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Wednesday, April 9, 2003 Record crowd hears HBA economic forecast If the size of the crowd was any indication, the state of the economy is a big concern for members of the Home Builders Association of Midwest Georgia. The association's annual economic forecast, presented by Curtis Smith of SunTrust Bank Atlanta, drew a record crowd of 185 attendees to the association's February gathering at the Wyndham Peachtree Conference Center. Smith, who is a first vice president of Suntrust Bank, began by outlining the current state of the national economy. Noting that the economy stalled in the fourth quarter of the past year, he stated his belief that the business decline had bottomed out and that a rebound seems to be beginning. Business has been holding the line on spending and using a smaller worker force to handle production. Consequently, the job growth rate as been down as employers have been squeezing more work out of their employees, and Atlanta has been one of the hardest hit areas in job losses. The threat of war and rising oil prices are threatening the economy, said Smith, but he also told of some bright spots, including the fact that business capital spending is improving slowing and that record low mortgage rates have stimulated the economy and created a very strong housing market. "The housing market has been the healthiest part of the economy," he pointed out. On the minus side, he told the group, consumer confidence has been the lowest in nine years, even though disposable income increased 5.8 percent last year. "The savings rate increased to 4.3 percent in the fourth quarter of 2002, but consumer spending slowed. Credit card debt fell $8.4 billion in December, and there has been a much lower level of cash out refinancing," he added, explaining that he feels that consumers are just now starting to follow the lead of business. "Consumers are starting to do what business has been doing. They're starting to get their house in order," he explained. Smith said the recession the nation has experienced is actually the weakest yet, since it has been a business-related recession as opposed to a consumer's recession. What's ahead for the nation's economy? Smith sees the return of moderate job growth. Consumer spending will hold up, business capital spending will inch higher, and the economy will return to a long term growth path. He believes interest rates will move higher as the economy strengthens, and the housing market will cool but remain strong. Presenting his 2003 Atlanta housing forecast and basing his conclusions on housing data provided by MetroStudy, Smith said the local housing market "is not a bubble." He feels new home starts will decline six percent to 39,400 for the Atlanta area and that mortgage underwriting will tighten. He predicts that the prime rate will rise to 4.75 percent by the fourth quarter of the year, and the mortgage rate will increase to from 6 to 6.25 percent. In the area of employment, Smith believes the Atlanta area will have a net gain of 25,000 jobs this year. Breaking down the Atlanta area housing market, he informed the group that the North Atlanta new home market has been down 6 percent, while the South Atlanta market has been up 32 percent, with affordability being the driving force behind this movement. Among Metro South counties, Smith described Henry County as the "800-lb. gorilla" with some 2,000 new homes on the ground. Many of these are townhomes, and the Locust Grove/Hampton area is currently getting a lot of attention from developers and builders. Clayton County, which Smith termed as basically a starter home market with most of the homes under $200,000, has approximately 1,200 homes either completed or vacant. By contrast, according to Smith, Fayette County lacks housing under the $200,000 level and won't meet housing demand because of the scarcity of affordable housing and county restraints. Saying that Coweta County has a good housing product range, with a good share of this in the $200,000 to $350,000 range, he said the county hasn't been a growth market principally due to the minimum lot size limit of 1.6 acres in its unincorporated areas. South Fulton County was described as a "brand-new market" with many of the new homes being well under the $200,000 level. Smith said that 13,000 lots have been approved to come on the market in South Fulton. "There's a tremendous land rush on here," he told the builders. The home builders association's February meeting was sponsored by SunTrust Bank Atlanta and the Coweta-Fayette EMC. The Home Builders Association of Midwest Georgia serves builders in Fayette, Coweta, Spalding, Meriwether, Heard, Pike, Upson, and Lamar counties. More information about the group can be obtained by calling the association office at 770-716-7189.
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