December 29, 2010
Florida's economic recovery is expected to be slow in 2011 as a dismal construction sector, tight credit, and wary consumers slowly rebuild confidence, economists project.
Double-digit unemployment will likely linger over the next 12 months while housing starts remain depressed despite strikingly low prices, several economists say. Economic distress is expected to continue in other regions that historically have provided Florida with newcomers but are now unable to sell their homes to finance a move to the South.
Still, economists say the seeds of recovery have been planted and will slowly take root in an economy battered by the Great Recession.
"The recovery has been under way since the late spring of 2010, but with growth rates that were more anemic than originally anticipated," said Amy Baker, coordinator of the Office of Economic and Demographic research.
Unemployment will remain "stubbornly high" in 2011, a panel of state economists said in early December.
The state's jobless rate could easily remain in double digits through 2011, as the state experiences a job recovery slowed in part by discouraged workers re-entering the workforce, said Sean Snaith, economist at the University of Central Florida. He predicts state unemployment won't drop to single digits until early 2013.
"The economy got back on its feet in 2010, albeit on legs that were still rubbery," Snaith said. "2011 will continue the expansion, but growth will decelerate until confidence in the recovery continues and the labor market begins to return."
The largest millstone around the state's economic neck is the housing market, which remains a shadow of its 2006 peak, a precipice that may not be reclaimed for more than a decade.
Construction employment in November was off 4 percent statewide from a year earlier. That's 13,100 fewer jobs than an already anemic 2009 figure of 360,700. During the construction peak in 2006 nearly 700,000 construction workers held jobs.
Construction employment was off 10 percent in Palm Coast, 11 percent in Fort Lauderdale and 15 percent in West Palm Beach. Orlando and Gainesville were the only areas in the state to buck the trend of fewer jobs, with Gainesville holding steady for the year and Orlando employment inching up 2 percent.
Nationally, construction employment rose in 120 of 337 metropolitan areas, according to the Associated General Contractors of America. Industry officials credit the increase to federal stimulus efforts and military spending.
Consumer spending will remain moderate until workers feel comfortable that they will not lose their jobs and those who are under-employed find the higher paying jobs for which they are qualified, Snaith said.
Until then, state revenue collections will continue to fall below previous forecasted amounts. Collections for general revenue, highway spending and property taxes are also expected to be lower in 2011-12 than in the current fiscal year, according to the Office of Economic and Demographic Research.
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Naples Rises From Florida Housing Swamp as Wealthy Buyers Return
By Dan Levy - Mar 23, 2011 12:00 AM ET
Joshua Bahoff bought a three- bedroom luxury condominium in Naples, Florida, in December for $235,000, about one-third of the price that the seller paid near the height of the U.S. housing boom.
“It was a great deal,” said Bahoff, 59, a Philadelphia dentist who plans to spend one week a month every winter in the 2,700-square-foot (250-square-meter) property in Fiddler’s Creek, a residential and golf development south of the city’s downtown historic district on the Gulf of Mexico. “We can’t see this market going down any lower.”
While much of Florida’s real estate market remains depressed by foreclosures, buyers seeking a second home in the state’s affluent vacation enclaves are “finally getting off the fence,” Karen Van Arsdale, an agent at Premier Sotheby’s International Realty in Naples, said in a telephone interview.
Sales in the Naples area last year rose 10 percent, the first annual increase in at least five years, while the median price for homes listed at $300,000 or more gained 4 percent to $544,000, according to data compiled by the Naples Area Board of Realtors. About half of the properties in the market are second homes, and discounts from 2006 peak prices average about 25 percent, said Brenda Fioretti, president of the group.
“Wealth determines housing, and the good places pick up first,” Karl Case, 64, a professor emeritus in economics at Wellesley College in Massachusetts who has been visiting Naples since a family vacation took him there when he was 13, said in a telephone interview. “For people with deep pockets, it’s generally a flight to quality.”
Atlantic Coast
Resort towns on Florida’s Atlantic coast are starting to follow the lead of Naples, said Patricia Fitzgerald, president of the Florida Realtors. Sales in Boca Raton, Jupiter and West Palm Beach rose 32 percent for existing houses and 40 percent for condos in February from a year earlier, according to the group.
Rising stock prices and the decision by President Barack Obama and Congress not to increase tax rates in 2011 contributed to the surge in deals, according to Van Arsdale. Record cold temperatures in parts of the Midwest and Northeast this winter “nudged people” to make real estate purchases they’d been putting off, she said.
Home values in South Florida markets may show a “surprise upward” trend while U.S. prices remain flat this year, according to Lawrence Yun, chief economist in Washington for the National Association of Realtors.
“Given that they are historical vacation destinations for the wealthy, and the stock market having risen so much, it’s possible that they get a nice snap back even though I’m calling for no change nationwide,” Yun said.
International Buyers
The Standard & Poor’s 500 Index, a benchmark for U.S. equities, has risen 91 percent since reaching a 12-year low in March 2009.
International buyers seeking to protect their wealth with U.S. hard assets may also buoy South Florida, according to a June 2010 report by the Chicago-based Realtors association. Florida properties accounted for 22 percent of all purchases made by buyers from outside the U.S. in the 12 months ended in April, the most of any state, according to the report.
