Homeowners Catch Their Breath, Spur Economic Recovery
The housing market is giving many Floridians time to catch their breath, something many of them haven’t been able to do since the economic nosedive began in 2007.
“There are still threats that could put the Florida in an economic chokehold, but all indications are that the Sunshine State is finally recovering and that the housing market is playing a big role,” said Sean Snaith, a University of Central Florida economist in his Florida Economic forecast released today.
Not only are more homes being constructed and sold, but the increase in home values is also giving some homeowners more choices.
“The increase in house prices continues to lift more and more borrowers in the state above the surface of the water,” Snaith said. “Getting above water in their mortgage provides mobility and raises confidence that having a home that is underwater took away. That means they are more likely to spend, which drives the economy.”
The bottom line is that the housing market is finally recovering from deep and protracted depression. The uncertainty of how exactly the national Affordable Care Act will be implemented and the economic crisis in Europe loom and could derail the nation and thus the state’s recovery. But for now, the horizon looks promising.
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Highlights from the forecast include:
- Payroll job growth year-over-year will grow and should average 2.0 percent in 2013, 2.1 percent in 2014, 2.5 percent in 2015, and 2.6 percent in 2016.
- The size of the labor force is still the wild card in predicting the future path for the unemployment rate (U-3) in the nation and in Florida. Labor force growth will average close to 1.3 percent during 2013-2016 and this will slow the pace of the decline in the unemployment rate.
- Unemployment rates have fallen from their peaks, in part due to a low labor force participation rate (60.3 percent in May), and they will continue to decline through 2016. The pace of decline will moderate as labor-force growth picks up; despite this headwind the unemployment rate should hit 6.0 percent in the second half of 2016. A growing labor force will slow the pace of the decline in the unemployment rate. Much of the decline in the unemployment rate to date has been a result of people dropping out of the labor force as this process is reversed future declines in the unemployment rate will not come as easily.
- The sectors expected to have the strongest average growth during 2013-2016 are construction (7.3 percent); professional and business services (4 percent); trade, transportation and utilities (3.2 percent); education and health services (2.2 percent); and leisure and hospitality (2 percent).
- Housing starts will surge this year. Total starts will be over 125,000 in 2014, just more than 160,000 in 2015, and then hit 176,000 in 2016. Average annual growth in housing starts will be 31.4 percent during 2013-2016.
- Real Gross State Product (RGSP) will expand 2.0 percent in 2013, then accelerate to 3.2 percent in 2014, and 3.9 percent in 2015 before easing to 3.6 percent in 2016. Average growth will be 3.2 percent during 2013-2016.
- Real personal income growth for 2012 slowed to 1.4 percent. From 2013-2016, real personal income growth will average 3.4 percent, with 2013 growth of 2 percent that will accelerate to 4.1 percent in 2015.
- Retail sales will grow at an average pace of 3.9 percent during 2013-2016, after growing 4.7 percent in 2012.
Snaith is the director of UCF’s Institute for Economic Competitiveness. He is a national expert in economics, forecasting, market sizing and economic analysis who authors quarterly reports about the state of the economy. Bloomberg News has named Snaith as one of the country’s most accurate forecasters for his predictions about the Federal Reserve’s benchmark interest rate, the Federal Funds rate.
Snaith also is a member of several national forecasting panels, including The Wall Street Journal Economic Forecasting Survey, CNNMoney.com’s survey of leading economists, the Associated Press Economy Survey, the National Association of Business Economics Quarterly Outlook Survey Panel, the Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters, the Livingston Survey, Bloomberg U.S. Economic Indicator Survey, Reuters U.S. Economy Survey and USA Today Economic Survey Panel.
The Institute for Economic Competitiveness strives to provide complete, accurate and timely national, state and regional forecasts and economic analyses. Through these analyses, the institute provides valuable resources to the public and private sectors for informed decision-making.