Economist expects locals to survive housing decline

DULUTH - Georgia banks and businesses should be able to survive the housing crisis, a leading economist told members of the Council for Quality Growth Monday. But water and oil prices could create a shaky economy in 2008.

Donald Ratajczak, a professor emeritus from Georgia State University, told the crowd of developers and financiers that the subprime mortgage problems have created a national housing failure. But Georgia is in a better position than many states because migration of people means a demand for houses will continue.

"We're bouncing on the bottom now, and we're going to bounce a while before we go up," he said.

"Housing is still going to be a drop on this economy. ... But at least we are doing what needs to be done," he said, referring to a building slump to stop adding to the housing stock. "The good news is we aren't building inventory. That's the bad news, too, because we're not building inventory, we don't have jobs."

Ratajczak said he expects the housing market and values to stabilize in the spring, and he said banks now have enough insurance to write-off the costs. Before then, though, he expects to see a month or two of job losses.

Kerry Armstrong of Duke Realty said he believes Ratajczak's forecast will ring true.

"We think the first half of the year will be bumpy, but we have the abilities in place to get through it," said Armstrong, who works mostly in commercial development. "We have to digest the bad news and get through it."

Tip Cape of Bowen Family Homes said his business has slowed during the troubled financial times, but he's optimistic about next year.

"It's a challenge," he said. "I always knew that Atlanta wasn't going to be as affected (as other areas). We're still going to have some work to do to get back on an even keel."

Ratajczak expects gas prices to rise as well as the stock market, but he believes the state needs to get serious about planning for future droughts.

"Water is important. We need people to get serious about it," he said, adding that he doesn't believe that Atlanta's growth has surpassed the supply, but that downstream users should have to face the same restrictions as metro Atlantans.

"This is not a great time for landscapers and I don't have a solution," he said about the drought.