Florida's Quickening Pulse
Through the recession, the state fell hard.
Now for the comeback...
by Michael Pollick / Herald Tribune / January 11, 2015
Florida appears to be recapturing its economic mojo.
After falling harder than most states during the Great Recession -- the result of double-digit unemployment and housing values cut in half in many areas -- the Sunshine State has regained lost ground in the categories of jobs, visitors, housing, manufacturing and other key sectors.
In some areas, like tourism, Southwest Florida and the rest of the state are even exceeding levels attained during the economic boom years of the last decade.
As 2015 begins, some analysts expect Florida's overall economy to grow this year by 4.1 percent -- a third greater than the nation's rate and one of the fastest growth rates in the U.S.
Much of the boost can be attributed to northern visitors and retirees, who are selling their homes or buying second ones here and providing a significant lift to cornerstone industries such as hospitality, health care and construction.
But more macroeconomic influences -- including the booming stock market, historically low mortgage rates and declining fuel prices -- also are helping Southwest Florida, analysts say.
"I think Southwest Florida has benefited disproportionately from the boom in the stock market and the bond market, and by all the wealth created by the stock market's incredible bull run," said Sean Snaith, an economist at the University of Central Florida. The region "tends to attract the more affluent retirees, and those are the people who, by and large, have reaped the benefits of a booming stock market. They are able to finance new home purchases and cash out assets and retire."
Economists also say the impact of falling gas prices cannot be underestimated.
"For 2015, what is different is we really have two potential upsides for the state -- low gas prices, which took us and everybody else by surprise, and the stock market," said Mekael Teshome, an economist who covers Florida for PNC Financial Services.
Both waning gas prices and waxing stock prices tend to bump up discretionary spending, which, in turn, boosts places like Florida that rely heavily on visitor and part-time residents' spending.
"Discretionary spending is what drives our business," said Virginia Haley, president of Visit Sarasota County, the area's tourism agency.
November statistics represent a window on the trend: Sarasota County's hotels were 53 percent occupied in November 2013, a record for what is often a slower month before the traditional winter visitor season begins in earnest.
A year later, November occupancy rates jumped to 64.6 percent. Average daily room rates rose at the same time, by nearly 10 percent, to $133.
If past trends hold, many of those visitors will become at least part-time residents.
Last year the Sunshine State added a net total of 712 new residents daily -- 260,000 in all, said Chris McCarty, director of the University of Florida's Bureau of Economic and Business Research.
The net in-migrations were at least partly responsible for Florida's ascension to the stature of third-most populous state in the nation, edging out New York.
That rate is still somewhat lower than during the economic boom years of the past decade.
Still, the in-migration is significantly higher than it has been since 2008, and it is having a tremendous impact on one of the region's key economic drivers -- residential real estate.
At least part of that boost is the result of mortgage rates, which have subsided in recent months as a result of global turmoil and investors' renewed interest in U.S. Treasuries that serve as a benchmark for rates.
Thirty-year mortgage rates have hovered around 3 7/8 percent, said Pat Neal, president of one of the region's largest homebuilders, Neal Communities.
"That means if you live in Ohio, Michigan, Indiana or Illinois, you can sell your home in the Rust Belt, which you have not been able to do for the past eight years," Neal said.
Lower mortgage rates have also spurred new development, though many Southwest Florida buyers have completed purchases with cash since the end of the Great Recession.
In downtown Sarasota, developer Tom Mannausa has completed 11 floors of a planned 18-story highrise called The Jewel.
All 19 of the building's units were presold as of last June, at prices ranging from $1.6 million to $3.5 million. To make their purchases, buyers provided nonrefundable downpayments of 35 percent to 65 percent.
In a possible harbinger of future sales for the Vue on Sarasota Bay and other planned downtown condos, Mannausa said he still receives about three calls a day from interested buyers.
"If The Jewel were three times larger, I could sell those condos, too," he said.
In all, there are 29 projects either under construction or in the pipeline in downtown Sarasota, valued at nearly $500 million.
"It represents the desirability of this area, and the rebounding economy," Sarasota City Manager Tom Barwin said.
"We are seeing evidence all over the place that people's attitudes are dramatically upbeat compared to three-four years ago and that they are now feeling that this rebound may be sustainable for a decent amount of time."
