Hammond, George

Ross, Justin

English

The Research Repository @ WVU (West Virginia University)

 Volume 1, Number 4● July 2005     Sponsored By Bruceton Bank  Population Booms and Busts The city of Morgantown has added the most residents of any city in the state during the last four years, according to the latest population estimates from the U.S. Census Bureau. With the addition of 1,362 residents from 2000 to 2004, which translates into a growth rate of 1.2 percent per year, Morgantown is now the 5th largest city in the state. Table 1 shows the top and bottom five cities in terms of population gains and losses during the last four years.  AnnualCity 2000 2004 Number Rank Growth Rate (%)Most new residents:Morgantown 26,798 28,160 1,362 2 1.2Martinsburg 14,948 15,635 687 3 1.1Hurricane 5,355 5,788 433 4 2.0Charles Town 2,999 3,408 409 5 3.2Ranson 3,064 3,432 368 6 2.9Most population loss:Weirton 20,369 19,691 -678 230 -0.8Parkersburg 33,081 32,159 -922 231 -0.7Wheeling 31,353 29,891 -1,462 232 -1.2Huntington 51,388 49,891 -1,497 233 -0.7Charleston 53,247 51,685 -1,562 234 -0.7Data from U.S. Bureau of the CensusPopulation Change 2000-2004Table 1 West Virginia City Population Change from 2000 to 2004   Bubble, Bubble,….Trouble? Strong population growth in the city and the Morgantown MSA (Monongalia and Preston counties) has contributed to the region’s surging construction activity and rising single-family home prices. According to the latest data from the Office of Federal Housing Enterprise Oversight, prices for single family detached houses in the Morgantown MSA rose by an annualized 9.8 percent in the first quarter of 2005, compared to the previous quarter. Compared to the same quarter of 2004, Morgantown house prices rose 11.5 percent in the first quarter. That far exceeded state results during the same period (up by 7.8 percent) but fell just short of the national average of 12.5 percent.  House price appreciation in the first quarter was strongest in the metropolitan areas containing West Virginia counties in the Eastern Panhandle and Potomac Highlands regions. House price appreciation in the Hagerstown-Martinsburg MSA hit 20.2 percent, the Winchester MSA hit 21.9 percent, and the Washington metropolitan area recorded the fastest appreciation of any MSA with a county in the state at 23.2 percent.   2      WVU Bureau of Business and Economic Research  House price appreciation is undeniably strong at the moment, but is it really an unsustainable bubble, as some believe? The Federal Deposit Insurance Corporation (FDIC) recently released a study examining house price appreciation for all U.S. metropolitan areas. In the study, booming markets are defined as those with rates of house price appreciation above 30 percent over a three year period, after adjustment for inflation. Figure 1 shows how metropolitan areas with West Virginia counties fair based on this definition. The figure shows results for three overlapping periods: 1999-2002, 2000-2003, and 2001-2004.  Charleston, W.Va.Cumberland, Md.Hagerstown, Md.Huntington, W.Va.Morgantown, W.Va.Parkersburg, W.Va.Washington, W.Va.-Md.-Va.Weirton, W.Va.Wheeling, W.Va.Winchester, Va.W.Va. U.S.05101520253035402002-19992003-20002004-2001Figure 1Inflation-Adjusted House Price AppreciationThree-Year SpansOffice of Housing Enterprise OversightTotal Percent ChangeInflation-AdjustedHouse price boom as defined by FDIC  Note first that for many of these metropolitan areas house price appreciation has accelerated during each subsequent period. This suggests that national conditions are contributing to similar trends across many metropolitan areas. In particular, low mortgage interest rates nationally have driven up demand