Savannah Chamber

20 Georgia's large floor covering, building materials, and forestry industries. Plus, (3) our large transportation and logistics industry benefits from higher levels of activity in construction—a very transportation-intensive activity. In addition, (4) recent and continuing increases in U.S. home prices will make it even easier for companies and people to relocate to Georgia. Finally, (5) the home equity generated via home price appreciation will boost small business formation and expansion as well as consumer spending. Georgia's housing market is responding to a more favorable balance of supply and demand. Increased demand for housing will come mostly from job growth. Those new jobs and slightly bigger paychecks will give more people the wherewithal, and the confidence, to buy homes. On average, Georgia's existing home prices have fully recovered, but the degree of home price recovery varies widely within the state. For example, on average, existing home prices in the Atlanta MSA are 8 percent higher than their pre-recession peak level. In contrast, existing home prices in rural Georgia are 8 percent below their pre-recession peak value. Home price appreciation will continue through 2018, but home prices will rise more slowly than in 2012-2017. For the state and nation as a whole, the home price recovery is complete, but those nominal gains do not consider inflation. Nonetheless, the recovery of home prices in nominal terms will help to sustain the housing market's recovery. In addition, rent affordability is at an all-time low. Meanwhile, mortgage rates remain a tremendous bargain from a historical perspective, but mortgage rates are above their recent historic lows and will continue to move higher as the Federal Reserve gradually reverses its easing policies. Supplies of new homes are still constrained by years of underbuilding. In addition, listings of existing homes are scarce, and it is especially acute for the least-expensive homes. That is partially because many Georgians are still underwater on their mortgages and are unlikely to put their homes up for sale. It is especially troubling that the negative equity is extremely concentrated in the starter home segment, because that hurts the trade-up market. In addition, many homeowners realize they will not qualify for a new mortgage, so they will stay put even though negative equity is receding. The price of the average existing single-family home will rise by 4 percent in Georgia in 2018. As potential homebuyers see a record of price appreciation, more will opt to become homeowners. Rising rents reinforce this trend. As home prices rise and the number of distressed properties shrinks, home sales to investors will drop sharply. Sustaining the recovery of the housing market through 2018 means that trade-up buyers and first-time buyers must become more active. There is tremendous potential for even more active housing markets because a huge number of young people are still living at home, or are doubled up with roommates rather than living in their own apartments or homes. Improving economic and housing market conditions combined with soaring rents will unleash that potential. Demographics Demographic forces are another factor behind Georgia's improving economic performance. For decades, Georgia depended on growth based on high levels of in-migration. That growth model stopped working during the Great Recession due to a dysfunctional housing market, the weak labor market, and high levels of student loan debt. Due to job growth and the housing recovery, geographic mobility turned up in 2014, and it continues today. Jobs will attract young, educated adults who will be more mobile than they were prior to the housing bust. The nationwide recovery in home prices will give retirees the wherewithal and confidence to move to Sunbelt states such as Georgia, whose population will grow at a pace that exceeds the national average in 2018—1.5 percent for Georgia versus 0.7 percent for the U.S. Georgia's higher rate of population growth also is dependent on net international migration of about 25,000 people, which is about the same as estimated for 2017. The foreign-born account for about 10 percent of

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