FDIC housing market analysis exposes vulnerabilities

TRIGAUX E-mail: Click here Archive

© St. Petersburg Times
published January 24, 2003

Mirror, mirror on the wall. What Southeast housing markets look most vulnerable to growing economic weakness?

Would you believe Florida is home to eight of the Southeast's top 10 vulnerable housing markets? And yes, Tampa Bay is one of them.

Despite the lowest mortgage rates in a generation, regional economists at the Federal Deposit Insurance Corp. in Atlanta recently analyzed the potential troubles lurking in major Southeast housing markets.

Doesn't the FDIC just insure bank deposits? Well, yes, but to make sure the thousands of banks they insure are strong, the FDIC constantly monitors market conditions so that its banks -- and the FDIC fund that insures their deposits -- can avoid nasty and expensive cleanups.

FDIC researchers say Atlanta ranks first in the Southeast as the market most vulnerable to an increasing housing bubble. They blame the dramatic halt in the boom times that defined Atlanta as the hottest metro area for job growth in the country. In the year ending August 2002, Atlanta experienced the largest percentage of job losses in the Southeast.

Florida metro areas are right behind. After Atlanta, the most vulnerable markets in the Southeast are, in order, Sarasota, Fort Myers, West Palm Beach, Fort Lauderdale and Orlando. Virginia's Roanoke ranks 7th, but is quickly followed by No. 8 Jacksonville, No. 9 Daytona Beach and, finally at No. 10, Tampa Bay.

Of the Southeast's 25 most vulnerable metro areas, according to FDIC analysts, 11 are in Florida.

I would not typically dwell on such a list. But the FDIC uses an interesting method of analysis, which offers some insight to the economies of Tampa Bay and Florida. To rank vulnerable metro areas, the FDIC looked at, then combined, three distinct factors:

1. Changes in the economy. Which Southeast metro areas are suffering the most from slowdowns after periods of rapid expansion in the 1990s?

2. Housing affordability. If metro area home prices are appreciating rapidly, are there enough jobs available that pay enough to allow people to afford such housing?

3. Bank lending. Are local banks (those under $1-billion in assets) lending too heavily tohomebuilders and setting themselves up for a fall?

So what did Tampa Bay do to earn a top 10 ranking? Its local bankers are not heavy homebuilding lenders. What tripped up this metro area (as well as Sarasota, Fort Lauderdale and Jacksonville) is the rising disparity between home price appreciation and income growth. Sharp economic slowdowns did not help, either.

Not all Florida markets are alike. In the hot Fort Myers market (ranked No. 3), the FDIC watchdogs warn local bankers are lending heavily, maybe excessively, to area homebuilders. But in the ritzy retirement market of Naples (comfortably ranked at No. 25), where the local economy did not suffer the jolts of other markets, the growth of personal income has outpaced home price appreciation.

FROM GREENVILLE, WITH LOVE: South Carolina's recent banking arrival, the South Financial Group, reported rosy bank earnings Thursday and planted everything but a big wet kiss on the Tampa Bay market. South Financial operates under the name "Mercantile Bank" in Florida after purchasing St. Petersburg's Mercantile Bank last year. And South Financial just completed its purchase of Tampa's Central Bank, noting Thursday that it will close two of Central's five branches for cost efficiencies. So how attractive is Tampa Bay to South Financial? Company CEO Mack I. Whittle Jr. put it into perspective: "The Tampa Bay market is half the size of the entire South Carolina market." Need he say more?

ENRON WAS NOT ALONE: Some might say the St. Petersburg Times got carried away in 2002 by citing the name Enron 1,060 times, for an average of almost three times a day. I think we should have mentioned it 2,060 times. But there were plenty of other less-than-upright corporations last year who escaped much of the media spotlight, courtesy of Enron. Multinational Monitor, a corporate watchdog publication, annually tracks unscrupulous behavior. Its choice for the 10 worst corporations of 2002 and its reasoning: Arthur Andersen (an Enron accomplice); British American Tobacco (encouraging youth smoking); Caterpillar (its bulldozers were used in Israeli-Palestinian conflicts); Citigroup (predatory lending and Enron); DynCorp (herbicides in Colombia); M&M/Mars (unresponsive to child slavery in African cocoa fields); Procter & Gamble (weak coffee prices helped its Folgers brand but destroyed small farmers overseas); Schering Plough (drug manufacturing problems); Shell (big polluter), and Wyeth (hyping hormone therapy to women without adequate health warnings). To Enron, these 10 say thanks!

A SURE BET?: Hard Rock Cafe International knows it's on to a good thing. The company, a unit of Rank Group PLC, just signed a deal with the Mississippi Band of Choctaw Indians to operate a hotel and beach club at the tribe's Pearl River casino resort in Choctaw, Miss. This is the same Hard Rock that's hooked up with the Seminole Tribe in building casino properties outside Tampa and, further south in the state, in Hollywood. It may be the closest thing to a gold mine.

-- Robert Trigaux can be reached at trigaux@sptimes.com or (727) 893-8405.

© 2006 • All Rights Reserved • St. Petersburg Times
490 First Avenue South • St. Petersburg, FL 33701 • 727-893-8111

Contact the Times | Privacy Policy
Standard of Accuracy | Terms, Conditions & Copyright