THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, September 4, 1995 TAG: 9509020340
SECTION: BUSINESS WEEKLY PAGE: 04 EDITION: FINAL
SOURCE: Ted Evanoff
LENGTH: Medium: 84 lines
When you try to make sense of the Tidewater economy, two interesting trends emerged this summer.
Civilian employment notched ever higher each month. The employment surge, however, failed to boost the housing market. Sales of existing houses remained sluggish most of the year. Until June and July.
Then Tidewater's long spell of slumping house sales finally broke. And in a big way.
Why? That's what's interesting.
Maybe the tide has finally changed. Maybe the boost in employment will sustain the house market into the autumn, and finally stimulate Tidewater retail sales, which edged below '93 levels in June.
After all, when lots of houses change hands, it's usually good for furniture and carpet dealers as well as appliance stores and hardwares to say nothing of locksmiths, carpenters and title lawyers. A strong house market can create jobs.
And the house market has been strong, outpacing the average of both the state and the Peninsula in June and July.
The Virginia Association of Realtors last week reported 1,612 pending house sales in July in South Hampton Roads.
One month doesn't make a trend, but two months is at least moving in the right direction. July's figure represents 21 percent more houses about to change hands on the southside compared to July '94. June was up 15 percent.
Those were the southside's first months for positive sales this year compared to '94.
In May, 0.30 percent fewer houses were on the pending sales list compared to May '94. April was down 20.88 percent compared to April '94. March was down 21.4 percent. February was down 4 percent. January was down 8.5 percent.
Why did the long sales drought finally end this summer?
Falling mortgage rates this summer are one reason. Brisk house sales in '94 are another.
Rates aside, what's been remarkable about '95 is Tidewater's employment level.
About 641,000 civilian jobs were filled in June on the Peninsula and in South Hampton Roads. That's the highest employment figure ever recorded for Tidewater by the Virginia Employment Commission. It means 25,000 new jobs have appeared since January.
Even so, house sales were sluggish until June. And retail sales in general were less than spectacular.
``The strong pace of hiring activity doesn't seem to be justified by the spending pace of businesses and consumers,'' said economist John W. Whaley of the Hampton Roads Planning District Commission.
For example, the Virginia Department of Taxation reports June retail sales totaled about $900 million. That's only about 5 percent above the June '94 level.
Why the slow sales pace? Whaley suggests Tidewater consumers were more avid spenders in '93. In fact, June '95 retail sales slightly trail June '93 sales.
Meanwhile, employers coming out of the recession were slow to build up business in '92 and even slower to boost payrolls. Not until '93 did employment grow substantially in the region and return to the old peaks reached during the roll of the late '80s.
``We simply didn't have enough people in jobs in 1992,'' Whaley said. ``Employers were playing catch up. Consumers were on the other side of the curve. They'd done their spending in '92 and '93.''
Then came '95. Halfway through the year the jobs were there in significant numbers, but for whatever reason the consumers weren't spending in a significant way.
So why did house sales finally kick in?
I think it's a combination of several things,'' said Barbara M. Wolcott, vice president of Prudential Decker Realty in Virginia Beach and president-elect of the Virginia Association of Realtors.
``We've seen a lowering of interest rates,'' she said, ``but if it were just the rates you would see the same trend statewide and nationally. I think the residents in Tidewater are more encouraged about the local economy and there's a greater consumer attitude today.
``There was a wait-and-see attitude until the base closings were decided,'' she said. ``Now we know we're going to see an infusion of people with the military. Residents in Tidewater recognize it's going to happen and they're finally willing to buy a new house and take on higher debt payments.''
KEYWORDS: ECONOMY REAL ESTATE SALES by CNB