The surge in Naples luxury prices contrasts with much of Florida’s housing market, where values are falling amid a glut of foreclosed properties. Loan servicers have been slow to resume home seizures as state attorneys general investigate mortgage-industry practices such as robo-signing, or using employees to sign affidavits and other documents, according to RealtyTrac Inc.
Foreclosure Ranking
Florida’s ranking of foreclosure filings per household fell to eighth among states last month from second in September, before the robo-signing controversy broke, the Irvine, California-based data seller said March 10. Florida ranked second in the number of filings sent to property owners with 18,760.
“The foreclosure market is completely dysfunctional,” said Michael Olenick, founder of LegalPrise Inc., a data seller based in Palm Beach that focuses on distressed properties. “People have given up finding a really cheap foreclosure.”
WCI Communities Inc., a Florida homebuilder that emerged from bankruptcy in September 2009, has “aggressively” reduced peak prices by as much as 40 percent at nine of its developments around the state, including three in Naples, Chief Executive Officer David Fry said in an interview.
The Bonita Springs-based builder, which cut its staff from 4,000 to 600, expects to sell 300 units this year and almost double that number in 2012, he said.
Land Prices
“The stock market has favorably affected confidence in recent months,” Fry said as he sat on the back patio of the Ritz-Carlton Hotel and Golf Resort in Naples, which WCI developed in 2002 as part of its Tiburon community. The hotel hosts the Naples Winter Wine Festival, a charity auction and social event that raised $12 million in January, 48 percent more than last year.
Land prices are rising as the real estate recovery takes hold, according to Steve Hagenbuckle, managing principal of real estate investment firm TerraCap Management Corp. in Cape Coral, Florida. Undeveloped land with zoning approvals in Estero, north of Naples, sold to a public builder he declined to name for $40,000 per quarter-acre lot. Eight months ago, Toll Brothers Inc. (TOL) bought similar land for $10,000, he said.
Premier Sotheby’s International Realty sold 41 Naples residences priced at $2 million or more this year through March 17, a gain of 14 percent over the same period in 2010, according to Lutgert Cos., a Naples property developer that owns the brokerage. There were 55 sales of homes priced between $1 million and $2 million, an increase of 17 percent, President Howard Gutman said in an e-mail.
Closing the Deal
“The buyers are value-conscious, but they’re making decisions,” said Van Arsdale, who brokered four transactions for a combined $27 million since Christmas. The properties sold for about 30 percent less than peak prices, she said.
Richard Azrael, 65, wanted to buy last year at WCI’s Marquesa subdivision next to the Ritz-Carlton until the company bankruptcy delayed his purchase. Last month, he closed on a three-bedroom, 3,000-square-foot condo and golf membership for $720,000, saving about $80,000 over the 2010 price, he said.
“We’ve been thinking of this for several years, and we felt that if we were going to do it, we should do it now,” said Azrael, a real estate developer from Columbia, Maryland. “We’ve been spending a lot of time in Florida on both coasts, and we happen to like the pace and environment in Naples.”
Interstate Access
Naples, with a bay like its namesake Italian city, was developed in the late 1880s by John S. Williams, a U.S. senator from Kentucky, and Walter Haldeman, publisher of the state’s Louisville Courier-Journal. They built homes, a pier and a 16- room hotel, according to the Naples Historical Society website.
The town, about 170 miles (270 kilometers) south of Tampa, remained “a small, lovely oasis along the Gulf of Mexico” until the 1950s, the website says.
After U.S. Interstate 75 was extended from Tampa to Naples and international service began at Southwest Florida Airport, Ritz-Carlton opened the first of its two hotels, a resort on Vanderbilt Beach near downtown, in 1985.
“That put Naples on the map,” Gutman said.
Midwest residents had always been the core vacation group, driving south on I-75, and now they were joined by air travelers and international visitors, Gutman said.
The office portion of the Mercato commercial development, a Lutgert joint venture with Barron Collier Cos. that opened in late 2008, is 83 percent leased with tenants including securities brokers Merrill Lynch & Co. and Wells Fargo Advisors, Gutman said.
Hotels Fill Up
The oldest hotel in town, the Naples Beach Hotel and Golf Club, is also feeling the upswing, said Mike Watkins, whose family has owned the property since 1946. Located on Gulf Shore Boulevard, which passes by the boutiques, sidewalk cafes and mansions of Old Naples, the hotel completed a $40 million renovation this year that includes refurbished rooms and golf greens and two new pools.
Occupancy in March for the 317-room property may reach 90 percent, the highest for the month in a decade, after the recession pushed the rate to the “low 50s,” he said.
“We’re positive about the economy,” Watkins said.
Case, co-creator of a widely watched home-price index with Yale University’s Robert Shiller, said a steady U.S. recovery bodes well for Naples and the national housing market. Private surveys they conduct every year show “consumer home sentiment is strengthening” after reaching a low in 2008.
“We’re not roaring out of this -- GDP is 3.5 percent to 4 percent and the stock market is around 12,000 -- but I believe we’ve hit a bottom,” Case, whose banker father first brought the family from New York City to Naples in 1959. He remembers his initial impressions of “a sleepy town that just took off.”
“If you look around the country at places that hold their value, there are not a lot of houses on Martha’s Vineyard or Aspen or Jackson Hole,” Case said. “Naples is one of those areas, kind of a special place.”