Cooling Housing Market Trickles Down, Hurts Many Southwest Florida Businesses

The cooling Southwest Florida housing market is starting to pinch a lot of residents, particularly those whose professional livelihoods are tied to it.

The Sarasota Herald-Tribune tells the story of workers like cabinet maker Jorge Ayo, who faces the difficult decision of whether to depart the region for greener pastures, double up on contracts, or moving to another sector in order to find steady work.

As recently as three months ago, Ayo earned $2,000 a week from a single customer, Timberlake Cabinets. Now, even with two additional accounts, he makes only half that income.

“Three months ago, I worked every day. Now the big houses are gone. I have a condo here and a town home there, and I get a few remodels here and there. And sometimes, I have no work,” Ayo said.

During the unprecedented real estate boom, building material suppliers, manufacturers and the area’s home builders alike ramped up to meet the escalating demand. Thousands of workers moved to Southwest Florida from around the nation.

But now, for the first time since 2000, construction permits are declining. In the second fiscal quarter of this year, 10 percent fewer permits have been issued nationwide, and a staggering 25 percent fewer in Sarasota and Manatee counties.

The most recent drops have been even more dramatic.

• In June, Sarasota County issued 222 permits, down 64 percent from 619 in June 2005.
• Manatee County issued 301, down 39 percent from the 495 issued just one year ago. At present, workers, builders, agents, buyers and sellers all find themselves caught in the middle of this adjustment.

Because of economic dependence on construction, Sarasota, Manatee and Charlotte counties are more vulnerable to the slowing Florida real estate climate than elsewhere. Housing slumps mean declining revenues for suppliers, along with fewer retail sales, restaurant revenues, home improvements and other purchases.

“It’s the truest example of the trickle-down economy. Anything that affects construction affects all of us.” said Paul Morgan, a spokesman for the North Port Contractors Association.

The slowdown will mean an eventual return to a normalcy in the region. As Florida mortgage loan rates stabilize, surplus homes will be bought at discount prices, and some time after that, experts think the market will bounce back to reasonable levels. In the short term, however, expect some suppliers, manufacturers and subcontractors to take a hit.

Smaller, construction-heavy communities such as North Port, Nokomis, Osprey and East Manatee will likely be hit first and hardest. North Port construction activity speaks to that, with the monthly permits issued tumbling from 300-400 a year ago to a paltry 65.

Once the inventory is sold off, Morgan believes we will see building turn around as well. But he doesn’t expect the market to bounce all the way back to the levels of 2004-05 by any means. Some workers already have headed to higher ground, so to speak — places like North Florida or hurricane-ravaged Louisiana and Mississippi.

Others will simply be pushed out of business.

“It’s hitting everybody real hard right now, especially the people on the low end of the totem pole. I see a lot of the small guys getting out of the business and going to industries where their incomes are more stable,” said Karen Lamb, President of the Sarasota Manatee Roofing and Sheet Metal Contractors Association.

With sellers remaining stubborn, inventory sky-high and buyers still priced out of many Southwest Florida neighborhoods, Ayo is preparing himself for some lean months.

“Some guys went up North. I’m not going anywhere. I picked up some of that work. I will keep working until there’s no work left,” he said.