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Florida hurtling toward recession

Posted by: Dean Foust on July 23, 2007

crane.jpgBob Ivry at Bloomberg has a pretty detailed report on the Florida condo scene, including a good line from Florida Gov. Charlie Crist—that the state bird should now be the building crane. Mark Zandi of predicts that Florida will be in recession as early as October, thanks to the rampant overbuilding—particularly in the condo market—that has ground to a halt and is leaving investors, banks and developers sitting on massive losses.

Zandi also notes that construction and housing accounted for 20% of all jobs in Florida—double the national average. Which explains why, with a number of those jobs evaporating, that Florida will slip into recession.

While I don’t expect the national economy to follow Florida—housing didn’t represent as big a component of the economy elsewhere—I do wonder about the impact that the housing downturn will have on the broader economy, given some estimates I’ve seen in past years that housing accounted for much of the economic growth nationwide. What sectors will pick up the slack? What indeed?

Reader Comments


July 23, 2007 4:36 PM


I don't know how you can write such an intelligent article about real estate and then try to boil it down to "housing." The real estate problems in Florida aren't just housing.

Condos in Florida really aren't about housing. They are commercial real estate ventures and investments. The crash in Florida condos is hurting REITS, commercial mortgage backed securities, and commercial lenders far more than it is affecting "housing."

If you want a barometer, watch the shares of Corus Bankshares, one of the heaviest lenders to Florida condos. Corus is an Illinois-based commercial lender (e.g., construction loans to developers) and its shares are down a third YTD and going at least another third lower.

Florida also shows that general real estate weakness is contagious (it quickly spreads among sectors) and also impacts consumption, state government revenues and employment, general economic morale, and population growth.

There is one other thing you should note. Florida is a state with very heavy dependence on automobiles and oil -- and there is a direct link between weakness of oil-dependent real estate (e.g., suburban shopping malls) and oil prices.

July 23, 2007 10:19 PM

Thank you again for the long awaited prediction to come true. I can say that while I can never wish this to occur in any state, Florida produces very little economic growth as a state. Over the past several years many people including family members of mine have made quite a bit on the growth of the market. Now is the time when the state will feel the wrath of unscrupulous lending from a class of population that should not have been purchasing. To expect this same class to purchase a condo, whether beach front or not, that would cost more than any home they could afford at any point in their life is ridiculous. Whats going on now can only be expected.


James Murray

July 26, 2007 6:16 PM

The Florida Real Estate Recession has started, the Real Estate Depression will start mid 2008.

History repeats itself in Florida, circa 1920-1926 Florida's property crash. Then two years later the Great Depression of 1929. I hope not but that's how the market works.

The housing boom is over! Within the next year the banks and loan companies will foreclose on properties throughout the State of Florida and in other states, due to defaults on all the no-interest loans, ARMs, Home Equity Loans, and other exotic mortgage 40-50 years, no interest payments. This scenario has already started, the speculator’s Bubble has burst the flippers and other speculators, dishonest appraisers, including governmental officials have caused this scenerio, the foreclosure rates in Florida are increasing, Florida is number two in foreclousre in the nation.

They say that death and taxes are the only inevitabilities. Well right now I’m not sure which sounds more unpleasant!

D Smith

August 9, 2007 10:01 PM

I happened upon this interesting website when I posed the following question in "Is Florida in a recession?"

I would like to post my opinion (if it's appropriate) based on personal experiences and observations.

I work for a municipality and just witnessed my health insurance premium double. When the property tax reform is put up for vote in January, we have already been warned that deep cuts will have to be made in the budget for next fiscal year to deal with the loss of revenue. This may result in layoffs and definitely a reduction in services to the public along with an increase in fees to offset some of this loss.

My husband is a self employed welder with custom sheet metal fabrication as his specialty, established for more than 30 years, who is experiencing a marked slowdown in business that traditionally never happens until the holidays. Those regular customers who still contract with him for work are delaying payments way past their due dates - if at all!

An acquaintance in the temp agency business said vendors they had accounts with for years are closing up shop and moving out of the state citing the fact that they can no longer afford to do business here.

I believe we are experiencing all of the symptoms of a recession but can its origins be traced back to the real estate bubble that recently exploded?

It is historic that some people will always live beyond their means with the 'I need it now!' mentality. Unscrupulous lenders, recognizing the bounty they could reap from these poor saps, swooped in and are now going belly up, one by one, as the buyers walk away from their massive debts.

Do I feel sorry for any of them? Absolutely not! I feel sorry for people like me who do live within their means and will ultimately pay a high price for their costly mistakes.


October 8, 2007 4:18 PM

it makes you wonder why the local boards in cities etc let the builders get so many permits approved to build. Why are so many or why were so many building permits approved. Maybe the florida building code can come to there sences after this. You see builders form all over the world come here and just build. I see construction workers and electricians come in to my line of business to get jobs now because of no jobs for them.
I don't see the recession hit so hard as most people think. The recession is built on that workers will be un employed. But most workers come from other states for a few months or maybe a few years to make some quick construction work money. They will just head back to theire states when they are done the florida party and work market.
I say that in the future approvals of buildings and homes should be limited to growth potential of the state and so we don't end up in a problem. Each city and county shoudl have a growth plan and not build over that plan.
This way demmand will always be there for the housing market.

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BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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