Savannah Chamber

18 6 While homes are moderately overvalued by traditional metrics, one reason we do not expect a repeat of the housing bust is that the fundamental supports for housing demand are stronger now. In addition, current supplies of homes for sale and under construction will be limited. The more favorable balance of supply and demand suggests that housing markets will not crater and are likely to recover quickly once the Federal Reserve begins to cut interest rates. Propelled by higher demand, the number of building permits authorized for new homes is projected to rise by 5 percent. Homebuilding demand is particularly important because Georgia gets a five for one from housing: (1) home builders and realtors benefit directly and (2) demand increases nationally for goods produced by Georgia's large floor covering, building materials, and forestry industries. Also, (3) our large transportation and logistics industry benefits from higher levels of activity in construction—a very transportation-intensive activity. In addition, (4) appreciating U.S. home prices makes it even easier for companies and people to relocate to Georgia. Finally, (5) the home equity generated via recent home price appreciation boosts small business formation and expansion as well as consumer spending. But we are pessimistic about the immediate prospects for multi-unit residential construction, which will decrease by 29 percent because there are too many vacant apartments on the market already. Tighter lending standards for these projects and high interest rates will be major problems, too. As of mid-2023, Georgia's existing home prices were 56 percent higher than prior to the Covid pandemic and we do not expect them to rise any higher in 2024. Recent home price increases and high mortgage rates have reduced affordability enough to limit additional home price gains and homes are already overvalued. Beyond 2024, however, there is tremendous potential for more activity due to faster economic growth, low er mortgage rates, and more homes for sale. Demographics Demographic forces are another factor behind Georgia's above-average economic performance and comparatively good prospects for 2024 and beyond. For example, Georgia's population will grow at an annual pace of 0.7 percent, which is more than double the 0.3 percent national average. Domestic net migration will drop only slightly to about 70,000 because unemployment rates will be on the rise in many of the states that typically send people here. Before the pandemic, Georgia's above-average rate of population growth traditionally depended on net international migration of about 20,000 people. Pandemic-related travel restrictions and pandemic-related reductions in the U.S. government's capacity to process visas changed that. Now we expect international migration to recede to about 15,000 in 2024. Despite these small shifts, and the fact that labor markets are likely to be much tighter over the next couple of decades, the state's above-average labor force growth will keep its potential rate of economic growth well above that of U.S.

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