The housing slump extends beyond houses
The drop has pulled the rug out from under rug sellers ... and landscapers, appliance dealers, plumbers and others.
By James Thorner, Times Staff Writer
Published July 22, 2007
As one of the Tampa Bay area's largest landscaping companies, Raymow thrived servicing new home buyers of companies such as Standard-Pacific and Transeastern homes.
Now Standard Pacific's Florida sales are in retreat. Transeastern has tanked and its corporate name will vanish under new ownership.
Housing's economic ripple has rolled over Raymow. The Oldsmar company projects $5-million less in sales than originally forecast and has laid off about 100 of 320 employees.
"We've had a hurt put on us for sure," vice president Wendy Andrews-Fine said.
Almost everyone's heard about the pain the crumbling housing market has inflicted on building trades, real estate agents and mortgage lenders. But the tremors have cascaded from the inner circle to more distant, but related, industries.
Think furniture stores, appliance dealers, pickup sellers - even the CSX trains that lug lumber to Tampa to build homes.
"It's weighing down the economy and it's shaved growth off. There's no doubt about that," said Sean Snaith, a University of Central Florida economist who tracks the economies of Florida's metropolitan areas.
But economists like Snaith caution that a slowdown in one of the region's largest industries hasn't dragged the overall economy into recession, even in Slump Central like the Tampa-St. Petersburg-Clearwater metro area. That's not to say a recession couldn't happen should the real estate outlook darken further, but it hasn't happened through the middle of 2007.
Job creation, though much reduced thanks to construction layoffs, hasn't stopped. Personal income is the best gauge of whether consumers will continue to spend. It has risen locally about 6 percent the past year, fueling retail sales. Florida's gross state product, the measure of all economic activity in the state, continues to rise.
"It's clear housing hasn't been able to knock the economy off track," said Ken Simonson, economist with the Associated General Contractors of America in Arlington, Va.
But Simonson isn't in the business of dispensing happy talk: "I do expect to hear about a lot of bankruptcies in businesses that furnished and equipped a home or yard."
Jeff Bloom knows what he's talking about. Bloom's family has run Ethan Allen furniture stores in and around Tampa since 1967. Since late last year, customers just aren't coming through the doors at his design centers in Tampa, Citrus Park and Brandon.
Construction of a planned Wesley Chapel store, a community that until early 2006 was the throbbing heart of housing's growth spurt, has been placed on hold.
A chain of upscale furniture stores called Storehouse, with a branch near Bloom's Citrus Park store, went bankrupt last year and closed.
"We have to wait and see when housing's coming back before we can justify building," Bloom said. "This is as rough as we've seen it in many, many years."
When St. Petersburg builder Construction Compliance Inc. filed for bankruptcy this year, one of the first things seized was its pickups.
Tom Castriota, owner of Castriota Chevrolet in Hudson, has noted the same phenomenon in Pasco County: a glut of pickups for sale on U.S. 19 from idled plumbers and other tradesmen.
It's an unhappy trend for Castriota, who's trying to move Chevy's new Silverado pickup. Even the car company with the hottest hand, Toyota, isn't moving as many Tundra pickups as it would like. High gas prices don't help, either.
"What I've heard industry-wise is that Florida and California are taking the hit," Castriota said.
Even national companies with a regional presence are blaming the housing downturn for much of what ails them.
Sears and Home Depot reported lower earnings when the spring home improvement season didn't materialize as anticipated. Home Depot named Florida as a sore spot. Sears cited a dip in demand for appliances.
Wal-Mart delayed construction of a supercenter in Dade City, citing lack of "maturation" in a housing market turned south.
CSX, the railroad based in Jacksonville that has tracks crisscrossing Florida, said slowing demand for lumber helped drive down profits the past year.
But CSX, Home Depot and Wal-Mart also illustrate the resilience of the overall economy: They all remain profitable, housing slump or not.
And some retailers that act as bellwethers for recession haven't felt the housing dip in any measurable way.
Consumer electronics stores Circuit City and Best Buy have benefited from a national mania for digital flat-screen TVs. A similar boom for its products and services has shielded Bright House Networks, which has been wiring homes at a record pace.
Economists Snaith and Simonson said falling home values haven't sapped retail sales as much as predicted. They blamed the fear on proponents of the "ATM effect," the theory that people used their home equity as cash machines for frivolous purchases. When that equity dries up, consumer spending stalls. So goes the theory, at least.
"I don't buy the notion that everyone was tapping into home equity for the express purpose of buying a flat-screen TV or fishing boat," Snaith said. "I think a lot of people were bundling up debt and refinancing at a lower interest rate."
Hobbling the theory even further, Freddie Mac, the public company formed by Congress that handles millions of mortgages, revealed that "cash-out refinancing" remains prevalent.
Duncheon's Nursery & Landscaping in Land O'Lakes represents the part of the boom that won't abate. Unlike Raymow, Duncheon's has focused on residential customers. And there's a lot more residences to go around. Thousands of new homes cocoon the business in a 5-mile radius from U.S. 41.
Joy Cole, standing at a display of coyote urine pellets that repel plant-nibbling deer, carries the sweat streaks of a worker who's been hustling even at 9 a.m. on a weekday.
"Business has been as good as it's ever been," she said.
James Thorner can be reached at thorner@sptimes.com or 813 226-3313.
Why the housing slump hasn't brought us a recession
Economists have a variety of explanations for Tampa Bay's resilience. Among them:
The "ATM effect," the theory that people took cash out of their homes to make foolish purchases during the boom, is exaggerated. Most people refinanced their homes to take advantage of record low interest rates, saving money in the long run.
Personal income growth, which includes investment gains along with wages, remains strong locally at about 6 percent. That, not home equity, is the best measure of whether a person will spend.
Despite job losses in construction, real estate and industries like furniture, jobs proliferate in fields like health care, hospitality and business services, pushing up employment 1.2 percent the past year.
Many workers in construction were illegal immigrants who worked for cash. The government had a tough time counting them when they were employed. And it has a tough time counting them when they are laid off.