Southwest Florida Housing Market Drags Down Economy

Officials have reduced estimates of general revenue collections by a combined $1.5 billion for fiscal 2006-08 - a result of the downturn in the Florida housing market.

Specifically, overheated areas such as the Southwest Florida housing market are starting to impact business and consumer spending, according to officials at TaxWatch, a non-profit group.

Economists say that while Florida’s forecast largely mirrors the nation’s, our state’s high level of speculative and second-home buyers upped the effect of the bursting “housing bubble,” said TaxWatch officials.

However, they contended that the underlying Florida economy remains sound and continued job growth helped the forecasts from deteriorating further.

“In addition to reductions in the level of tax collections Florida had been enjoying from record home construction, consumer confidence and spending on items such as furniture, appliances and automobiles has also cut into the state’s revenue,” TaxWatch said.

“Of the $1.5 billion revenue estimate reduction, $928 million was from sales tax.”

Other big revisions occurred in corporate income taxes (down $428 million) and documentary stamp taxes (down $140 million), the group found, noting the Florida housing market affected both.

“Higher [Florida mortgage] rates and home prices, coupled with stricter lending practices have cut into doc stamp revenue,” they said.

“After record growth of 39.1 percent in 2005-06, corporate income taxes were reduced by smaller profits of real estate related companies and higher labor costs.”

Will the Florida home mortgage market rebound before 2008 or 2009? Don’t hold your breath, the group says. Experts believe the stagnant market will persist at least that long.

SOURCE: Bradenton Herald