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Real Estate Woes Not Over

By Aaron Kessler and Michael Braga
Sarasota Herald Tribune, February 14, 2008

Hank Fishkind, the Economist who forecast an '07 housing nadir now says it's still on the way. BRADENTON Whoops, did I say bottom?

Well-known state economist Hank Fishkind says he erred in calling a floor to Southwest Florida's housing market last year.

Fishkind admitted to a crowd of business people from the Manatee Economic Development Council on Wednesday that he mistakenly thought the housing market was bottoming out in mid-2007, but he added that he now thought 2008 would mark the beginning of the recovery.

"I thought the market had stabilized right here," Fishkind said, pointing to a chart illustrating existing home sales in Manatee County. "But then we got the financial panic, and the meltdown in the market, so things took another turn down."

Fishkind said that he thinks the low point has now arrived, and that "in the next few months" we will see a "bottom form in the existing housing market."

"You see some stabilization, granted at low numbers, but the market is beginning to stabilize," Fishkind said.

He is predicting that the national economy as a whole -- in the first half of 2008 -- will skate close to the edge at "nearly a recession," but will not fall into a full-fledged recession. He thinks that by the second half of the year a recovery will begin.

Fishkind's predictions of late have been on the rosy side of the prognosticators.

Jack McCabe, the Deerfield Beach-based real estate economist, would be roughly 180 degrees away.

"We're in a recession right now," said McCabe, who spoke at two functions recently in the region.

"Tell the people who have lost their jobs, to young families who have left the area because they can't afford it, and those people in foreclosure right now, that we're not. They have a much different perspective."

McCabe anticipates a continued slide in the housing market during 2008, with a possible drop of 10 percent to 15 percent.

"We have some economists in the state of Florida who have been inaccurate in their predictions over the last three years," he said. "Those who have been calling a bottom now for a year or more, which has proven to be not correct, need to get out of their ivory towers and unbury their nose from outdated Census Bureau statistics. They need to hit the bricks and start talking to people, and then they'll find out just how antiquated their predictions are."

Fishkind acknowledged that 2007 was tough, economically speaking, given high energy prices and a full-fledged financial panic. In particular, employment figures for the Sarasota-Bradenton metropolitan areas showed work rolls actually shrank last year.

"There are only three metropolitan areas in all of Florida that actually had a contraction of employment in the twelve months leading up to December," Fishkind said, and Sarasota-Bradenton was one of them.

Migration into the area also declined in 2007.

"Population growth has clearly slowed down," Fishkind said. "It's slowed down from other states, because of the housing problems nationwide, and also from other counties within Florida."

He pointed to two factors: people who cannot sell homes in other places and thus cannot move, and the drop in available jobs, meaning the economy has not been pulling people here for work as it had been.

That said, the U.S. and Florida avoided recession in 2007, and barring an energy crisis or another financial panic, the economy will slowly recover in 2008 thanks in part to lower interest rates, Fishkind said.

But like McCabe, Miami-based economist Kenneth Thomas -- who correctly predicted the last recession in 2001-02 -- does not see a recovery like the one Fishkind outlined as probable.

"I think we're still on a downward slope, and will be on it throughout this year, and probably even into much of next year," he said. "We're not going to get out of this in a matter of months or quarters."

Thomas put the chance of a recession by 2010 at more than 90 percent. He said Floridians could even see a "double recession," in which things briefly appear to be turning around, only to plunge again.

Thomas said the future of housing in the Southwest Florida market would be tied to what the economy as a whole does, and that, if recession comes, it could be at least two years before homes begin to appreciate in value again.

Fishkind said consumer spending would be on a weaker trajectory than in the past. He said that Florida's economy would not be as strong as that of the nation, and that housing problems across the country would limit migration to the Sunshine State. But the baby boomers are coming, and the state will return to healthy growth, he said.

In one slides, Fishkind showed that the number of people over 65 would rise to 40.2 million by 2010, 54.6 million by 2020 and 71.5 million by 2030.

He said 20 percent would be inclined to move to other states. Even though Florida will capture a declining percentage of those people in coming years because of competition from other states and other countries, the number of retirees moving to Florida will still grow from 8 million in 2000 to 16 million by 2030.

Fishkind put up a chart showing that Manatee County's inventory of unsold homes peaked at just over 6,000 in 2006 and declined to just over 5,000 in 2007.

That downward trend will continue in the years ahead until inventories drop to about 2,500 in 2010, which is about the same level as in 2002.

Despite the large inventory of unsold homes, Fishkind predicted that starts of single-family and multifamily homes would climb from their abysmally low levels of 2007. He also predicted that commercial construction would rise in 2008 and 2009.

Thomas said he thought in many cases the true housing inventory numbers now are even worse than they appear because some people have simply given up on selling.

"It's like unemployment, where people just give up looking for a job altogether, and suddenly they're no longer counted in the statistics," he said. "It's the same thing now with housing, where people have just pulled her homes from the market. They're no longer listing them."

Last modified: Thursday, Feb. 14, 2008 at 2:47 a.m.

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