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Presentation to the Tidewater Builders Association

Presentation to the Tidewater Builders Association. By John W. Whaley Deputy Executive Director, Economics Hampton Roads Planning District Commission February 2006. Topics. Economic Indicators 2006 Forecast Defense Issues Impact of Housing Project Housing Economics Forecasting Permits

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Presentation to the Tidewater Builders Association

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  1. Presentation to the Tidewater Builders Association By John W. Whaley Deputy Executive Director, Economics Hampton Roads Planning District Commission February 2006

  2. Topics • Economic Indicators • 2006 Forecast • Defense Issues • Impact of Housing Project • Housing Economics • Forecasting Permits • Impact of Construction Industry

  3. Economic Indicators

  4. The U.S. Economy

  5. The U.S. Economy Continued to Grow in 2005

  6. The Hampton Roads Economy

  7. Regional Employment Continued to Grow but at a Slower Rate

  8. The U.S. Economy Has Been Slow to Create Jobs

  9. The Taxable Sales Growth Rate Slowed

  10. Auto Sales Have Weakened

  11. The Number of Homes Sold in Hampton Roads Has Begun to Decline

  12. Residential Construction Has Slowed

  13. Home Prices In Hampton Roads Have Increased Faster than Inflation Since 2001

  14. HR Home Prices Have Outpaced the U.S. Increase for the Past Two Years

  15. The Average Selling Price of Area Housing Increased Because ….. • Demand Was Strong • Low Mortgage Rates • Military Pay Increases • Innovative Financing • Homes of Higher Value Were Constructed • The Supply of Housing Was Slow to Respond to the Increase in Demand

  16. The Pace of New Home Construction Has Not Responded to the Increase in Home Prices

  17. The Increase in Housing Values Has Driven Up the Regional Cost of Living

  18. Forecast

  19. The Economy Will Slow Modestly in 2006 Due to …… • Higher Interest Rates • Slower Growth in Home Equity • High Energy Costs • High Consumer Debt • Less Residential Construction • Less Stimulus from the Defense Department

  20. Defense Sector Challenges

  21. #1 Defense Spending Has “Peaked”

  22. #2Potential Relocation of Carriers • Carrier John F. Kennedy may be retired • Norfolk-based carrier could replace the JFK in Mayport • Norfolk-based Carrier George Washington will be sent to Japan in 2008 (or elsewhere in the Pacific depending on distance to Taiwan) • Cost of losing a carrier is large • Carrier without air wing: $225 million GRP • Carrier battle group and air wing: $980 million GRP

  23. #3 BRAC Impacts • Base Realignment and Closure Commissions decide on the future of domestic bases • Current BRAC recommendations have been accepted by the President and Congress

  24. On-Base Employment Will Decline by Nearly 2,400 Jobs If Oceana Remains Open

  25. How Will BRAC Impact the Regional Economy? • Used REMI Model • Nation’s most powerful regional economic model • Assumption • Direct effects were allocated across five years • Ten percent of the direct effect in 2007 – 22.5 percent in each of the years from 2008 to 2011

  26. BRAC Impacts will be Large

  27. When Will Impacts be Felt?(Builddown/Carriers/BRAC) • 2006: slight impact • 2007: modest impacts • 2008 – 2011: largest impacts

  28. Best Case Lose 2400 on-base jobs Slower increase in defense spending Worst Case Lose 2400 on-base jobs Lose one/two carriers Close Oceana Large cuts in defense spending Two Scenarios2008 - 2011

  29. Impact of New Communities

  30. Impact of New Subdivision: Population and Employment

  31. Impact of New Subdivision: Employment by Sector

  32. Impact of a New Subdivision: City Gross Regional Product

  33. Housing Economics

  34. The Change in Interest Rates and the Pace of Local Economic Growth are Important Predictors of Residential Construction in HR

  35. The End

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