Savannah Chamber

22 16 development policy. Job training programs and new highly specialized workforce training centers will increase the supply of highly skilled workers thereby attracting businesses with high-paying jobs. Georgia's workforce centric approach towards economic development attracts business, raises workforce productivity, and boosts per capita incomes. The skills learned are portable, ensuring that the benefits of such incentives endure. Legislation has made Georgia more competitive, but Georgia will have to be extremely aggressive in closing the right deals. Georgia should target industries that expand the economic base and have good potential for long-term growth, such as electric vehicle manufacturing. Georgia must invest strategically and grow clusters in areas ranging from biotechnology to advanced manufacturing. The focus should be on innovation-based companies. Of course, Georgia must also make sure that its statutory incentives remain competitive – the statutory incentives help to get Georgia short-listed by site selection professionals. Then, only after Georgia is short-listed, do those critical deal-closing incentives come into play. A review of economic development announcements issued by the Office of the Governor and the Georgia Department of Economic Development indicates that economic developers are closing many deals in industries in which the state can produce at a low opportunity and marginal costs – comparative advantage. Specialization in activities where Georgia has comparative advantage bodes well for sustained success of the companies that received incentives thereby enhancing the prospect for long- term economic growth. Logistics, transportation, distribution, warehousing, electric vehicle manufacturing, software/technology, FinTech, data centers, cyber security, transactions processing, headquarters operations, floor coverings, building materials, automotive parts, food processing, and professional and business services are good examples of industries where Georgia competes effectively. Housing Market Conditions Housing is one of the most interest sensitive sectors of Georgia's economy. Shortly after the Federal Reserve pivoted from easy money to tight money mortgage rates doubled, which ended the post- pandemic housing boom. In 2022 and 2023, Georgia's single-family homebuilding industry was in recession. Higher mortgage rates were not the only factor behind the 2022-23 housing downturn. The sharp runup in home prices that began in mid-2020 was a second factor behind the housing recession. The combination of higher mortgage rates and the exceptionally large increases in home prices over a brief period reduced housing affordability. A third factor behind the housing downturn was a temporary loss of faith in the economic situation. Shortly after Russia's invasion of Ukraine, people became concerned about recession, especially as energy prices and inflation soared. People were less willing to commit to buying a home. These same factors reduced home builders' confidence in their ability to sell newly built homes whether under contract or built on speculation. In 2025, sales of new and existing homes and permits to build new single-family homes will increase but permits to build new multi-family homes will decrease. The downturn in multi-unit construction reflects more difficulty obtaining financing as well as recent high deliveries of properties in the construction pipeline that raised vacancy rates and softened rents. Meanwhile, investors will be less active in Georgia's single- and multi-unit housing markets. Inventories of new and existing single-family homes for sale will rise – albeit from extremely low levels. In 2025, single-family home prices will hold steady. That expectation may surprise many, but it is worth noting that historically single-family home prices are typically very sticky to the downside. The sharp price declines in the wake of the Great Recession were the exception and we believe are unlikely to be repeated in 2025. Indeed, the lack of homes for sale should prevent home prices from declining despite moderate overvaluation. While homes are 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 than prior to the Great Recession. In addition, current supplies of homes for sale and under construction will be limited, which is the opposite of the situation prior to the Great Recession. The more favorable balance of supply and demand suggests

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