OLD DOMINION UNIVERSITY

 ECONOMIC FORECASTING PROJECT

COLLEGE OF BUSINESS AND PUBLIC ADMINISTRATION

PRESS RELEASE

April 22, 2009

UPDATED 2009 ANNUAL ECONOMIC FORECAST FOR HAMPTON ROADS MSA

(All forecasted changes are relative to calendar year 2008)

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, Surry County, York County, Chesapeake, Hampton, Newport News, Norfolk, Poquoson, Portsmouth, Suffolk, Virginia Beach and Williamsburg.

Real Gross Regional Product (-0.3%)

The Bureau of Labor Statistics on March 10, 2009 provided their annual benchmark revisions of Civilian Non-agricultural Employment data for States and Metropolitan areas. These revisions revealed that civilian employment in Hampton Roads declined by 6,800 or by 0.9 percent in 2008. Original data released by the Bureau and the Virginia Employment Commission (VEC) had shown that employment in Hampton Roads had increased by approximately 10,700 or by 1.4 percent. VEC in its Press Release stated "Hampton Roads had a larger downward benchmark revision this time because of more construction, manufacturing, and trade/transportation losses than the samples were showing".  This major downward revision in employment has led us to revise our forecast for Hampton Roads economy for 2009.

The national economy is expected to continue to be in recession at least through the third quarter of 2009. The Hampton Roads economy is expected to experience a negative growth in both real gross regional product and employment. 

The Hampton Roads economy is not immune to events affecting the national economy. A combination of factors will be responsible for the 2009 contraction. The anticipated year-over-year slowdown in national growth will spread to Hampton Roads especially with respect to residential housing construction, port activity and tourism all of which are expected to seriously dampen regional growth in 2009.

Offsetting the dampening influences on the regional economy in 2009 is anticipated growth in defense spending.  Rising income for uniformed military personnel, locally outsourced defense contracts and an increase in goods spending should all provide a buffer for regional economic activity. Defense spending within the region is expected to increase by 4 to 5 percent.

Employment (Non-Agricultural Civilian Employment -0.4%) and Unemployment Rate (Civilian  Labor Force 7.5%)

We expect that region will loose about 3,000 jobs 2009.  Cargo tonnage, tourism revenues, new residential construction, and a slower growth in commercial construction are all likely to act as a drag on employment growth in 2009.  Employment growth is likely to be concentrated in firms providing professional and business services, and health care services. 

The region's unemployment rate is expected to rise to 7.5 percent. 

Retail Sales (Taxable Sales -3.9%)

Declining household spending, business investment and slower growth in state and local government spending will act either directly or indirectly as a drag on taxable sales. A reduction in household wealth due to declining home prices and financial assets is also expected to contribute to declining taxable sales.

Tourism (Hotel Room Revenue  - 2.2%)

We do not anticipate a good year for the Hampton Roads tourist industry. Negative growth in the national economy and a reduction in the wealth of households will contribute to lower tourism revenues. The number of Canadian visitors is also expected to decline due to slower economic growth in Provinces of Montreal and Quebec.

Port (General Cargo Tonnage -14.4%)

Cargo volumes are expected to decline significantly in the first half of the year due to the national recession and a slowdown in global economic growth. Cargo volume is not expected to increase until retail sales begin to increase. However, somewhat offsetting the global economic slowdown is likely gain in cargo tonnage from an increase in vessel calls from CMA CGM and Maersk.  These firms are set to launch a new service to the port, called the "Columbus Loop Service." The port is expected to be the last East Coast port on the new route to locations including the Mediterranean, Asia and the Pacific Northwest. Large container ships, with a capacity of 6,500 20-foot equivalent units, are scheduled to call on the port on a regular basis. Additionally, Maersk announced its intention to leave the port of Charleston by 2010.  A staged decline of cargo to Charleston may lead to at least some increased cargo coming to Hampton Roads in 2009.

Housing (Value of Single Family Housing Permits -40.7%)

The residential construction industry in Hampton Roads will continue to experience a significant downturn.  We anticipate that this industry shake-out and a reduction of unsold inventory will continue into 2009. The median price for newly constructed homes in 2008 fell by 10.6 percent relative to 2007. New construction residential median home price is expected to continue to decline in 2009.

Appreciation in the price of existing single-family homes is likely to be negative. We expect a decline in the price of existing single-family homes particularly in the $250,000 to $600,000 price range.  The median price for existing single family homes in 2008 decreased by 1.8 percent relative to 2007.

The 2009 median price of single family homes in Hampton Roads is likely to decline by 5 to 10 percent. The latest data on residential sales and on the active listings of unsold homes indicate that at the current pace of residential sales, it will take approximately 11 to 12 months to exhaust the active residential listings of real estate agents.  Continued significant reduction in new residential construction in 2009 will help cushion the expected decline in residential prices in 2009.  Closing cost assistance, builder interest rate buy-downs and broker commission assistance will continue to be featured in both the region's existing and new construction housing market in 2009.