for housing nation-wide. Note also that the strongest house price appreciation has tended to be in the metropolitan areas in the eastern section of the state, with two out of three of these metropolitan areas posting real house price appreciation rates above 30 percent during the 2001-2004 period. This reflects their relatively strong population growth and overall economic performance. Finally, note that by this definition the Morgantown MSA, with its inflation-adjusted appreciation rate of 11.5 percent, is not booming and is not even close to booming, according to the FDIC definition.   One interesting result of the FDIC study, is that metropolitan areas that experience house price booms do not always subsequently experience house price busts. The more common experience is for a period of boom to be followed by a period of house price stagnation, not outright price declines. Further, busts tend to be accompanied by major local economic problems, such as the downsizing of major employers or industries. This should be at least a little comforting to our neighbors in the Eastern Panhandle and Potomac Highlands.   It seems at first glance that housing affordability must have declined rapidly since 2001. Indeed, while real single family-detached home prices appreciated by 11.5 percent from 2001 to 2004, real income growth in the MSA has likely been between 2.0 and 4.0 percent during the period, depending on the particular income measure used. This situation has been similar for the state and the nation, as Figure 2 shows.      Morgantown MSA Economic Monitor July 2005     3  1995 1996 1997 1998 1999 2000 2001 2002 2003 20042.02.53.03.54.04.5W.Va.U.S.Median Sales Price/Median Household IncomeSource: West Virginia State Profile, Summer 2005, FDIC.Data from Census Bureau and Economy.com.Figure 2Home Price-to-Income Ratios in W.Va.Remain Below the National Average However, housing affordability often boils down to the monthly payments required to finance the purchase. As we’ve seen house prices in the MSA rise since 2001, we’ve also seen mortgage rates decline. Let’s compute the monthly payment (excluding insurance and taxes, with 20 percent down) for a $180,000 house, assuming a 30-year fixed mortgage rate of 7.0 percent (that’s approximately the national 30-year fixed rate in 2001). Using the Bruceton Bank (www.brucetonbank.com) mortgage calculator, these data yield a monthly payment of $958.04. Next, assume that the house price rises by 18.9 percent (which is the nominal house price appreciation in the MSA) to $214,094 by 2004. In contrast, national 30-year fixed mortgage rates fall to 5.84 percent. The monthly payment under these terms rises to $1,009.32, an increase of 5.4 percent during the period (and before adjustment for inflation). During the same period wages and salaries per worker in the MSA rose by 8.8 percent, again before adjustment for inflation. Thus, while house prices have risen far faster than incomes, monthly mortgage payments have not risen as quickly, due to declining mortgage interest rates.  Region/Indicator 2002 2003 2004 Dec. 2004 Jan. 2005 Feb. 2005 Mar. 2005 Apr. 2005 May 2005Morgantown MSATotal Nonfarm Employment (thous.) 52.2 54.4 55.9 56.6 56.9 56.8 56.9 57.6 57.4Total Nonfarm Employment (%) 2.1 4.2 2.8 -10.0 7.6 -2.5 1.6 16.2 -4.5Goods Producing Employment (thous.) 6.4 6.7 6.9 7.1 7.1 7.1 7.1 7.2 7.3Goods Producing Employment (%) 2.3 3.9 3.5 32.8 -6.8 8.8 4.5 15.0 10.4Service Providing Employment (thous.) 