Page 8 - Georgia Forestry - Issue 2 - Spring 2024

25%
DECREASE IN DEMAND FOR COMMERCIAL
& INDUSTRIAL LENDING
NAVIGATING ECONOMIC
CROSSROADS
“An economist is an expert who will know tomorrow why the things he pre- dicted yesterday didn’t happen today. That phrase is particularly appropriate when you look at what the experts said was going to happen in 2023 and exactly what did happen,” said Evans.
He was referring to the discrepan- cies between economic predictions for 2023 and the actual outcomes. Despite expectations of a rough year, most eco- nomic indicators remained strong. But, even with 2023’s expectation-defying performance, Evans still believes 2024 will buck the positive trend in favor of a mild to moderate economic decline. He forecasts slow GDP growth, an unemploy- ment rate around 4.3%, and a normalized 3% increase in median home prices.
With eyes on the Federal Reserve’s next move, Evans warns that the political con- ditions of the coming year are likely to impact how rate cuts are deployed, and that people should be conservative in how much they trust the rate cut outlook.
“We expect these rates to come in con- current sessions in the summer — June, July and September” said Evans. “But it’s going to be interesting because the Fed doesn’t like to do anything that could be construed as political. Unfortunately, everything this year is going to be con- strued as political, so the timing will be paramount here.”
Commercial activity indexes reveal a mixed picture for the coming year, according to Evans. Manufacturing shows signs of contraction while services show very slight expansion. Demand for commercial and industrial lending is decreasing by as much as 25%, indicating overall cautiousness toward economic
conditions among businesses.
Evans’ outlook on real estate suggests
it to be one of the weakest areas of the national economy. While single-family home prices have continued to rise, sales remain down in the face of high inter- est rates and oversupply in the market. While he expects some reprieve soon, he’s concerned that many Americans won’t be able to afford homes as savings rates have plummeted and individual debt is reaching all-time highs, particularly with student loans.
Commercial real estate (CRE) trans- actions have plummeted even worse, according to Evans. In 2021, there were over $870 billion in CRE transactions, compared to just $374 billion in 2023. CRE only saw one area of strength in 2023: senior living facilities. All other sectors, including office and multifamily housing, declined.
“Multifamily, which we generally con- sider a great sector and pretty low risk, had the second-largest value drop and actually the highest volume drop in terms of deals done,” said Evans.
Evans points to Atlanta as a prime example of the challenges facing multi- family properties. Extreme oversupply in the region is leading to a significant and
Cal Evans, senior director of investor relations and market intelligence at Synovus
sudden decline in rents, further challeng- ing sales and development.
Though Evans outlined several chal- lenges on the immediate horizon, he indi- cated that mild economic declines in 2024 will lend future stability for real estate and other sectors going into future years.
“Survive until 2025,” said Evans.
AMIDST CHALLENGES,
FORESTRY REMAINS
RESILIENT
Keeping in mind the overall macroeco- nomic indicators shaping the national economy, Jobe is openly aware of the challenges directly facing the forestry sector today.
But, despite the supply chain disrup- tions and rising diesel costs contributing to heightened freight rates, coupled with sluggish growth in home starts and an unfavorable lending environment, Jobe’s analysis suggests that these challenges, while substantial, should not be a cause for prolonged concern within the industry.
“Despite challenges, the forest prod- ucts industry has shown remarkable resilience. The US South, in particular, remains a strong and attractive region for
6 | GEORGIA FORESTRY
ZACH CLIFTON, GEORGIA FORESTRY ASSOCIATION