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Gloom, yes, but no doom

The housing crunch will widen in 2008, but it won't bring a recession, mayors say.

By JAMES THORNER, Times Staff Writer
Published November 28, 2007

The housing malaise will sap property values, crimp property tax collections and shave a full point off of Florida's growth in 2008.

So says the U.S. Conference of Mayors in a report Tuesday that predicts real estate turmoil will reduce the nation's well-being next year, but won't throw the country into full-blown recession.

The report was specific about the potential harm to Florida as rising foreclosures flood an already unstable housing market: $589-million in lost property taxes, a $148-million dip in sales tax receipts and an $80-billion drop in property values in 2008.

"Not that long ago economists said housing was the backbone of our economy," said U.S. Conference of Mayors President Douglas Palmer, mayor of Trenton, N.J., at a meeting of mayors, mortgage industry representatives and community advocates in Detroit. The mayors' group represents cities with populations of 30,000 or more.

"Today the foreclosure crisis has the potential to break the back of our economy, as well as the backs of millions of American families, if we don't do something soon."

The report, titled "The Mortgage Crisis: Economic and Fiscal Implications for Metro Areas," predicts that an additional 1.4-million foreclosures in the country next year will slow growth to 1.9 percent.

The Tampa Bay area makes out better than most of the 361 metro areas in the study. The mayors said the area will grow about 3 percent next year, though it would have been 4 percent without the housing crunch.

Sarasota-Bradenton-Venice is forecast to be among the worst-hit metros. The report predicts 2.88 percent growth for our neighbor to the south. Growth there would be close to 4.5 percent if the housing was healthier.

"The fast-growth states will still be faster growing, just less so," said Jim Diffley, an economist with forecasting firm Global Insight, which did the study for the mayors. "Relative to the rest of the country, you're still doing well."

Nationally, the conference estimates a $1.2-trillion decline in property values, about half of that attributable to foreclosure homes pouring onto the market and lowering prices. The mortgage spillover will contribute to sluggish job growth, with 540,000 fewer jobs created than originally anticipated.

Near the end of their report, the mayors get to the gist of their argument: They want mortgage lenders to give hard-strapped families a break on their payments. The federal government estimates that 150,000 adjustable-rate mortgages reset each month, in many cases leading to higher payments for homeowners already struggling to pay off loans.

"In the end the economy will not come off the rails, and we may actually have learned something," the mayors said.

Bay area tops in price plunge

Tampa-St. Petersburg-Clearwater showed the biggest home price drop among 20 cities, nudging aside other hard-hit housing markets like Miami, San Diego and Detroit, said the S&P/Case-Shiller U.S. National Home Price Index on Tuesday.

The region's 11.1 percent price decline was more than twice the national average of 4.9 percent, according to the index.

Case-Shiller measured housing price changes from September 2006 to September 2007. The index lags a month behind housing statistics released by the National Association of Realtors, which is scheduled to put out October home sales numbers today.

Longtime homeowners in the Tampa Bay area need not weep from poverty. Case-Shiller said home prices have more than doubled locally since 2000.

Houses in five of the 20 markets studied by Case-Shiller appreciated in the past year. Charlotte, N.C., Portland, Ore., and Seattle led the way.

James Thorner can be reached at thorner@sptimes.com or (813) 226-3313.

Read his housing blog, (Un)Real Estate, at blogs.tampabay.com/realestate.

[Last modified November 27, 2007, 22:54:29]