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Sunbelt City in Grasp of Housing Undertow
When the Fort Myers housing market collapsed, William Coleman lost his $100,000-a-year job and was fortunate to find one paying $60,000. "I had to take the only job that was available. Everybody's looking for work."
(Cathy Kapulka - For The Washington Post)
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Every night, she said, "we fight over every dollar." With their income below $60,000, they have more bills than they can pay and have ruled out any big purchases. Even dinner at a modest restaurant is too great an extravagance.
Shevlin says she is trying to get a steady job as an airport security officer, but the competition is fierce. "I'm 45 years old and I feel like I should be going to a higher place in my career," she said. "Instead I'm taking 20 steps back."
With families like the Shevlins curbing their spending, retailers are suffering.
Boat sales have dropped 30 to 40 percent, estimated Larry Jones, who moved from Warrenton three years ago to manage Boater's Landing, a chain that sells boats from $10,000 to $1 million. Jones is concerned the most about upper middle-class buyers, who have closed their wallets. His dealership in nearby Naples, which is home to some of the wealthiest people in Southwest Florida, is suffering more than any other in the chain.
"No matter how favorable the financing or no matter how cheap the price gets, it's not bringing the buyer back," Jones said.
These ripple effects worry economists.
"A big issue is whether developments in the relatively small housing sector will spread to the large consumption sector, perhaps through declines in house prices," Janet L. Yellen, San Francisco Federal Reserve Bank president, said in a speech last week. "Should the decline in house prices occur in the context of rising unemployment, the risks could be significant."
National retail sales, excluding the volatile automotive sector, fell 0.4 percent in August, the Commerce Department said on Friday, more than had been expected and raising some alarm among economists.
But so far this downturn is playing out differently across the country. For instance, in the Washington area, housing prices have gone way up and consumers rely on home-equity loans as much as in Fort Myers. But housing is not the predominant source of job growth. Only an eighth of jobs in the Washington area are real estate-related, which has lessened the impact of the housing slowdown.
Overall though, economists have grown more pessimistic. According to a survey by Blue Chip Economic Indicators a month ago, economists said the odds of a recession in the next year have risen to one in three, up from one in four a month ago.
The major question is whether areas like Fort Myers have gone through the worst or if they are still heading downward. There are signs of both. It could take two years to sell all the houses currently on the market, and a Manpower Inc. survey of businesses found that a third planned to reduce their employee count in the fourth quarter.
Still, some real estate agents say a few buyers are returning, attracted by cheap prices, a potentially optimistic sign.
"The sooner the excessive prices correct, the sooner these markets can get back to growing again," said Mark Vitner, a senior economist at Wachovia. "It's just painful while it's happening."
