Savannah Chamber

9 3 prospects for job growth include wood products and furniture. Limited, but positive job growth is expected for producers of non- metallic mineral products, fabricated metal products, computers and electronics, and transportation equipment. Producers of primary metals will cut jobs, however. Manufacturers of nondurable goods also will add to their workforces, but at a very modest rate. Among nondurables, food products will account for most of the job growth. Jobs will be lost in the textile, apparel, paper, and printing industries. Because the economies of EU and Japan have done poorly, manufacturers who want, or need, to locate elsewhere increasingly will opt for locations in North America. The U.S. ranks very highly in manufacturing competitiveness in terms of talent-based innovation, the legal system, property rights, and physical infrastructure. China outranks us in terms of its low costs and high levels of government investment in manufacturing/innovation-focused research and development. Tightening of China's labor markets and low U.S. energy prices are helping to shrink the cost advantage of manufacturing in China, but overall progress will be very slow. Housing Supported by demographic trends, housing will be a strong tailwind for U.S. GDP growth. In 2016, the number of single-family home starts for new construction will increase by about 20 percent (to 850,000 units). Existing home prices will continue to rise, but at a more moderate rate—about 3 percent in 2016. Any remaining pockets of home price depreciation are spotty, reflected local imbalances rather than overall macroeconomic conditions. In most markets, home price appreciation therefore will continue to bolster the psyche of the consumer, households' net worth, and homeowners' ability to spend. As the record of home price appreciation lengthens, potential homebuyers who have been waiting on the sidelines for even lower prices will increasingly opt to become homeowners. Rising rents will strongly reinforce this trend. In 2016, the share of homes sold to owner/occupiers will rise and the share sold to investors will decline. Going forward, the performance of the housing market will depend primarily on the performance of the labor market, mortgage rates, and credit conditions. Employment and personal income growth are expected in 2016, so more people will have the wherewithal and the confidence to buy homes, ensuring the sustainability of the housing market's recovery. Mortgage rates will remain a tremendous bargain, but rates will rise. The rise will not be large enough to stop—or reverse—the housing recovery, but it will be a headwind. Home mortgages should be somewhat easier to obtain, however. Credit conditions will ease as home values and macroeconomic conditions improve, but credit will remain tight for riskier loans. Although lending standards for new home construction and new residential developments will get a bit easier, credit lines and money to builders will still be somewhat scarce, restricting the supply of newly built homes. Also, low appraised values will stymie conventional lending as well as housing turnover. A scarcity of developed lots and a developing shortage of skilled construction tradespeople will curb the recovery of the housing market, too. Fortunately financing for lot development should be more available in 2016 than in recent years. Despite recent home price gains, many households owe more on their mortgages than their homes are worth, which limits the availability of financing, especially for those with lower credit scores. Moreover, many more homeowners are in near negative equity situations, and will not be able to absorb the transactions costs involved in selling their homes, make a significant down payment, or qualify for a new mortgage. Another factor that will restrain housing activity is that many homeowners have locked in extraordinarily low mortgage rates that they will be reluctant to give up. A potentially powerful demand side support for homebuilding is the rebound in the rate of household formation, which had been quite depressed. Job growth will be the key to unlocking the pent-up demand for housing that built up as young adults opted to stay a home a bit longer. In addition, improving job prospects will partially reverse the recent surge in college enrollment and might also slow the rate at which student loan debt is piling up. Indeed, record-breaking levels of student loan debt is one reason why young adults have delayed moving out on their own, getting married, having children, and buying a starter house. Nonresidential Construction Although slightly higher interest rates constitute a headwind, spending for new nonresidential construction will increase modestly. Credit conditions will ease for those looking to build nonresidential structures, but will remain tight in markets with high vacancy rates. Employment and population growth will generate gains in net occupancy, however. In many markets, tenants will no longer have the upper hand in lease negotiations. There will be some negative trends: there will be very little spending on energy- related construction; and the strong dollar has dampened foreign investors' interest in U.S. real estate.

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