University of Central Florida economist assesses local, state and global data with a look to the future
Given the number of positive economic statistics for the area and the state, the director of the Institute for Economic Competitiveness at the University of Central Florida acknowledged this week to the Sarasota County Commission that he was “a little bit surprised” to learn county property values “are still way down from where they were” before the Great Recession.
“You’re not as well off as maybe I thought you were,” Sean Snaith said during a presentation that was part of the commission’s March 30 budget workshop.
Chair Al Maio pointed out that ad valorem tax revenue went down about 42 percent for the county at the height of the Great Recession.
According to a slide staff showed the board, the county took in $175.7 million in ad valorem tax revenue in the 2008 fiscal year — the peak amount prior to the recession; in FY 2015, the figure was $118.3 million. The county is projected to bring in $128.2 million this fiscal year.
“Caution is probably a smart path forward,” Snaith told the board.
Commissioner Christine Robinson talked of how county residents often tell her, “‘Do more! Do more!” given the recovery from the recession, because they are unaware of the government body’s finances. “It’s been a tough explanation to our residents.”
He understood that, Snaith told her. “At the surface, things are booming.” The economic downturn did not have as severe an impact on jobs in Sarasota County, he noted, and the county’s GDP is on track to approach the $17-billion mark by 2019.
Still, he said, board members need to remind their constituents about the imbalance in the correlation between traffic they see on the road and tax revenue collections.
And one of Snaith’s major points during his presentation was the predication of another recession, perhaps in 2019. “I’ve been talking about the ‘R’ word lately … the timing of which is a little more difficult to predict.”
This recovery is approaching its seventh year, he pointed out. Some recoveries have lasted longer than the current one, he noted, including the one after the 1991 recession. In approximately the seventh year of that recovery, he said, “the ‘dot.com’ boom was raging,” so the next recession did not begin until 2001.
With this recovery, he continued, “I don’t see that white knight arriving …”
In the post-war era, Snaith noted, the average period of a recovery is five years. Still, he said, he does not anticipate the next recession being as bad as the previous one.
The data and the portents
In his economic forecast, Snaith pointed out, “2016 didn’t get off to the greatest start,” adding, for example, “China’s economy is slowing; that’s clear.”
It appears that Chinese leaders have been heavily involved in economic numbers coming out of the country, he continued, which makes those figures suspect. “You wonder if this is just a pagoda of cards waiting to fall.”
“Overall,” he added, “the rest of the world is a drag on the U.S. economy.”
The GDP report for the first quarter of 2016, issued by the Federal Reserve Bank of Atlanta, Snaith continued, shows growth of 0.6 percent; for the fourth quarter of 2015, it was 1.4 percent. “So we are sputtering in the recovery.”
Consumers have been the bright spot, he told the board, “but we’re not exactly spending unabashedly.”
Higher spending would have been realized if wages had grown significantly instead of gas prices falling, Snaith said. Moreover, consumers understand that with “one geopolitical event … oil prices can shoot right back up.”
In regard to the Florida housing market, Snaith pointed out that over the past year, data show almost”double-digit price acceleration” for sales of existing single-family homes. While some concern has been voiced that the state might be approaching a “housing bubble” again, he said, he does not see it that way. Prior to the Great Recession, he added, many unqualified homebuyers were able to get mortgages — what he called “the easy sugar high of finance without any sort of vetting.” At present, he continued, “It’s still very difficult to get a mortgage.”
Prices are rising because of the shortage of houses in the market, he added, but they have not reached the peak recorded at the height of the boom. In fact, he said, “We’re still significantly below [that level].”
In Sarasota County, he noted, sales of houses are down year-over-year. When he saw that, he told the board, his first thought was, “The financial market giveth, and the financial market taketh away.” Sarasota County “has benefited from this tremendous bull run in the financial markets,” he pointed out. Likewise, the decline in the markets at the start of 2016 has had an impact. Still, prices “are up dramatically year-over-year,” he said.
Robinson told Snaith she hears a lot of questions about why the County Commission is not doing more to create affordable housing in the community. In looking at his data, she continued, it appears that not enough inventory of single-family homes exists to allow for affordable housing.
“I would agree with that statement,” Snaith replied. In 2005, Florida saw construction of far more homes than those justified by the population and job growth, he pointed out. At this time in the state, people need more houses than developers are building.
Then the argument from the public becomes, “‘Why don’t you make people build affordable housing?’” Robinson told him.
“Obviously,” she said, “builders are going to build what they can sell.”
A government body can provide incentives for affordable housing, Snaith responded, but “markets always in the long run win out.” If it is an issue of the “heavy hand of government” versus the invisible market forces, he added, the invisible market forces will prevail.