Hampton Roads Housing/Real estate/and Economy

[rusthebuss]

Is Smithfield a part of Hampton Rhoads?

actually yes it is.

[wrldcoupe4]

I just stumbled across this on money.cnn.com....

It seems that the Hampton Roads real estate market is overpriced:

Most over-valued housing markets

It's not significantly overpriced, but what are some thoughts on what it would mean for the housing market in the region?

The overvalue is around 16%... the article mentions that corrections are likely when a market is +40% overpriced, so I don't think it means anything serious, which is good.

[urbanvb]

I think the article could be right to a degree but I still feel a lot of the reason for overpricing is due to the urbanization of the area. Look how sprawl is going south towards Moyock NC or west towards Suffolk- and Franklin could even be the next boom town. Coastal areas will continue to be a big draw especially for retirees from up north. We are now experiencing a cooling of the market in most areas however I have discovered housing in really hot areas (such as TC) are continuing their upward climb. Parts of FL however are way overpriced and it will be interesting to see how everything shakes out.

[urbanvb]

Interesting read in today's Pilot.

Hampton Roads economy bruised, but not beaten, amid bad news

The loss of Ford is a serious blow, they said, and threats to the Navy's presence a major concern. A carrier employs about 3,000 people and pumps about $200 million into the economy annually. Oceana, the largest employer in Virginia Beach, generates about $1.4 billion a year and has 12,000 military and civilian workers.

Even so, economists expressed confidence in the underlying strength of the region's economy.

"There's no fundamental shift here," said John Whaley, chief economist at the Hampton Roads Planning District Commission. "We've been there before and we survived, and we'll survive again."

story

[vdogg]

Per Capita income makes big jump, but still sits below national average

The region's rise in the Bureau of Economic Analysis ranking is good news because the improvement is likely to catch the attention of marketing and development people elsewhere, said John Whaley, an economist with the Hampton Roads Planning District Commission

[urbanvb]

Looks like we have made some good strides though in the last 4-6 years. I think it would be even more interesting to see which areas or cities represent the largest gains.

[vdogg]

As real estate slows across nation, HR only sees slight drop

[vdogg]

First quarter 2006 HR office market summary

According to the 2006 Market Survey published by Old Dominion University, the Hampton Roads office market continued to improve gradually throughout 2005. The overall vacancy rate decreased from 10.1% as of January 1, 2005 to 8.0% as of January 1, 2006, and average rental rates for Class A and B properties increased from $15.64 PSF to $15.84 PSF during the same period. New construction was down slightly in 2005, with just under 250,000 SF delivered; however, 2006 promises a more active construction market, with over 438,000 SF currently underway (excluding the owner-occupied Trader Publishing building described below). Net absorption of 600,000 SF was primarily attributable to the growth of two urban markets, Downtown Norfolk and the Virginia Beach CBD. Local experts predict continued growth in rental rates due to declining vacancy rates. New development will be relatively modest due to increasing construction costs and relatively tepid demand from tenants. The investment sales market in Hampton Roads was relatively active in 2005, with the six office buildings trading at prices reflective of improving market fundamentals and relatively limited supply. The most notable transaction was the sale of 150 West Main Street to St. Joe's in December 2005 (located next door to Parkway's Town Point Center) for $50.5 million or $223 PSF, the highest price ever paid for a Norfolk office building. Trader Publishing's 220,000 SF, 20-story Electronic Media Group Headquarters Building, which is currently under construction, will be a significant addition to Downtown Norfolk's skyline in early 2007 and, fortunately, will not deliver any speculative office space to the submarket, as Trader will own and occupy the entire building.

[rusthebuss]

Companies forced to search outside Hampton Roads for skilled workers

[urbanvb]

This is not an end all by any means but it is bad news for the region. And salaries continue to lag.

Add skyrocketing home prices in Hampton Roads, sagging real wages and slower growth in high school enrollments, and the result for many local companies, including manufacturing, construction and high-tech defense contracting, is a critical shortage of skilled workers.

