Gloom seeps into our outlook
Battered by fuel prices, a housing slump and storm fears, Floridians see less sunshine in the economy than any time since 1993.
By HELEN HUNTLEY
Published August 29, 2006
Floridians’ confidence in the economy plunged this month to its lowest level in 13 years, University of Florida economists said Tuesday.
The chill in the housing market, higher interest rates and fuel prices appear to be taking their toll. National confidence numbers also fell in August, but not as much as they did in Florida.
The Florida Consumer Confidence Index fell 11 points to 76, while the national index, compiled by the Conference Board, went from 107 to 99.6.
The Florida drop is very similar to the one that occurred last September in the wake of Hurricane Katrina, only this time there was no hurricane to blame. Chris McCarty, director of survey research at the University of Florida’s Bureau of Economic and Business Research, thinks the changed outlook for housing is at least partly responsible.
“Florida is in a position to really be affected by a decline in housing,” McCarty said.
“There are a lot of overvalued markets in Florida and there are a lot of risky loans, some of which are going to readjust right about now,” he said. “Also, a lot of employment increases over the last few years have been related to housing.”
When projects get canceled or put on hold, that has a direct impact on jobs and a secondary impact on sales of appliances and furniture, he said.
Many consumers also are feeling the pinch of higher energy prices at the gas pump and in their utility bills.
“The feedback I get from people when they cancel their appointments at the last minute is that they’re broke,” said Valerie Bohr, 41, who owns Brilliance Color and Hairstyles in Largo. “Just this week I had two people tell me they got electric bills over $400. People can’t afford to come in and get their hair done if they’re working to pay an electric bill like that.”
She worries about being able to keep her salon open.
“Prices are going up for everything, and wages aren’t necessarily going up with it,” said Kristi Leach, 27, a technical writer in New Port Richey. “It’s hard to understand sometimes.”
She is concerned she may never be able to afford a house.
The Florida survey showed the biggest drop in confidence was among working-age people. They feel a pinch from rising interest rates on credit cards and home-equity loans, while retirees are more likely to benefit from rising rates on CDs and money market accounts.
“We’ve got an adjustable rate home equity loan, and every time the prime rate goes up, our payment goes up,” said Mike Della Penna, 51, a flooring contractor in Land O’Lakes. He said he and his wife continue to pay more than required because they’ve set a target for paying off the debt.
“But there may be a squeeze on some people whose incomes are marginal,” he said.
Homeowners who have been using their home equity as a piggy bank find their borrowing power is no longer growing now that property appreciation has come to a standstill.
“A lot of people unfortunately built that into their personal finances,” said Stan Close, 51, of Riverview, a banker.
“That probably is a key contributor to people not feeling as good about their wealth.”
He said confidence also is affected by rising interest rates, turmoil in the Middle East and “this sense of doom we have in Florida that a killer hurricane is headed our way and we can’t keep dodging the bullet forever.”
Helen Huntley can be reached at firstname.lastname@example.org or (727) 893-8230.
[Last modified August 29, 2006, 20:51:44]
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