Economy Weathers Central Florida Housing Market Slide
The worst of the Central Florida housing market slowdown is over, and the state’s economy withstood the damage without slipping into negative territory.
But challenges remain, including rising unemployment and uncertainty over gas prices, Sean Snaith, a University of Central Florida economist and the director of UCF’s Institute of Economic Competitiveness, said.
“The economy was staggered by the housing correction, but not knocked down,” Snaith said.
His forecast was released the same day the U.S. Commerce Department revised downward the nation’s first-quarter economic growth rate.
In the Sunshine State, few economic factors are not influenced in large part by the Florida housing market slump.
Gross domestic product, the broadest measure of the economy’s health, grew at a 0.6 percent annual rate, the slowest rate in four years.
The preliminary estimate of GDP growth was 1.3 percent, and during the final quarter of last year was a healthier 2.5 percent.
The first-quarter rate will be revised one more time, a month from now.
“A lot of things conspired to weigh the economy down,” Snaith said, but the rate of growth “didn’t turn negative,” he noted, which lessens the chance that a recession - defined as two consecutive quarters of negative GDP - will happen any time soon.
Snaith forecasts that U.S. housing starts will decline further in the second and third quarters until inventory shrinks, before starting a “slow upward climb through 2009.”
Florida mortgage rates will “creep to 6.9 percent in 2009,” he predicted, while the excess supply of homes in many overvalued markets will continue to hold down prices through 2007 and into 2008.
The nation’s unemployment rate will end a three-year decline and begin to rise slightly this year, the forecast predicts, although it will remain below 5 percent next year before falling back to 4.7 percent in 2009.
U.S. payroll job growth will also slow to 1 percent in 2008 before recovering to 1.5 percent in 2009.
Inflation also should remain relatively tame, though energy prices “threaten to reignite inflation,” Snaith said.
The UCF institute’s quarterly forecast focuses on the U.S. economy; a second forecast for Orlando and Central Florida is scheduled to be released by late June.
A separate analysis released Thursday by UCF finance professor Stanley D. Smith concludes that the Orlando housing market continues on its current “soft landing” trajectory.
This despite recent declines in median sales prices as reported by local Realtors.
Smith noted that the housing-price index released Thursday by OHFEO shows that single-family home values in the Orlando metropolitan area rose 1.64 percent in the first quarter compared with the previous quarter, after rising only 0.71 percent during the fourth quarter.
Compared with the same quarter a year ago, prices in the Orlando area were up 7.94 percent in the first quarter.
The index is based on repeat sales or Florida mortgage refinance activity involving the same properties over time, a method that eliminates some of the variables in the local Realtors’ median-price data, which are not necessarily from the same types of houses in the same locations.
Volusia County home values also remained in positive territory during the first quarter, rising 0.32 percent from the fourth quarter, the index showed.
Statewide, values were down 0.34 percent, and in Brevard County prices fell 2.29 percent - the third quarterly decline for that area.
On a year-over-year basis, Brevard County’s single-family home prices were down 2.07 percent, Volusia’s were up 5.62 percent, and the statewide, the appreciation rate was 4.34 percent.
All told, experts predict that in the next 2-3 decades, Florida mortgage loan activity will be among the nation’s highest. So long term, there is not nearly as much to worry about.
SOURCE: Orlando Sentinel
