Florida’s economy continues to improve, according to the Florida Legislature Office of Economic and Demographic Research, although there are risks.
In its updated “Florida: An Economic Overview” released a week ago, the office reports that the state is showing signs of economic recovery. It repeated from earlier reports that the Florida economy turned positive in 2010 after declining two consecutive years.
However, the report also said that key economic variables are mixed, and that Florida’s quarterly personal income growth in the third quarter over the second quarter fell for the first time since the third quarter of 2009, down 0.1 percent compared to national growth of 0.1 percent.
Looking ahead, the report said that problems persist among the 27 countries of the European Union, referred to as the eurozone, leading to banking instability that affects the global credit market. It said the eurozone apparently has slipped into recession.
Other risks include continued weakness in Florida’s personal income growth and federal spending cuts that could affect Florida businesses that receive federal contracts, including defense-related contracts.
The report also repeated that Florida’s economy is “very slowly recovering.
Unemployment and jobs
Florida’s unemployment rate in December was 9.9 percent, with 913,000 people out of work. That was an improvement from the 10 percent unemployment rate, and 926,000 people out of work, in November.
Both rates are lower than the state’s highest monthly rate, which was 12 percent in December 2010.
Also, year-over-year, the state gained 113,900 nonfarm jobs as of December, more than the 98,100 jobs gained year-over-year as of November.
Also in December, 27 of the state’s 67 counties posted double-digit unemployment rates, fewer than the 32 that did so in November.
Through December, the state found that 779,700 jobs were lost since the peak of employment, closing some of the gap from the November loss of 789,500 jobs since the peak.
The state continues to say that it would take the creation of more than a million jobs for the same percentage of the total population to be working as at the peak of employment.
The office said Florida’s prime working-age population, people ages 25-54, is predicted to add more than 2,600 people a month, “so the hole is deeper than it looks.”
Housing
According to the report, Florida housing continues to improve, based on a study of total documentary stamp tax collections.
The “sales volume of existing homes and building permits are both back in positive territory, showing year-over-year growth” for calendar years 2011 over 2010 and 2010 over 2009.
Still, while calendar year 2010 showed the first annual increase in documentary stamp tax collections since the peak in 2005, the 2010 total was just 28.5 percent of the peak and the 2011 total was slightly higher at 29.4 percent of the peak.
The documentary stamp tax is levied on documents that transfer interest in Florida real property, such as warranty deeds and quit claim deeds as well as other documents.
Regarding existing home sales, the sales level in calendar year 2010 was 70.1 percent of the 2005 peak and sales rose in 2011 to 76.4 percent of the peak, although the median sales price continued stuck at roughly half the price at the peak in mid-2006.
The median sales price of existing homes was $134,300 in December, up 3.2 percent from $130,100 in November.
Still, the December median price was down 48 percent from the peak of $257,800 in mid-2006. The November price was down even more, at a 49.5 percent drop.
Foreclosures and home ownership
The office’s headline about foreclosures remains the same: “Foreclosure filings remain daunting.”
For 2010, the state had the second highest number of filings in the country, at 485,286 properties, and the third highest foreclosure rate, with 5.51 percent of housing units receiving at least one filing during the year.
The state remained No. 2 for filings in the fourth quarter of 2011, which was October-December. The rate of foreclosure fell to sixth in the country, continuing in the top 10.
At the beginning of 2007, the foreclosure process in Florida took 169 days. That lengthened to 806 days (2.2 years) in the fourth quarter, the third lengthiest process period in the nation.
The report said that almost half of all residential loans in Florida are for homes that are underwater, unchanged from the previous report in January.
The sales mix continues to adjust, although lender-mediated sales continue to account for more than half of all sales. Cash sales make up more than a third of sales.
In fact, cash sales are up by 5 percentage points and financed sales are down by 4 percentage points.
From December 2010 through November 2011, short sales and properties owned by lenders after unsuccessful foreclosure sales, called real-estate owned properties, fell slightly from 52.6 percent of sales to 51.5 percent of total sales, while cash sales rose from 29.6 percent of sales to 34.7 percent of sales and financed sales fell from 17.8 percent of sales to 13.8 percent.
The REO price is nearly 40 percent lower than the average price and the short-sale price is about 21 percent lower, the office reported.
The Florida homeownership rate of 69.3 percent in 2010 was the lowest since 2002 and down from the peak of 72.4 percent mid-decade.
Banks
On the banking side, 58 Florida banks have failed since January 2009, consisting of 14 in 2009, rising to 29 in 2010 and dropped back to 13 in 2011. So far in 2012, there have been two failures.
The other failures since 2002 were two that year, one in 2004 and two in 2008.
Population
Florida’s population expanded from almost 16 million people in 2000 to 18.8 million in 2010 and 18.9 million in 2011 and is forecast to reach almost 23.6 million by 2030.
The office said population growth is Florida’s primary engine of economic growth, but is forecast to remain relatively flat, averaging 0.85 percent from 2011-14 but increasing to an average 1.1 percent from 2025-30, with 86 percent from net migration.
Still, that growth rate is slower than the average 3 percent from 1970-95.
Florida remains on track to exceed a population of 20 million during 2016, surpassing New York to become the No. 3 most populous state in the country.
Perceptions
Perhaps the biggest changes the past several months are the headlines about consumer sentiment nationwide, which the office said Florida follows.
“Perceptions Plummeted In August” in the October report was followed by “Perceptions Recovering After August” in December and January and “Perceptions Recover After August Dive” in February.
In August, consumer sentiment fell to near the lowest level of the recession and not far from the record low of 51.7 in May 1980.
The subsequent months have shown improvement. The nation’s sentiment reached 75 in January and Florida’s rate was 77.
Summary
Florida growth rates are slowly returning to typical levels, the report said. “But it will take several years to climb completely out of the hole left by the recession,” it said.
The national economy continues to recover and credit markets are regaining stability, but are still difficult, it said.
“So far, the recovery has been roughly half as strong as the average gain of 9.8 percent over the same period during the past seven recoveries,” it said.
Florida’s housing recovery will be led by low house prices that attract buyers and clear inventory; long-run demand caused by population growth and household formation; and the aging of the baby boom generation as boomers start to retire.
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