Tuesday, October 20, 2009

Slow Recovery in States Dependant on Home Construction

According to this article in the Atlanta Journal-Constitution, states like Georgia and Florida whose economies are heavily dependent on the home construction industry are struggling harder to emerge from the recession.

It's interesting that cities in the Sunbelt that have boomed in good times are now handicapped by their economies based on sprawl.  Here's a quote from the article:

“We expect Georgia’s economy to emerge somewhat more slowly from the recession than the nation,” senior economist Mark Vitner and economic analyst Yasmine Kamaruddin noted in their 20-page report. “The state’s heavy dependence on manufacturing and construction, especially as it relates to residential and commercial construction, will weigh on the state’s economic performance for at least the next 18 months.”

This seems to be backed up by what I'm hearing from local officials.  One leader from a county in north Georgia told me Friday that local tax collection is way down, and the only bounce they can hope for is from the new VW plant planned in Chattanooga.  (Interestingly, the plant is being built here in the States because the dollar is so weak against the Euro, making goods from Germany more expensive here.)  People just aren't buying vacations homes in the Georgia mountains like they were before the economy tanked.

The full report is available here.  Here's a particularly devastating quote from the report itself:

The recession has had a disproportionate impact on Georgia, because its economy was more closely tied to the housing boom than many other states.   The Atlanta metro area was the number one market for single-family construction every year from 1998 to 2005, which marked the height of the housing boom.  During this period, more than 416,000 single-family permits were issued in the Atlanta area. The construction boom reached nearly every corner of the metropolitan area, particularly long slumbering areas to the south, east and west of the city.   The nation’s housing boom also fueled growth in Georgia’s important forest products and carpet industries. The collapse in new home construction sent the region reeling ahead of the rest of the country.  Construction employment has plunged 27 percent since March 2007.  Employment in building products industries fell 24.3 percent over the past two years, and Georgia’s carpet industry has seen employment decline 18.3 percent.  

The report goes on to say that the expansion of the housing market also led to an increase in consumer spending, which is now, not surprisingly, decreasing.  The report does have a slightly more upbeat forecast for Athens:

Steady growth at the University of Georgia and the surrounding area population should eventually engender a recovery in housing and retail trade.  The recovery is expected to remain slow, however, as state and local government budgets remain under intense pressure.

Still, housing permits are way down even in Athens, and many homes sit on the market for months. We haven't seen the widespread foreclosures of other areas, but folks are definitely pinching pennies, and according to anecdotes I've heard, homelessness is increasing here.

Jamie Baker Roskie

PS Today we make a site visit to Hawkinsville/Pulaski County, in South Central Georgia.  Hawkinsville is a small rural town that has been losing population over the last 20 years but is working hard to preserve and redevelop its historic downtown and its housing stock.  More on this visit soon.

http://lawprofessors.typepad.com/land_use/2009/10/economies-of-states-dependant-on-home-construction-slow-to-recover.html

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