The housing correction is expected to significantly impact the construction sector of the Eastern Panhandle, according to the latest forecast for the region issued today by the West Virginia University College of Business and Economics.
The Eastern Panhandle region includes Berkeley, Jefferson and Morgan counties. The forecast was presented at the Eastern Panhandle Region Economic Outlook Conference in Martinsburg.
The region added 1,200 construction jobs during the last five years, which reflects the huge amount of residential building in the region so far this decade,said George W. Hammond, associate director of the Bureau of Business and Economic Research.
However, residential construction activity in the region has slowed so far this year as the national housing correction works its way through the regional economy. According to FW Dodge estimates, the value of residential activity in the region declined by 26.3 percent during January to July compared to the same period of 2006.
This correction has already affected house price appreciation in the nearby metropolitan areas,Hammond said.Indeed, house price appreciation in the Hagerstown-Martinsburg and Washington metropolitan areas decelerated from the 15 percent range during 2005-06 to the low single digits during the past year.
According to the latest estimates, single-family house prices fell 1.2 percent in the Winchester metropolitan area during the past four quarters.
The forecast calls for the region to absorb the housing correction and continue to add jobs, population and inflation-adjusted per capita personal income. Job growth is expected to far outpace state and national growth rates during the next five years, although growth decelerates as the housing correction slows construction job gains. Most job growth comes in the service-providing sectors, especially government; healthcare; professional and business services; and trade, transportation and utilities.
Continued job growth drives real per capita income gains during the forecast with growth expected to be close to the state rate but below the national rate. Population gains remain strong during the forecast with the region forecast to add 4,300 new residents per year. The regions labor market is expected to remain tight with an unemployment rate in the neighborhood of 4 percent during the 2007-11 period.
Overall, the region is well positioned to continue to grow, but there are risks to the outlook. The forecast calls for the region to avoid a housing bust during the forecast. If the expected housing correction turns into a bust, then regional growth will likely come in slower than expected.
Further, the gaming sector of the regional economy has contributed to job growth so far this decade. Increasing competitive pressure from operators in Pennsylvania (and potentially Maryland) may slow growth in this sector during the next five years.
The conference was sponsored by Centra Bank. The Gateway New Economy Council and the Economic Development Authorities of Berkeley, Jefferson, and Morgan counties co-sponsored the event
Details of the forecast are presented in theEastern Panhandle Region Outlook: 2007-2011,available free online athttp://www.bber.wvu.edu.