More projects could be on the way, said Norman Gollub, the city's downtown economic development coordinator.
The tally does not include, for instance, the former Sarasota Quay site, a 15-acre bayfront parcel that recently sold to a Jacksonville-based company for $27 million. Developers are entitled to build 700 residences, a 175-room hotel and nearly 200,000 square feet of commercial space there.
Downtown Bradenton, too, has experienced a resurgence that will carry into 2015 and beyond.
Starting with the completion of the $6 million Riverwalk in 2012, the city has transformed itself into a livelier place to live and work.
NDC Construction, which was the construction manager for the project, reflects the resurgence.
Today, the firm is working on $89 million worth of development comprising two new apartment complexes along the Manatee River. The first, the $23 million Riversong, is slated for completion in February, NDC president Ron Allen said.
"With these projects, we will be bringing a lot of new residents downtown," Allen said. "Once those residents are there, shops and restaurants downtown will flourish even more than it is today."
While the respective downtowns have attracted considerable attention, much of the new development activity has centered on suburban areas throughout the region.
Neal has had so much interest in his new communities -- spread throughout Southwest Florida -- amid rising materials and other costs, that he has raised prices more than 10 percent, to an average of $345,000.
In 2014, Neal matched its sales and profit figures from 2005. This year, the builder expects to sell 1,044 new homes.
To get there, Neal is expanding geographically, with nine new communities from Hillsborough County to Collier County.
The additions will bring to 30 the number of communities Neal is active in this year.
"We are banking on the fact that the boomers have postponed their retirement, and because they can now sell their homes in Ohio, that they will buy homes from us in record numbers," he said. "Now that we see the Midwest recovering, our buyers are coming from the Rust Belt states for the first time in eight years."
In Lakewood Ranch -- already one of the fastest-growing developments of its kind, with about 20,000 residents -- the master-planned community is poised for further growth in 2015.
"I think we will escalate from our current pace of 500 homes a year up to close to 1,000," said Rex Jensen, president and CEO of Schroeder-Manatee Ranch Inc., the master developer.
Among the planned projects is a 640-acre Del Webb community that will ultimately have as many as 1,300 homes.
Jensen also said SMR intends to add about nine more miles of roads and utilities to open up access to the ranch from the south side at Fruitville Road. The company to eventually construct a bridge across Interstate 75 to connect Lakewood Ranch Boulevard to Cattlemen Road.
Bridge construction is tentatively slated for 2017, pending state financing to be arranged by Sarasota County government.
It's not just the out-of-towners buying homes here, thanks to an improved regional job market.
Both statewide and in Southwest Florida, the unemployment rate has showed continued improvement since 2012.
Florida's jobless rate in November -- the latest month available -- was 5.8 percent, while the three counties comprising Southwest Florida came in even stronger, at 5.4 percent.
By comparison, in late 2012, Southwest Florida's jobless rate stood at 7.7 percent.
But Snaith warns 2015 will not likely see similar gains.
"The growing labor force and rising labor participation rate will make lowering the unemployment rate more challenging," Snaith said. "The pace of decline will slow dramatically, and could reverse direction in any given month, as labor force growth picks up. As a result of this headwind, the unemployment rate should still hover around 5.8 percent through the end of 2017."
Payroll job growth, meanwhile, should average 2.3 percent this year, 1.9 percent in 2016 and 1.6 percent in 2017, he predicts.
Cyclical in nature
Economists note that the state's economy has surged in the past year because it is largely "pro-cyclical" in nature.
"It works both ways. The bad times are worse in Florida. The good times are better," said Kwame Donaldson, an economist who covers Florida for Moody's Analytics.
On the downside, the state still has less manufacturing than any southern state as a percentage of its overall job mix, and it has more reliance on tourism and construction than is desirable.
Wages remain low, too, which has somewhat checked economists' enthusiasm.
To boost wages, the state needs to expand its variety of businesses, they say.
"Florida needs to diversify," said McCarty, of the University of Florida. "There seems to be some awareness of that in Tallahassee, but how do you do it?
"Tourism is doing great right now, and we are building houses again, and people are moving here," McCarty said.
"But when things go sour, people stop coming -- that is the roller-coaster economy we live in."