Meanwhile, wages and salaries have not kept pace. When adjusted for inflation, median household income in Hampton Roads fell by about $2,600 to $48,709 between 1999 and 2003, according to Opportunity Inc. The median is the point where half the salaries are above and half below.

[rusthebuss]

This is not an end all by any means but it is bad news for the region. And salaries continue to lag.

This is what upsets me about this area. Why can we not pull those figures up???? Why aren't the cities trying to push higher paying jobs to this area? Its like they are content with low paying jobs that do not increase with the cost of living.

[vdogg]

Revenue from tourism increases 10% over last year

Tourists increased their spending in Virginia in 2005 by $1.5 billion over 2004, an almost 10 percent increase that tourism leaders hope is a preview of the impact of the Jamestown 2007 commemoration.

[Telmnstr]

Hey man it could always be worse!

You mean when NS moves to GA?

[Telmnstr]

This is what upsets me about this area. Why can we not pull those figures up???? Why aren't the cities trying to push higher paying jobs to this area? Its like they are content with low paying jobs that do not increase with the cost of living.

I think you will find some of the companies that come here, come here for the low wages. The call centers have the added excuse of a fairly neutral speech accent, but they too take advantage of our low paid workforce. The military also helps keep salaries low. I've heard of some low class employers (Contemporary Cybernetics) who actually said "We would like to offer you this pay, as you receive military retirement." The person I know told them to shove it, which is respectable. One's other sources of income (especially that which they earned) shouldn't earn them a lower wage. All home owners before 2001 should be paid 1/2 of what new home buyers have to pay! That sure wouldn't fly.

The employers here are for the most part weak. It's mostly service level stuff. Sure Trader might pay software developers $40k, but that isn't going to go far in the land of $360K starter condos. The tech companies I've been with, many of them were poorly managed. We will never compete in these fields.

Dave Addis from the Virginian Pilot wrote some pieces some time ago about the wages. He cornered the City of Chesapeake I believe, as well as the Hampton Roads EDA. They were advertising our low paid employees to outside companies as to why they should move their headquarters here. Just because the common employees don't make squat doesn't mean that the more affluent power people in Hampton Roads don't get paid. Real estate, legal advice, taxes. Plus, making a couple million a year take home pay goes farther in Hampton Roads than New York City.

This trend is going to change though. Much of the housing price runup was due to lack of inventory, which was stressed by people using equity from a primary property to buy more houses (easy easy lending) as well as others who shouldn't be buying getting extended massive amounts of credit. As the defaults hit and these people can't carry these properties, the inventory will skyrocket (This is happening now!) and the prices will eventually drop. I think the lack of inventory was an illusion. Everyone wanted to buy houses so they could force the next person to pay that much more for their property. Look at the late night TV ads to see where they are getting the idea.

I think our country is headed for a huge crash. We've been sold out by the large corporations. Americans are ignorant. Bidding wars on houses? What is wrong with people?

I read and troll Craigslist alot. I've seen some of the condos in downtown Norfolk up for rent for $1600/month. I just did the math. Assuming the place was $300k, and they put down 20% (NOT LIKELY), the monthly nut will be $1438.92 assuming 6% interest rate. Add in the condo fees, and taxes - they are loosing money. If they go to sell, figure 5% transaction costs, loosing money. I'm pretty sure the 2 bedrooms @ 500 granby are more than that. Sure, they might have bought them a while ago before it ran up that high. Still I see the property listed over and over, so it's not moving at that price... and once the confidence of "I'm rich because my house is worth so much" bakes off (hurt by things like the 10% disney layoff today, ford layoff, all of the mortgage layoffs) then everyone will be penny pinching.

The truth is, this _NEEDS_ to happen. The RE market needs to crash, and it will be a good thing. Our country needs to innovate, to form new companies, to not have a few companies own EVERYTHING (Bank consolidation anyone?). We can't sell each other real estate at forever rising prices based on risky lending forever.

Only the recent buyers and those that took out lots of equity should be hurt.

The sad thing is, I believe less people own their own homes now versus 5 years ago. So many people have extracted equity to buy things like cars and flat panel TVs, that home ownership has gone down. Savings rates are negative too. Sure it's kept the spirits high among the consumers, but you can only run up debt so long.

