Today’s Courier Herald Column:
The good news coming out of Athens may be limited to the football field these days. It certainly isn’t coming from the University of Georgia’s Terry College of Business and their economic forecast for the state. Dean Robert Sumichrast presented the school’s annual outlook for Georgia’s economy Tuesday, and their predictions are stark and frankly somewhat bleak with respect to economic recovery and job creation.
The state, facing unemployment rates that have exceeded the national average since the housing/financial crisis began in 2008, is expected to add less than 20,000 jobs next year, with unemployment continuing to exceed 10% statewide. This is despite the fact that the center is not projecting another economic downturn.
Georgia has lost over 357,000 jobs since the economic downturn began with total employment now at roughly 3.8 million. This is down from 2008’s peak of 4.15 Million, with about 25,000 jobs lost during 2011. UGA’s prediction for this year was originally that we would add just over 40,000 jobs, demonstrating that the recovery here at home remains stubbornly elusive. UGA now says it may be 8 more years until Georgia’s employment returns to 2008 levels. This stands in stark contrast to the previous two decades, when the state created jobs at a much faster rate than the rest of the country.
At the root of Georgia’s problem is housing, as it is in many areas of the country which experienced extreme overbuilding during the last decade. Georgia is also not seeing the in migration of new residents which have fueled housing, population, and economic growth for decades. With population growth slowed by the lack of people moving to Georgia, the oversupply of housing remains difficult to absorb.
The continued lack of demand for Georgia’s existing housing supply contributed to another stark number released yesterday, as the widely followed Case-Shiller housing index showed that the price of homes in metro Atlanta fell to a new low in September, with their index now at 95.99 for the month. With the benchmark set at 100 for year 2000 home prices, this means that homes in Atlanta are now at less than 96% of what they were worth at the dawn of this millennium. Or put another way, the average homeowner who purchased a home in the last 12 years has a home that is worth less than it was when it was purchased.
The continued loss of Georgia jobs combined with dropping home values feed a vicious cycle of lowered home prices, with more than half of metro area homes worth less than the mortgages owed on them. This makes the home difficult to sell, and impossible in most cases without the aid of a “short sale”, where the bank must agree to waive the remaining balance it is owed above the net proceeds – the sale price less commissions and closing costs – to facilitate a sale.
An extremely high percentage of sales in metro Atlanta are short sales, which are time consuming and tedious transactions which are difficult to estimate the timing for an actual close. Those who are unable to complete a short sale or are unwilling to participate in an extended process that can take many months end up in foreclosure, with fully one third of metro Atlanta’s sales represented by foreclosures. These foreclosures are often now purchased by investors at a discount, continuing the downward pressure on home prices.
While fixes for the housing market remain mostly in the realm of national and international financial and banking policies, Georgia leaders can be expected to feel the heat for a general lack of demand. The fact that Georgia remains stagnant in job creation means that Georgians are having difficulty finding the jobs needed to purchase these homes or pay their existing mortgages, while the flood of those from other states who once came here for better economic opportunities are no longer arriving to fuel our economic growth.
The state’s current vision for a competitive advantage continues to rely on logistical infrastructure from a Hartsfield Jackson airport which is completing yet another expansion and a Port of Savannah that is seeking a half billion in federal funds to accommodate larger ships and the good that they will carry. If grim predictions like the ones released from Athens continue, expect some Georgia politicians to arrive in Savannah with snorkels and shovels preparing to start the dredging themselves.