BACKGROUND
Housing prices have gone up 350% in the United States since 1986, while housing prices in Hampton Roads and Richmond have gone up slightly less than 100% during that same time. So, in real numbers a home that was worth $80,000 in the United States in 1986 is now worth $280,000. During the same time period in Hampton Roads/Richmond a home that was worth $80,000 in 1986 is now only worth $150,000. We are way behind the appreciation averages creating a tremendous upside potential for our home prices to significantly increase. One of the reasons for our past lower appreciation rate is that we have experienced two 14-year periods that our home prices were basically flat. One of those 14-year periods which was 1986 to 1999, we had virtually no appreciation or depreciation. In the 2nd 14-year period, which was 2007 through 2020 the prices went down a little over 20%, then came back to their current values, just below or just above our 2006 peak prices (depending on location).
One of the reasons for this 2nd 14-year period was that out of the 100 most populated regions in the country, we were 100th (last place) in economic recovery after the Great Recession that started in 2007/2008. Our recovery didn't start until somewhere around 2014, as compared to 2009 and 2010 in most regions of the country. To further illustrate our slow recovery with one data point – Distressed Sales – In 2011, approximately 33% of our residential home sales were distressed sales (foreclosures or short sales) compared to today where distressed sales are less than 4% of our sales.
Our turnaround has been much slower and that's the major reason why our housing values are very close to where they were in 2006. Sequestration was one of the biggest factors that stalled our recovery. During this same period 2006-2020, Washington DC’s housing prices have almost doubled.
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Now that the stage has been set, here are the reasons that housing prices are going to continue going up in Hampton Roads, which will also affect Richmond, over the next several years
SUPPLY DECREASE
1. Our inventory has been cut in half from 2019 to 2020, creating less housing supply in a market where we have greater demand...............................................
Now, let's look at why demand is increasing which is connected directly to our population increasing as our jobs increase, bouncing back from the decrease in jobs/population between 2007 and 2014. (Sequestration)
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DEMAND INCREASE
2. Ship Repair: In prior years there were forced military spending cutbacks. One of the things that affected us in Hampton Roads significantly was cutbacks for ship repair of Federal ships, primarily Navy ships. So, we're currently playing catch-up which is going to take many years, even though ship repair is going in full swing.
3. Shipbuilding: Newport News Shipbuilding and other Hampton Roads shipbuilding facilities have multi-decade contracts for shipbuilding where we anticipate a continued, much larger than normal workforce for Navy shipbuilding over the next several decades. At Newport News Shipbuilding alone there is a $45 Billion multi-year backlog as the US Navy is spending what is needed to fulfill its 30 year plan to increase its fleet from 290 to 355 ships.
4. Wind Power: Wind power generating devices will be installed off of the Virginia Coastline. There are estimates of between 7,000 and 14,000 jobs related to this green initiative. There is also the possibility that Hampton Roads could become the hub for manufacturing and expertise for wind power generation for the mid-Atlantic region or the entire East Coast.
5. Transatlantic Global Data Cable: The TGDC connects Europe to the east coast and comes ashore in Virginia Beach. This 4,000 mile undersea data cable connection from Europe into the United States, plus more ocean floor data cable projects on the drawing board to come ashore at VA Beach, create opportunities for more companies to move to Hampton Roads to take advantage of this data entry point. Over half of the worlds data currently travels through VA.
6. Our Port: We have the deepest Port on the East Coast and a commitment to dredge five more feet which will ensure that we will continue to have the deepest East Coast port here in Hampton Roads. At the same time in 2020 alone, our Port's capacity increased by 40%. Our cargo has not increased 40% yet, but this will follow the increase in our capacity. We have major expansion plans to continue increasing our Port which will be a source of additional jobs and will attract additional companies to our region.
7. Working from Home Factor: The phenomenon of people working from home is going to enable people to seek marketplaces that have a higher quality of life and lower housing costs. On October 29th 2020 Upwork Inc released a poll of 20,000 people that determined that 11% of households plan to relocate as working from home becomes more popular. This equates to 23 million Americans that are thinking about relocating. We have already seen a significant uptick in young families relocating here, who are now working from home.
8. Continued Growth and Expansion of our Military Installations: Recent announcements that the Air Force is bringing a F-22 squadron to Hampton’s Langley Air Force Base (800 airmen) and the Navy’s decision in January 2021 to move Amphibious Assault Ships (400 sailors per ship) to Norfolk, continue to confirm the DOD’s realization that the economies of scale factor applies to our military operations, which bodes well for Eastern VA, already rich with military installation & supply systems.
OTHER FACTORS
9. Roadway improvements: The project to build 4 additional lanes going east/west connecting Hampton and Norfolk through the Hampton Roads Bridge-Tunnel system is well underway and on schedule for a 2025 completion. This is the most significant traffic bottleneck in Hampton Roads and adversely impacts our region’s productivity. At the same time we have been improving our Interstate System between Hampton and Williamsburg by widening lanes and there is growing support to widen the interstate between Williamsburg and Richmond to 6 or 8 lanes in the not too distant future.
These major, multibillion-dollar road improvement projects are a precursor to the Richmond- Hampton Roads mega-region which will also stimulate growth as the rest of the world realizes that we are a region of close to 3 million people. This should also encourage new developments like major sports franchises and other exciting opportunities that we have been missing out on for decades.
10. Escalation of New Home Prices: Because of the shortage of land around our major employers, increased sewer/water tap fees and new environmental laws that have spiked our land development costs significantly above inflation, it is exponentially more expensive to develop land for new housing projects. This is forcing the cost of new construction to be disproportionately above resale homes which is a cyclical precursor to resale home price appreciation.
11. Companies/jobs moving here for quality of life: Another reason for people & companies to move here is our quality of life which includes thousands of miles of waterfront, an above average education system that includes several outstanding universities, below average crime rate, and below average house prices compared to comparably sized metropolitan areas in the country. In a report just released by 24/7 Wall St, Hampton Roads was named as one of Americas 20 Cheapest Cities Where Everyone Wants to Live Right Now! The report boasted that our cost of living is lower while our household income is higher than the national averages. The report further cited half of the people searching our area for homes from the outside are in Washington DC where housing costs approximately 2.5 times more than our homes, after almost doubling from 2006 to today, while our much lower home prices remained flat. Never in history has there been this much of a differential between Eastern VA & Washington DC home prices. Currently the median home in the Washington DC metro area is getting close to $700,000 while our median home value is still significantly under $300,000.
12. Cost of Renting vs Buying: In a normal economy and currently across the vast majority of the USA monthly payments (counting principle, interest, taxes and insurance) cost 35% - 50% more than renting. Currently in Eastern VA for homes up to approximately $400,000 the cost of monthly renting is MORE than the house payment to purchase that same home.
Conclusion
The growth from 2020-2030 and beyond is inevitable for Eastern VA. Our Republic started here, and we watched other parts of our great nation flourish beyond our joint efforts & accomplishments. But at the same time, we remained stable, became more diverse, continued building and homeporting the worlds greatest Navy ships & have also been home to the Air Force, Army, Marines & Coast Guard, who have all kept our planet a safer place – But now is our time to grow again, expand, import/export/manufacture more, while loving & caring for each other & living in harmony, because that’s what nice Virginians do! – Virginia is not only for Lovers, this Virginia, Eastern Virginia is for Growth!
Predictions
- 15% appreciation in residential real estate in Eastern VA by Dec 2021
- 50% appreciation in residential real estate in Eastern VA by Sept 2026
The primary occurrence that could jeopardize this significant appreciation level over the next few years would be if interest rates more than double.