Sorry for the doom and gloom! But the fact that so many people have no idea about this stuff bugs me. The fact that people expect me to go into twice as much debt to buy a crappy house infuriates me. I won't do it, and have no issues at "insulting" them with lowball offers. I love the entitlement attitude too. They put in some stupid stainless steel appliances and expect and extra $100k for the year? Hah shove it.

I was renting a place. I had finally left my low paying job at NASA Langley (yes, I said that right) and moved on to where I was making salaries more realistic (But well below what I could make in other markets as a skilled network and system administrator). Then the houses went crazy in price. I questioned what has changed this month versus 3 months ago. And found, nothing. I found one or two people talking about the bubble in California / FL / MA. And have followed it with awe. It's expanded. They called it right, and the media started picking up right when the predictions suggested they would.

Most of my friends were saying I'm full of it. But they have heard things here and there... one was at a mortgage company doing work and overheard people talking about how there is going to be so many forclosures it's going to be insane. Then another accidentially got copied an email where an appriasor was complaining about being under the gun to commit fraud -- match the lenders desired loan amount on property or no more business for you. This was old news to me, there are lots of complaints from appriasors (even was on 60 minutes like a year ago). But my friends see it now. Of course, they want investment advice now -- and I have none of that to give.

It was a mania. And now it will end. It's not good for our economy. People paying 50% of their income to their houses and more.... our jobs are eroding and our future is becoming more uncertain. Yet people have no qualms about taking on more and more debt, especially with adjustable rate mortgages.

It needs to be fixed.

Edited May 31, 2006 by Telmnstr

[rusthebuss]

You still haven't answered me about why you decide to stay in this desert of a job market?

[Telmnstr]

You still haven't answered me about why you decide to stay in this desert of a job market?

A: Because I have lots of crap I would need to move. I have both an apartment and a business space filled with servers and some existing customers. I'm in the slow process of moving the servers and such to a co-location facility in the Washington metro DC area.

B: I'm a native. I grew up here. I have a good number of job contacts and many of my friends are here.

C: I tell myself I have more of a chance of getting somewhere on my technical skills in a small market like Hampton Roads versus a large market like Silicon Valley. But my opinion on this is starting to change. After I didn't get far with the other business I started to come to the idea that people in Hampton Roads just don't get technology. Sure consumers buy residential internet service to look at porn or play xbox on, but overall... it's just not a tech savvy area. I go to the local business tech meetings and it's like... The hotel owner's ideas of new improved technology is soft beds. Seriously. Not video on demand or community networking, soft beds.

Do you not think it's a bad idea to have a market where no one can afford to buy housing?

What if Hampton Roads really did somehow manage to escape reality and prices stay at the same values. Once the other regions crash, do you not think that those areas would become more attractive? Northern VA is BANGING with construction. It's so overrun it's not funny. So is Miami. MA is crashing hard. Arizonia is dead. If there are awesome deals on housing there, I think lots of people might leave HR. We have gov't jobs. And that is about it.

Also, my discovery of the housing bubble blogs has really opened my eyes. The other day the Virginian Pilot ran an "article" about some crappy condo place. It wasn't an article, it was an advertisement in the form of an article. You can tell who's pocket the Virginian Pilot is in.

Check out the numbers:

http://www.benengebreth.org/housingtracker...rginia/Norfolk/

215% inventory increase over 9 months... eekk

[urbanvb]

Looking at your link, if I am reading this correctly, actually brings more questions than answers. If in 9 mos we have 215% more inventory (6420 units versus 2975 now) then why would the median housing price be 5% more? Historically its supply versus demand that drives market value.

[rusthebuss]

I really think these numbers are squewed (sp.?)

[Telmnstr]

Looking at your link, if I am reading this correctly, actually brings more questions than answers. If in 9 mos we have 215% more inventory (6420 units versus 2975 now) then why would the median housing price be 5% more? Historically its supply versus demand that drives market value.

Actually, that is based on asking prices. What is happening is the "buyer/seller" standoff.

