Florida's outlook is still sunny
Economists are all gloom nationally, but here it's a bit better.
By HELEN HUNTLEY, Times Personal Finance Editor
Published November 2, 2007
Everywhere you turn you can find reasons to be concerned about the economy, from Thursday's 362-point plunge in the Dow Jones Industrial Average to oil prices approaching $100 a barrel. Is Florida in trouble?
Economists say that in spite of a severe housing meltdown and other worrisome signs, Florida should continue growing and creating new jobs at a faster rate than the U.S. economy as a whole.
That's not a universal view. For Clearwater-based boat dealer MarineMax and chief executive Bill McGill, these are truly tough times.
"The environment we are experiencing today is about as bad as the softness we felt in the early '90s with the luxury tax, recession and Gulf War," McGill said Thursday as the country's largest boat retailer reported weaker profits. McGill said he doesn't expect things to get better any time soon.
"It's a precarious time," said Orlando economist Sean Snaith at the University of Central Florida. "If you tend to worry, there are plenty of things for you to worry about. Since 9/11, I don't think we've been in a period where there's such economic uncertainty as there is now."
Florida's economy clearly isn't as strong as it was two years ago when free-flowing mortgage money and a hot housing market provided a rising tide that lifted our collective boats, including McGill's. Overall the economy is still growing, but at a much slower pace.
Foreclosure rates in Florida are among the highest in the nation, with one filing for every 95 households - more than twice the national rate - according to RealtyTrac Inc. The California company said foreclosures in Florida during the third quarter were up 52 percent from the previous quarter and more than double the same quarter a year ago. Only California and Nevada are in worse shape. Each foreclosure means another house on an already-glutted for sale market.
But there also are signs that the pain won't last forever. In the Tampa Bay area, single-family housing starts were down 57 percent last quarter while sales of new homes were off 36 percent, according to statistics compiled by MetroStudy.
"At the current absorption rate, it will be the fall of 2008 before Tampa Bay reaches supply-demand equilibrium - if the job market does not improve," said Tony Polito, director of MetroStudy's Tampa Bay division. "The good news is that builders are building only to demand levels, a strategy that has allowed finished vacant inventory to decline during the last two quarters."
Wachovia economist Mark Vitner said it could be the end of 2009 before the housing market comes back into balance in Florida although he hopes for sooner.
One huge issue is how much the housing downturn will hurt consumer spending. Florida sales tax collections are down and state economists say the year could end with the first decline in annual sales tax collections in 15 years. Two of the hardest-hit areas are sales of autos and consumer durables such as appliances.
High gas prices, property taxes and insurance costs, and declining home values all are weighing heavily on Floridians, Vitner said.
"Folks are beginning to rethink how much they want that next big item," he said. "If it's a plasma TV, they still want it, but the bad news is if they get it they're going to be staying home instead of going to the sports bar."
Independent insurance agent Michael Krizmanich in Largo said his customers have become much more cost-conscious: "Even middle class people are becoming really frugal in looking at coverages, saying, 'What can I take off?'" He said increasing your deductible is the smart way to cut costs, but "a lot of people just want to under-insure. One woman said she was going to pay off her mortgage with her 401k and go bare. If we have a hurricane, she's not only lost her house, she's lost her life savings."
However, economist Vitner points out that "there are still plenty of things going right" and cites Tampa Bay area tech and defense companies. Tourism also is "holding up reasonably well." Look for more international tourists this winter, he said, since the decline in the dollar makes it less expensive for Canadians and Europeans to visit.
Outside the housing sector, businesses are still borrowing to finance their growth, said Steve Raney, president of Raymond James Bank in St. Petersburg.
"The rest of the economy locally seems to be holding up pretty well," he said. "Banks have raised a lot of capital and are still aggressively going after business loans."
Economists also say Florida's population is continuing to grow in spite of declining school enrollments in some areas and reports of people moving out of state.
University of Florida economist David Denslow was downright cheery in a Thursday presentation to a state taxation panel in Tallahassee. He said the slump is a short-term dip and predicted that if the nation doesn't fall into recession, Florida will start to see a turnaround in about a year.
Denslow said retiring baby boomers will give the economy a boost and create demand for housing that will cause prices to rise again over time.
"It's sort of a gold mine heading toward us in the long run," he said.
Staff writer Jennifer Liberto contributed to this report. Helen Huntley can be reached at firstname.lastname@example.org or (727) 893-8230.
Tourism: Hotels are making more money, but visits to Florida are flat. One upbeat note: Europeans can hit the beaches, Busch Gardens and Disney on the cheap thanks to the weaker dollar.
Construction: Home building is drying up, down more than half in the Tampa area the past year. Construction of shopping centers and offices is picking up part of the slack but employment is way down.
Financial and professional services: Mortgage bankers are thinning their ranks, but computer and technology geeks are still in short supply in many industries.
Agriculture: A bumper crop of citrus has things looking up. And the push for cheaper plant-based ethanol to fuel cars plays to Florida's long growing season.
Retail: High gas prices and lower home prices are sapping consumer confidence. That's hurting retail sales heading into the holidays. But store construction is still playing catch up to the recent population boom.
Health care: What's not to like? An aging population, the coming wave of retiring Baby Boomers, new medical advances and health crazes equal more profits for the life enhancing professions.
James Thorner, Times staff writer
[Last modified November 2, 2007, 00:21:01]
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