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U.S. & Florida Economic Update
Sarasota, FL
July 11th, 2013
U.S. Forecast
U.S. Forecast
 A Pall of Uncertainty Hangs Over
the Economy
 Health Care Reform
 Impact on labor market
 Dodd-Frank Financial Regulatory
Reform
 Impact on credit flows
 Fiscal Cliff
 Tax cuts
 Sequester
 Euro
U.S. Forecast
 A recent paper has created an
index that quantifies economic
policy uncertainty and analyzes
its economic impact:
 Measuring Economic Policy Uncertainty
By Scott R. Baker Nicholas Bloom, and Steven J
Davis
U.S. Forecast
 The index has three components:
1. Newspaper coverage of policyrelated economic uncertainty.
2. Number of federal tax code
provisions set to expire in future
years
3. Disagreement among economic
forecasters
(Survey of Professional Forecasters)
U.S. Forecast
 The economic impact of economic
policy uncertainty
The results of the statistical analysis
in the paper show that higher policy
uncertainty causes:
1. Lower private investment
2. Lower industrial production
3. Much lower employment
Economic Policy Uncertainty Index
U.S. Forecast
 Depleted Housing Wealth
 Still Weak Labor Market
 A continuing ballast on consumer
spending
U.S. Household Wealth
(Trillions of $)
2005
2006
2007
2008
2009 Q1* 2013 Q1
Total Assets
71.3
78.6
79.5
66.6
62.8
83.7
Financial Assets
42.9
49.0
51.4
42.2
39.6
57.7
Home Equity
13.2
12.8
10.3
7.0
6.1
9.1
Net Worth
59.1
65.1
65.1
52.4
48.7
70.3
U.S. Forecast
Total Nonfarm Payroll Employment
(Millions)
145.0
140.0
135.0
130.0
125.0
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Total Nonfarm Employment
U.S. Forecast
Civilian Unemployment Rate
(%)
10.0
9.0
8.0
7.0
6.0
5.0
4.0
3.0
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Unemployment Rate
U.S. Economic Outlook
2012
Q4
2011
Q1
2013
Q2
GDP
% Change, Annual Rate
0.4
1.8
1.6
1.9
1.7
2.5
Consumer Price Index
% Change, Annual Rate
2.2
0.2
0.4
1.3
1.5
1.8
Consumer Sentiment
Consumption
% Change, Annual Rate
2013
Q3
2013
2014
79.4 76.4 79.8 80.1 80.1 83.1
1.8
2.6
1.8
1.9
1.8
2.5
U.S. Forecast
 Monetary Policy
 Fed Funds rate unchanged until
unemployment rate hits 6.5%
 QE III
 Open ended purchase of mortgage
backed securities
 Is inflation a worry?
U.S. Forecast
U.S. Forecast
U.S. Forecast
Money Supply
(Annual Growth Rate %)
40.0
30.0
20.0
10.0
0.0
-10.0
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Annual Growth Rate of M2
Annual Growth Rate of M1
U.S. Forecast
Consumer Prices
(% Change Year Ago)
6.0
4.0
2.0
0.0
-2.0
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Consumer Price Index
Core Consumer Price Index
A Slippery Subject
 What is the Fate of the
Euro?
 Bailouts, haircuts, ECB bond purchases
 Ongoing concerns (CPIIGS?)
 Euro still facing greatest threat since inception
 Two possible outcomes for the Euro zone in the
long run.
 Does the political will to implement the necessary
changes exist in Europe?
A Slippery Subject
The Euro and the Tacoma Narrows
Bridge
U.S. Forecast
30-Year Mortgage Rates and Housing Starts
(Mortgage rates - Left axis, %)
9.0
2.5
8.0
2.0
7.0
1.5
6.0
1.0
5.0
0.5
4.0
3.0
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
30-Year Fixed Mortgage Rate
Housing Starts - Millions
0.0
Florida’s Housing Market
Housing market finally showing
signs of life
Has housing market found a solid
bottom for prices?
Distressed vs. Traditional
Investor role in distressed market
Housing finance problematic
Florida Housing Market
Florida Housing Market
Florida Housing Market
May 2013
May 2012
Closed Sales
22,375
18,884
18.7%
Median Sale
Price
$171,000
$147,500
15.9%
Median Days
on Market
55
65
-15.4%
5.0
7.5
-32.7%
Inventory
(Months Supply)
Percent
change
Florida Housing Market
Distressed Market Share of Total Market Declining
Closed
Sales
Percent
change
Year ago
Traditional
15,768
34.8%
$205,900
11.9%
Foreclosure/REO
3,342
-2.6%
$100,000
9.7%
Short Sale
3,265
-13.1%
$125,300
11.9%
Median
Sales
Price
Percent
change
Year ago
Florida Housing Market
Housing market recovery
continues to unfold
Prices have gained traction
Can the momentum be
maintained?
The growing investor role
Housing finance still problematic
Florida Forecast
Florida Housing Market
Investors are back in Florida
residential real estate
Evidenced by high share of cash
transactions
Private equity & hedge funds
Is this a good thing or a bad
thing?
Florida Housing Market
Housing Finance
Unsustainably high share of cash
transactions
Mortgage availability has been
restricted by
Dodd Frank
Capital Standards
Underwriting Standards
Limited Private Securitization
Demise of Mortgage Brokering
Shell shock
Florida Forecast
 In 2010 the economic recovery began
• Real GSP growth 1.4% that year
• In 2011 the economy limped further along
• 1.3% Real GSP growth
 In 2012 we expect 1.6% growth
 Job growth has limped alongside but only
starting late in 2010.
Florida Forecast
 Economic and job growth doesn’t gain
significant altitude until 2014 and 2015
 Real GSP growth:
 2014 = 3.3%
 2015 = 4.0%
Florida Forecast
Florida Real Gross State Product
(% change year ago)
8%
6%
4%
2%
0%
-2%
-4%
-6%
-8%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Florida Forecast
Florida & U.S. Unemployment Rate
(%)
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
FL Unemployment Rate
U.S. Unemployment Rate
Florida Forecast
Florida Employment
(Thousands)
8200.0
8000.0
7800.0
7600.0
7400.0
7200.0
7000.0
6800.0
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Wage & Salary Employment
2013-2016 Averages;
Q2 2013 Forecast
Florida
Sector
% Average Annual
Growth
Construction
Professional & Business
Services
Trade, Transportation &
Utilities
Education-Health Services
7.3
Leisure & Hospitality
Information
Manufacturing
Financial
State & Local Government
2.0
1.1
0.9
0.7
0.3
4.0
3.2
2.2
Sarasota Housing Market
May 2013
May 2012
Closed Sales
731
669
9.3%
Median Sale
Price
$189,950
$163,445
16.2%
Median Days
on Market
44
50
-12.0%
4.4
5.8
-25.1%
Existing
Single-family
Inventory
(Months Supply)
Percent
change
Sarasota Forecast
Sarasota Forecast
Sarasota Forecast
2013-2016 Averages;
Sarasota Forecast
Sarasota
Sector
% Average Annual
Growth
Construction
Professional & Business
Services
9.2
Education-Health Services
2.0
Trade, Transportation &
Utilities
Information
Leisure & Hospitality
Manufacturing
Financial
State & Local Government
4.7
1.3
1.3
1.0
1.0
0.6
0.6
Thank you
Sean M. Snaith, Ph.D.
Director
Institute for Economic Competitiveness
(407) 823-1453
[email protected]
WWW.IEC.UCF.EDU
www.facebook.com/seansnaith
Twitter: @seansnaith