Where is the Savannah housing market headed in 2012?

In my City Talk column today, I talk about the direction that the Savannah area housing market is headed: What we can expect from the local housing market in 2012.

I’m not going to rehash all my predictions and all the numbers here, but let me add a few comments:

  • In predicting that we’re a few years away from full recovery, I’m relying on fundamental economic numbers that simply don’t change — presto! — overnight. We’ve been in a long slog for a few years now, and we’re going to be in the long slog for a few more years, just like much of the nation that prospered and expanded irrationally during the housing boom.
  • We have clearly hit “bottom” in one key respect: the number of home sales. We may have hit bottom in terms of housing starts. We almost certainly have not hit bottom in terms of prices. Those trends appear to be true for the nation as a whole.
  • In the column, I do not discuss job growth, but that’s obviously key to a full housing recovery. It might be 2020 before Georgia recovers all the jobs it has lost since 2007. Georgia is the only state to continue to see statistically significant job loss. The Savannah metro area has lost 2,600 jobs over the last year according to the most recently released numbers from the Georgia Department of Labor. We’re sure not going to see a steadier floor under the housing market while that’s going on.
  • Keep in mind that new home construction is much more important to the economy than existing home sales are. Existing home sales facilitate worker mobility, generate transfer fees and subsequent jobs, spur retail purchases, and put upward pressure on home prices, but existing home sales themselves do not contribute to GDP; new home construction does contribute to GDP. The catch-22, of course, is that each new home built only adds to the excess inventory.
  • I’m relying for that column on a wide range of data that I have been following for years, including homes sales, historical inventory trends, the average turnover in recent decades of existing homes each year, the ratio between existing home sales and new unit construction, the key relationship between home prices and effective rents, and so forth and so on. I’m a little amazed that I could talk off the top of my head about all those things, but I’ve been immersed in the numbers for a long time.
  • I do not in the column get into the problem of downtown Savannah condominiums, which represent a particularly problematic sector.

From late 2007 on, I wrote a lot about the local housing market. Mostly, it was dire warnings about where we were headed — and that’s pretty much where we ended up. I got a lot of blowback on many of those columns, but the data was clear. And the data is pretty clear now: we’ve turned a corner in terms of sales, but prices and new construction are not going to bounce back anytime soon.

I wish I had been much more proactive in 2005 and 2006 looking at sales and at new home construction. I was skeptical of a number of much-touted projects — especially New Hampstead, Savannah River Landing, and new residential communities on Hutchinson Island — but I should have written more promptly and more skeptically about those projects.

Maybe if there had been a chorus of voices from the media, local and state leaders, economists, and others who should have seen the writing on the wall, we wouldn’t have seen investors and banks throw bad money after good well into 2008.