More predictions for 2012 for local and state economy, including housing

I’ve already posted excerpts from and links to a number of credible predictions for the 2012 economy of the Savannah metro area on up to the national economy

Today, two more.

From Mary Carr Mayle’s Savannah’s outlook for 2012: More slow growth in the Savannah Morning News about last week’s Economic Outlook Luncheon, sponsored by the Chamber of Commerce and the Terry College of Business, featuring local Armstrong prof Michael Toma giving a regional outlook and UGA dean Robert Sumichrast giving a statewide forecast:

“Our manufacturing job base is growing, with major announcements in 2010 and 2011 from such companies as Gulfstream, Mitsubishi, Firth Rixson and JCB,” said Toma, director of the Center for Regional Analysis at Armstrong Atlantic State University.

“Tourism is up. Consumers are getting back in the game. Unemployment insurance claims are trending downward, although at a projected 1.25 percent, employment growth will continue to lag well below the 2.75 percent annual pace set before the recession.”

Job growth of 1.25% would be in the ballpark just to keep pace with expected population growth. No better. That’s pretty much what I expect this year too.

And this about the state:

Georgia’s inflation-adjusted GDP is expected to increase by 1.5 percent — an improvement over last year’s 1 percent growth but short of the 1.9 percent gain forecast for the country as a whole.

“When your growth rate is less than 2 percent, you need to be concerned,” Sumichrast said. “It makes you more vulnerable to a setback.”

Georgia lost 250,000 jobs in 2009, 50,000 more in 2010 and 25,000 in 2011, he said. While the state is projected to add 20,000 new jobs in 2012, employment will grow at only half the rate of the nation this year.

“If we continue growing, Georgia will replace its 325,000 lost jobs by 2020 — four years later than the rest of the country,” Sumichrast said.

Georgia’s ports have fully recovered from the Great Recession, he said, but face a “critical weakness.”

“Savannah is one of the shallowest major container ports in the world,” he said, adding that harbor deepening is essential to GPA maintaining and growing market share.

Sumichrast was also critical of the state’s economic development policies.

I’ve noted that 2020 date before, and in today’s paper I talk about the modestness of Governor Deal’s economic agenda.

I was critical in the past of Sumichrast’s annual talks in Savannah (like when he predicted three years ago that home prices would begin appreciating in late 2009 or 2010)), and here it’s clear that he either disagrees with — or has not read — the Corps of Engineers’ economic analysis about harbor dredging.

To repeat an increasingly stale refrain: According to the Corps of Engineers’ economists, the port of Savannah will move the same amount of cargo over the next 20 years whether it is dredged or not; the considerable economic impact comes through increased efficiencies because of larger vessels, less dependence on the tides, and other factors. I see little reason to think that impact will be felt locally.

In today’s paper, Adam Van Brimmer of the Savannah Morning News has a strong analysis of the Savannah metro area housing market. As I noted in a column last month and in a followup blog post, I think we’ll see more sales in 2012, with stagnant or very slowly improving new home construction, and continued downward pressure on prices.

That’s pretty similar to the picture that Van Brimmer paints in today’s piece, which ends by focusing on uncertainties over prices. Note that the local MLS data that is released monthly contains average prices, but median prices might be more useful — and neither measure represents the type of repeat sale data used by major home price indices. Still, over time, a clear picture emerges:

Price is the factor clouding the recovery picture.

Marketwide, the average sales price of single-family homes is off by almost 25 percent from pre-housing slump marks. Many insiders hoped the average price had bottomed out in 2009 when it hit $176,040.

The average price ticked up in 2010 before slipping again in 2011, however, finishing at $169,406.

The decline comes as no shock when considered in context — between 35 and 40 percent of sales in 2011 were foreclosures or distressed properties. But those sales do impact the prices owner-occupant sellers as well as builders get for their homes and cannot be discounted.

Gutting, the head of the Realtors’ board, argues the focus on average sales price is misplaced. The median home price changed marginally in 2011, Gutting said, off $5,000 from the previous year.

The article notes that there currently the inventory of residential properties is more than 11 months in metro Savannah. (I like to assess the inventory on a different monthly measure than was done here; perhaps I’ll explain why sometime.) In any case, this is very high by any measure. The analysis predicts rising prices when we get to 6 to 8 months of inventory.

That is extremely unlikely. While many analysts speak of 6 months of supply representing a balanced market, the data nationally shows that 4 to 5 months is needed for any significant price appreciation.