45.8 47.7 49.0 49.5 49.9 49.7 49.7 50.4 50.1Service Providing Employment (%) 2.1 4.3 2.7 -14.8 9.8 -4.1 1.1 16.4 -6.5Unemployment Rate (%) 3.7 4.0 3.5 3.2 3.4 3.7 4.0 3.8 3.2Residential Const. Contracts ($ mil. NSA AR) 13.385 15.870 37.647 20.472 22.272 15.804 18.672 18.420 22.272Non-Building Const. Contracts ($ mil., NSA AR) 31.111 17.245 18.627 0.000 0.000 0.000 0.000 40.728 5.868Non-Residential Const. Contracts ($ mil., NSA AR) 28.965 70.858 119.664 5.568 164.868 93.936 72.600 38.484 46.248Residential Const. Contracts (Units AR) 150 157 456 156 168 120 144 144 168Population 112,373 113,502 113,774 n/a n/a n/a n/a n/a n/aPer Capita Personal Income ($) 25,062 25,927 n/a n/a n/a n/a n/a n/a n/aWest VirginiaTotal Nonfarm Employment (thous.) 733.1 727.6 736.2 736.8 741.1 740.3 742.5 743.2 743.7Total Nonfarm Employment (%) -0.3 -0.8 1.2 -1.1 7.2 -1.3 3.6 1.1 0.8Unemployment Rate (%) 6.1 6.1 5.3 4.9 4.7 5.0 5.2 5.1 4.5Residential Const. Contracts ($ mil. AR) 571 725 843 1,056 1,086 957 846 951 789Non-Building Const. Contracts ($ mil., NSA AR) 847 509 696 476 51 67 299 392 2,158Non-Residential Const. Contracts ($ mil., NSA AR) 460 482 527 131 193 234 663 1,257 537Residential Const. Contracts (Units AR) 4,625 5,271 6,106 5,600 7,791 5,908 5,152 6,493 5,858Population 1,805,230 1,811,440 1,815,354 n/a n/a n/a n/a n/a n/aPer Capita Personal Income ($) 23,841 24,542 25,872 n/a n/a n/a n/a n/a n/aUnited StatesTotal Nonfarm Employment (thous.) 130,341 129,999 131,480 132,449 132,573 132,873 132,995 133,269 133,347Total Nonfarm Employment (%) -1.1 -0.3 1.1 1.4 1.1 2.7 1.1 2.5 0.7Unemployment Rate (%) 5.8 6.0 5.5 5.4 5.2 5.4 5.2 5.2 5.1Population 287,941,220 290,788,976 293,655,404 n/a n/a n/a n/a n/a n/aPer Capita Personal Income ($) 30,804 31,472 32,937 n/a n/a n/a n/a n/a n/aNotes:Construction data is from FW Dodge. Monthly data is reported at annual rate. NSA means Non-seasonally Adjusted data. AR indicates annual ratePer Capita Personal Income is from www.bea.gov , Population is based on Census estimates on July 1 of that yearEmployment data is from the Bureau of Labor Statistics and West Virginias Bureau of Employment Programs Data compiled by WVU Bureau of Business and Economic Research, www.bber.wvu.eduMorgantown MSA Economic IndicatorsYear Month(Seasonally Adjusted Unless Otherwise Noted) Geography 2000 2004 Change Ann. Gr. Rt. (%)West Virginia 1,807,436 1,815,354 7,918 0.11 Morgantown MSA 111,169 113,774 2,605 0.58  Monongalia County 81,862 83,918 2,056 0.62     Blacksville 175 172 -3 -0.43     Granville 778 778 0 0.00     Morgantown 26,798 28,160 1,362 1.25     Star City 1,364 1,364 0 0.00     Westover 3,935 3,922 -13 -0.08  Preston County 29,307 29,856 549 0.47     Albright 247 248 1 0.10     Brandonville 120 122 2 0.41     Bruceton Mills 74 74 0 0.00     Kingwood 2,935 2,914 -21 -0.18     Masontown 645 644 -1 -0.04     Newburg 359 356 -3 -0.21     Reedsville 517 523 6 0.29     Rowlesburg 612 615 3 0.12     Terra Alta 1,455 1,483 28 0.48     Tunnelton 336 343 7 0.52Data from U.S. Bureau of the Census. Population as of July 1 of the year.Morgantown MSA City Population Change from 2000 to 2004(Incorporated Areas)Population 2000-2004   Morgantown MSA Economic Monitor George W. Hammond, Ph.D. Director, West Virginia Economic Outlook  This document is published by the Bureau of Business and Economic Research at the College of Business and Economics, West Virginia University, P.O. Box 6025, Morgantown, WV 26506-6025, (304) 293-7876, fax (304) 293-7061, george.hammond@mail.wvu.edu.      Tom S. Witt Associate Dean for Research & Outreach and Director of the Bureau of Business and Economic Research Justin Ross Graduate Research Assistant     Copyright © 2005 WVU Research Corporation www.bber.wvu.edu   

Morgantown MSA Economic Monitor July 2005

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Morgantown MSA Economic Monitor July 2005

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