Tough Times: The Southeastern Economy in 2008
Real estate takes a tumble
Like the region's workers, the Southeast's housing markets were hit hard, most notably in Florida and Georgia. In several areas of the region, existing home sales and inventories of homes for sale began to stabilize later in 2008. Yet even that good news was tempered by the reality that lender-owned foreclosed houses crowded the market and depressed prices (chart 2).
During the fourth quarter, for example, existing home sales in Florida climbed 12.5 percent above a weak year-earlier period. But the average price tumbled 24 percent. Industry contacts told the Atlanta Fed that houses foreclosed by financial institutions accounted for up to half those sales.
Falling prices and scarce sales also plagued Georgia, particularly the once-booming metro Atlanta market. Over the past decade, no metro area in the country issued more single-family building permits than Atlanta. But since peaking in 2005, the number of permits issued slid 91 percent through the fourth quarter of 2008.
As demand dried up, many home builders closed or were forced into bankruptcy. In September 2008, the Greater Atlanta Homebuilders Association reported its membership had shrunk 22 percent in two years.
The effects of foreclosures and bank-owned houses flooding the market were not contained to Florida and Georgia. In markets across the Southeast, home prices fell, and access to financing was limited.
Commercial real estate saw shrinking demand
Commercial contractors reported fewer projects in their backlogs, especially in Florida. Not surprisingly, more bidders, including some idle residential builders, chased less work, forcing prices down. By the middle of the year, more construction projects were being postponed or canceled. Worried consumers spent less, undercutting the need for new shopping centers, while demand for office space and access to financing also shrank.
Construction industry woes were bad news for workers. Construction employment in the Southeast in 2008 dipped more than 14 percent from the year before.