Hampton Roads Market
Why Hampton Roads?
There are a lot of great opportunities and highly-qualified reasons to invest in Hampton Roads
due to its strategic location, economic status, recreational and commercial activities.
Hampton Roads is considered the third largest metropolitan area in the United States and the second largest between Washington DC and Atlanta. It is strategically located right in the middle of the Eastern seaboard where three major water bodies – the James, Elizabeth and Nansemond rivers – pour out to Chesapeake Bay, making it one of the largest natural harbors in the world. Six of the ten largest population centers in the US are situated within 750 miles of Hampton Roads. It has started to become a major hub for economic and trade activities in the country.
One of the major economic drivers in Hampton Roads is its distinction of being the military capital of the US. It houses the largest number of military installations, as well as home to most operational bases for the US Department of Defense (DOD).
With a land area of around 527 square miles, Hampton Roads also earned the title of being the “world’s greatest natural harbor.” It is also an ideal vacation destination for many visitors, both military and civilian that has dramatically spurred tourism and business activities in the area.
Hampton Roads is also home to some Fortune 500 companies involved in shipbuilding, food industry, transportation, and retail industries providing employment to thousands of local residents, plus a good number of expatriates serving in large multinational companies holding its base of operations in the area.
Hampton Roads 2016 Market Review, Forecasting and Trending
Majority of the economic growth for Hampton Roads is through federal spending, thanks to Department of Defense (DOD) operational, employment and maintenance spending. But while the local economy has been influenced mainly around the military spending, it came with a price.
According to the 2016 Market Review conducted by the E.V. Williams Center for Real Estate at Old Dominion University, pointed out that over the past several years, Hampton Roads has been experiencing a sluggish economic growth.
The reason? Reduction in federal spending by the DOD accounted on the slow progress, for which most of the economy of Hampton Roads have been dependent on.
Regional growth for 2016 was slower as expected based on historical annual average of 3.1%. Between 2010 -2014 the US GDP growth was at a total of 8.0%, while Hampton Roads GRP moved up slightly by only 1.6%.
While DOD spending noted an increase at an annual compounded rate of 5.65%, expenditures in 2016 were estimated at 2.8% lower than the peak increase in 2012. This decline impacted the local economy, thus, the sluggish performance for the past several years.
Source: U.S. Department of Defense, U.S. Department of Commerce, and the Old Dominion University Economic Forecasting Project. e represents estimated value ; f represents forecasted value.
But where there is adversity, one finds opportunity
Despite the general economic drawbacks, Hampton Roads grew at an estimated 1.59% in 2016, higher compared to 2015 which was at 1.14%. Industry experts have noted this due to the need for Hampton Roads to diversify and focus on trading and commerce activities beyond federal spending. Many have started to heed the call and are banking on other opportunities for diversification of Hampton Roads.
As a result, lending interest rates remained at a steady level, despite a slight increase in percentage. The industrial sector has seen growth over the past year, with a steady increase noted starting from 2015. Prime industrial businesses have started pouring in especially in warehouse leasing and building sales, where an upswing was seen for the past couple of years.
Diversification has is starting to gain better influence over a more robust and stronger market for Hampton Roads, other than its dependence on federal spending. Retail, food, tourism, infrastructure development and commercial industries are seeing growth year over year to cushion the effects of decelerating federal expenditures.
Strength in Residential Real Estate
Surprisingly, one of the stronger performers for Hampton Roads as a result of diversification activity was in residential real estate. The resale market for residential real estate properties has remained healthy throughout 2015 and onwards.
Resale sales saw an uptick of 20,012 sales or 8.17% in 2015. Resale closings also increased by 1,696 or 9.24% compared to 2014. Median sales price also went up from $196,000 to $202,767. This promising situation for residential real estate was influenced by consumer confidence, reduction in fuel prices and declining national and local unemployment rate.
Federal rate hike mortgage rates remained at a low level at 3.96% average for a conventional 30-year loan term which peaked to only an average of 4.05% in July, according to the Federal Reserve Economic Data (FRED).
Residential resale highlights for Hampton Roads 2015 vs 2014;
Sales went up 8.17% with 1,511 more sales issued, totaling 20,012 sales.
Closings went up 9.24% with 1,696 more closings, totaling 20,049 closings.
Median Sales Price up 3.45%, a $6,767 increase to $202,767.
Distressed Closings down 14.4% to 3996 representing 20.4% share.
Market Share of Resale Homes ended the year at 87.8%.
The residential real estate outlook for Hampton Roads is forecasted to see progressive and sustainable growth with existing market forces coming into play. All these growth signals are geared towards addressing the effects of economic growth for residential real estate market in Hampton Roads.