Economists from McGraw-Hill have released an economic forecast
for Florida — and the picture, while gloomy, offers some rays
of hope ("Florida
Construction Outlook 2010: Winter Issue," by Senior Economist
Jennifer Coskren - $345).
Florida is ground zero for the national housing market collapse,
and heads into 2010 after several tough years. Says the McGraw
report: "The housing market, which had buttressed the state's
economy in the early 2000s, is still deeply troubled. Foreclosures
are among the highest in the nation, and prices continue to
plummet. With no income tax, Florida relies heavily on the housing
market for its revenues. Consequently, plunging home values and
property taxes have put the state budget perpetually in the red.
The housing collapse has also damaged consumer confidence and
decimated retail spending."
But the housing market slide may be ending, says the report:
"Hope is emerging that the bottom is close. One the single family
side, home sales are finally beginning to stabilize after years of
steep declines. Florida Realtors reported that single family home
sales were up 26% through October 2009 and were up 46% over a year
earlier." McGraw-Hill projects a "modest recovery" for total
construction in 2010 — led by "the first increase in single
family construction since 2005."
Source: McGraw-Hill Construction
Instead of the word "modest," however, economist Coskren could
have used the term "tiny." The report projects residential starts
for 2010 at 42,491 — up about 6,000 or 15% from 2009's 36,489
starts. But that number is still down more than 240,000 from the
2005 high of 286,684 starts, and will leave the state's
homebuilding industry languishing at barely 15% of its pre-collapse
level. And the huge backlog of foreclosed homes in the state's
housing inventory — plus the impending wave of future
foreclosures — means that the state's builders are likely to
continue to struggle.
Source: McGraw-Hill Construction
Florida's state budget received a major boost from Federal
stimulus spending in 2009 and 2010, with Federal dollars staving
off far deeper cuts in state spending on education and other
priorities. But that money is slated to run out by 2011; and while
stimulus dollars allocated to public works construction will last
longer, they fall far short of the amount needed to counterbalance
the continuing shortfall in private construction investment. If
Florida can't manage to re-invigorate its own economy before
Federal support fades away, builders and remodelers in the state
will be facing a very tough decade ahead.