A: People aren't able to get financing. Most of the market has been subprime, and alot of it is really shady. The floodgates were opened to people who before wouldn't have qualified, so they were all competing with this free money. Now the spigot has been turned off, and this is slowing down. Look at the huge layoffs in the morgage industry, and check out the huge decreases in origination.

B: Many flippers and specuvestors have properties that they recently purchased that they need to sell for a certain value. Perhaps they pulled money from a primary residence thru HELOC loan and bought a 2nd property to hold for 6 months and resell making a quick $30-60k. Or perhaps they have a house where they extracted equity to buy SUVs, boats, granite slabs or what have you. Or they are just greedy and want the next buyer to fund their retirement. Some neighbor had some out of town sucker that overpaid for their box, so the other people feel that they deserve this new high price.

C: The news media is finally interested in reporting what has been talked about for 1.5 years on the blogs. That is, the bubble. The fact that the runup was a mania. There really is plenty of land and properties. The numbers of houses being built is INSANE compared to actual residents.

D: Everyone is running for the exits.

Drive around Hampton Roads. I went to a friends place and there was a whole line of for-sale signs in Suffolk. I bought some music equipment off of Craigslist, and it was like every other house in the neighborhood had a for-sale sign. I had a picture from Freemason area when walking to work one morning of like 4 for-sale signs within the camera's view.

And all of these places are way outside of the normal affordability based on incomes in Hampton Roads.

http://norfolk.craigslist.org/rfs/173081797.html

(It's Vinyl. Nothing special. Large, but large isn't that costly)

http://norfolk.craigslist.org/rfs/173124896.html

(That would go for what, $130k in 2002? Slab foundation, Vinyl).

http://norfolk.craigslist.org/rfs/173117335.html

(Thats a small apartment turned condo conversion, my friend rented in there for $1200/month. Add in condo fees, and that price blows the P/E ratios out of the water. It's just way overpriced).

http://norfolk.craigslist.org/rfs/172896183.html

(See? That would be a good starter home, at $100k or less)

It was a mania. It's coming to an end. And it's going to hurt our economy, and us, very badly.

I know a good number of hard working professionals in Hampton Roads who are priced out of the market. Luckily I saved a good number of them from making the mistake of buying into a $300k "starter" condo which would have put a huge financial burden on them. This was a few months ago. Now "it's a whole new paradigm" with all of the bubble talk on the TV and radio.

The neat thing was, the people who seemed to believe in the bubble had facts. All the way down to newspaper articles that described the current condition from previous run ups. Numbers.

The pro-real estate, it never goes down crowd was strictly realtors, housing construction companies, mortgage companies, and some college reports from highly respected institutions that had a huge list of reator organizations and builders as their funding (Harvard!). I believe there is conflict of interest with that ODU study, and some chump with a radio show on Saturday mornings (Rose and Womble? Rose guy?) was talking about how someone related to him was involved with it.

Once the market craps out, people aren't going to want to touch real estate for a while.

I have friends that bought into the market recently, and they are hurting. And they work at respectable jobs. And they aren't living it up.

[hoobo]

Do you mind if I call you Lou Dobbs?

Real estate crashes when it was either a speculators market (i.e. Vegas 2005/06) or it was preceded by an economic crash (i.e. L.A.'s aerospace/defense industry collapse 1990-1994). Granted, this rise in home prices has attracted speculators, but that doesn't mean that the market has to crash as a reponse. People want homes. They want to buy a place when they get married. They want to trade up to larger homes when they start a family. Homes are not tech companies.

L.A.'s home prices dropped 25% when the aerospace industry collapsed. Unless a recession or a defense/gov't industry collapse occurs, HR is not going to see such a drop in home prices. Home prices in Vegas and Miami are being jacked up by vacation condos. Those places are priced significantly higher than homes for locals. Once speculators back off those vacation condos, they're prices will fall to more pedestrian values which will result in an overall drop in average home prices. Vegas and Miami will experience drops in average prices. The rest of the U.S. will likely experience horizontal changes or minor corrections that already being seen in Boston and San Diego.

