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Credit crunch squeezes Florida economy

To avoid defaulting on her nearly $1,500 monthly house payment, Maria Folk sold a family boat, unhooked her cable, even canceled her household phone line.

But when the New Port Richey resident has called her mortgage lender pleading for a reduction in her 7.8-percent adjustable mortgage, she gets mostly busy signals and answering machines.

"Countrywide (her lender) is telling us this fairy tale that there are lower rates available," Folk says. "But they won't return your phone calls."

Folk could be speaking for many of her neighbors statewide in feeling a tighter economic squeeze. Last week's meltdown of Wall Street powerhouses Lehman Brothers and Merrill Lynch left Florida in an even greater state of credit starvation, depriving homeowners and businesses alike.

American Express has sliced the number of credit cards it issues in Florida. On Friday, the real estate firm CB Richard Ellis, on the verge of sealing a $20-million Tampa shopping center deal, watched in dismay as the buyer's lender pulled the plug at the last minute.

"You now have it spreading into cuts in credit card lines, business can't get money, people will not be going out to restaurants, they may give up on financing vacations," said University of Florida economics professor David Denslow.

The result: Don't expect improvement in the Tampa Bay area's 6.9 percent unemployment rate until 2009. Good times probably won't roll again until 2010, economists said.

"We've been down a difficult road and still are on that road," Wachovia economist and Florida expert Mark Vitner said. "We're probably two years away from solid recovery in Florida."

Local developer Joel Cantor sniffs the ill winds. Last year he successfully launched Signature Place, a ritzy condo tower in downtown St. Petersburg with average unit prices running about $650,000.

Now he's getting calls from other developers hoping Cantor has some magic advice for financing their own deals. After all, he persuaded Fifth-Third Bank to bankroll Signature Place in a so-so economy. He offers little consolation.

"There's no debt available now for real estate," Cantor said. "With new retail or office buildings or any sort of construction, banks are not in lending mode. They're harboring their capital.''

While job losses from Lehman Brothers' bankruptcy and Merrill Lynch's acquisition by Bank of America are concentrated in New York City, the Tampa Bay area won't escape the blow.

Merrill Lynch, for example, leases two floors in St. Petersburg's Bank of America Tower and another 1 1/2 floors in Tampa City Center. Landlords expect vacancies once Bank of America buys out the company.

Mike Talmadge, who leases offices for St. Petersburg's Echelon Real Estate Services, said businesses are punting expansion plans into the future, uncertain of their hiring needs.

"You can expect even more consolidation. This isn't the end of it," Talmadge said. "You've got a bank like Washington Mutual on the block. There's going to be a ripple effect across the board."

While many economists hesitate to pronounce a recession nationally, they're not so shy about placing Florida in that category. The fallout from hyper-speculation in housing — record foreclosures and depressed home sales — has given us our first statewide business contraction since 1991. Numbers released Friday showed Florida's unemployment rate has risen to 6.5 percent, with some west-central Florida counties reporting more than that. In a year, Hernando County's jobless rate has jumped from 6.1 percent to 9 percent.

Denslow said the government's infusion of billions of dollars into the likes of mortgage giants Fannie Mae and Freddie Mac could help. If spring brings about an increase in home sales in the Northeast — one of Florida's feeder markets — construction could pick up here.

"Late spring or summer, we might see the peak in the unemployment rate,'' Denslow said.

For Ray Sandelli, senior managing director at CB Richard Ellis in Tampa, it's a question of confidence. Lenders need to know their next loans won't be their last loans.

"Credit lines will eventually open up and allow people to consume, and with consumption comes growth," Sandelli said.

But that could require our patience for the better part of a year as foreclosures and jobless lines continue to stack up.

"It might make it a little bit longer and a little bit deeper,'' Miami banking expert Ken Thomas said of Wall Street's impact on the Florida slump. "The light we saw at the end of tunnel turned out to be a train.''

Credit crunch squeezes Florida economy 09/20/08 [Last modified: Friday, September 26, 2008 1:29pm]
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