease in 2012. The data also indicate that the median price of existing homes actually increased in April 2012. Further, the latest data on residential sales and on the active listings of unsold existing homes indicate that at the current pace of residential sales, it will take about 7.5 months to exhaust the active residential listings of real estate agents. The continued decline in excess supply and an increase in sales volume mean that house prices are very likely to stabilize soon. The actual timing of this stabilization in housing prices will depend upon the rate of decline in the share of distressed sales.
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.