The U.S. is not losing people and major home builders are drastically cutting back on construction. Supply and demand will work themselves out so that any price correction is minimal.

Just as there is a "it will never go down - buy now" crowd, there is an equally vocal "the sky is falling" crowd. In the end, places like HR, Baltimore, and Charleston which are somewhat overvalued will experience +/- 5% growth/loss in home values in the next couple years. Places in California and Florida as well as DC will experience a 5-10% decline in prices before population pressures push prices back up. Sepculation places like Vegas, Miami, and Honolulu will see upwards of 15% drop over the next couple years.

[rusthebuss]

Telmnstr do you have any other source other than the craiglist? To prove your point you should have multiple sources or your gripe becomes suspect

[Telmnstr]

Telmnstr do you have any other source other than the craiglist? To prove your point you should have multiple sources or your gripe becomes suspect

Well, there have been a few numbers posted in the RealtyTimes.com site by realtors with access to the REIN/HRMLS system. The realtors aren't going to publish bad numbers, and the newspapers make tons from realtors paying for advertising. Don't bite the hand that feeds you.

I can say that prices are out of wack. Most of the newly married people I know with good, well paying jobs for the area can't afford to buy anything desireable. A few pushed their way in a while ago, and now at least one couple's financial hardships brought on by their $200k condo is causing hardships on their relationship.

If you ask most people who have homes if they could afford to buy now, they generally say no.

CNN has our market at 27% overvalued for VaBeach:

http://money.cnn.com/2006/06/12/real_estat..._worse/?cnn=yes

There are some real gems on Craigslist.

If you want some stories often from reputable sources:

http://www.patrick.net/housing/crash.html#links

That is my daily reading on the subject generally.

Also, the previous busts in areas like San Diego that got hit be defense spending cutbacks are nothing compared to what is going to happen. There has been so much risky lending, and it has touched some 60+ metro markets that this correction will be much bigger.

A bunch of banks could be in trouble too, depending on how much of the subprime loans they hold.

And figures are 30%+ of all homes purchased last year were for speculation. Plus some 10% of that was "2nd homes for vacation" which is sort of a grey line between speculation and real vacation home, since the reason so many people want second homes as they believe it will perform better than investments in the stock market, bonds, CDs, etc.

Edited June 22, 2006 by Telmnstr

[hoobo]

CNN has our market at 27% overvalued for VaBeach:

http://money.cnn.com/2006/06/12/real_estat..._worse/?cnn=yes

And figures are 30%+ of all homes purchased last year were for speculation. Plus some 10% of that was "2nd homes for vacation" which is sort of a grey line between speculation and real vacation home, since the reason so many people want second homes as they believe it will perform better than investments in the stock market, bonds, CDs, etc.

1) Probe around the CNN Money (same thing as Money mag) website and you'll find that they predict HR prices will increase another 5% this year because of people fleeing the even more overpriced DC market.

2) How do you define speculation? Is it someone who is buying a home to live in as well as hoping that this investment will appreciate at the 15-20% clip it has been the past few years? Or is it someone who is buying the house to flip it in a couple months? The Florida, California, and Vegas markets are the flippers markets because of their even more rediculous appreciation. Those places are way overvalued.

Finally, what kind of decline do you expect? You keep talking about it but never really say how much prices will go down. 5-10% would be a correction while a larger drop really means that prices are inflated. I need to dig it up (it was either in Fortune or Money), but the largest historical drop in home prices for HR was 2% between 1981 and 1982. Again, compare that to the 20-25% drop in L.A. between 1990-94.

[vaceltic]

Check the last video of VB city council meeting. Around the 55th minute mark, an affordable housing development was proposed and so many people went up to speak, begging for some in the city. Virginia Beach is definitely an overvalued market.

[urbanvb]

Good news for us.

In last-minute move, governor proposes 36 amendments.

One of which:

n $200,000 for the Hampton Roads Partnership to help create modeling and simulation jobs in the region. The partnership works with universities, military researchers and government agencies to promote high-tech industries that use computer simulation for transportation, medical and emergency response research.

link