Southwest Florida housing market improving, experts agree

Economist Bradley Hunter

PKEcreative.com

Economist Bradley Hunter

Dennis P. Lockhart, president and CEO of the Federal Reserve Bank of Atlanta

PKEcreative.com

Dennis P. Lockhart, president and CEO of the Federal Reserve Bank of Atlanta

The housing market in Lee and Collier counties is improving, despite the negative perception of the country’s economic state.

That is the opinion of local economist Bradley Hunter, national director of consulting for Metrostudy, and Dennis Lockhart, president and CEO of Atlanta Federal Reserve Bank. The two appeared together Friday at the sixth annual Market Pulse hosted by Bonita Springs Chamber of Commerce and Florida Gulf Coast University, where the event was held.

“Fort Myers is doing better than perceived, but areas like Lehigh and Cape Coral are still struggling,” Hunter said.

Both counties have similar growth patterns, but Collier County has been a close third behind Lee in the housing market. While there hasn’t been a big market boom, vacancies are falling in the area – the top salesman: Old Man Winter. People are buying homes in Southwest Florida to find relief from the harsh winter conditions of the north. However, home prices still remain under pressure.

“Nationally, home prices have dropped more than 30 percent since 2006 and continue to decline in certain markets,” Lockhart said.

But with more than one-fifth of American households upside down on their mortgages, it adds to the financial vulnerability of consumers and their caution about spending. Increasing prices at the gas pump and in the grocery store have also forced adjustments in household budgets.

“Since last August, the cost of groceries is up about 2.5 percent and gasoline prices are up about 25 percent,” Lockhart said.

Back-of-the-envelope calculations suggest that over the past six months, those two rising costs have added more than $50 per month to the average household’s expenses. Tighter budgets mean less spending on discretionary items, even though household finances have improved substantially. By the end of last year, Lockhart said, consumers had recouped nearly half of the massive wealth losses brought on by the recession and financial crisis.

“Consumer debt, including mortgages and credit cards, fell in 2010 for the second consecutive year,” Lockhart said.

Hunter agreed.

“Americans are saving more and paying down debt,” he said. “The savings rate has jumped from 2.9 percent to 6 percent.”

It seems Americans are slowly recovering from a recession that began in late 2007 and ran for nearly two years. The key to full recovery, according to Hunter and Lockhart, will be job growth.

Even though employment has been gradually growing over the past year, new business formation has been constrained by tight credit. Early-stage businesses – a major source of jobs – are often financed in ways other than direct loans.

“Continuing difficulties getting home equity loans, related to lower home values, and tighter credit card availability are holding back some entrepreneurs,” said Lockhart.

One reason why Florida is still considered to be lagging behind other regions is due to its dependence on construction activity prior to the recession, Lockhart said.

“Commercial real estate continues to be a stressed sector,” he said. “Nonresidential private construction has plunged over the last two years and is unlikely to bounce back any time soon.”

With conditions holding back growth and favorable winds pushing the economy forward, Lockhart has come to a net positive outlook for the economy for the rest of the year and into 2012.

The Federal Reserve Bank of Atlanta, where Lockhart is based, sees a continuation of the storyline of moderate growth, a gradual decline in unemployment and settling of price movements around the inflation rate that is consistent with the Federal Reserve’s price stability objective.

“While short-term measures of inflation have moved up rather strongly in the last few months, I hold to the view that this trajectory will not persist,” he said. “I continue to see the Federal Reserve’s inflation objective attainable.”

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