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Hurricane plus recession would slam housing, tourism, jobs

Tribune file photo by JASON BEHNKEN (2004)

Four hurricanes hit Florida in 2004, destroying 25,000 homes and damaging 40,000 more.

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By SHANNON BEHNKEN | The Tampa Tribune
and TED JACKOVICS | The Tampa Tribune
and MICHAEL SASSO | The Tampa Tribune

Published: June 12, 2009

TAMPA - Forecasters predict a relatively mild hurricane season this year.

If their projections bear out, it couldn't come at a better time.

Floridians face the worst recession since the 1930s, with double-digit unemployment rates, broad job losses across several industries and a disastrous real estate market clogged with foreclosures and vacant homes.

In a state reliant on tourism and housing, a major hurricane could plunge the economy into an even steeper decline. Perhaps we'll be fortunate again. If not, here's a look at the grave effects of a major storm on Florida's historically vibrant economic engines: housing, tourism and jobs.

Housing

Hurricane-force winds not only could rip through individual homes, it could also wreck Florida's troubled real estate market — just as it is starting the slow, uphill move toward recovery.

"In the long-term it would be detrimental to housing affordability," said Chris Lafakis, an economist who covers Florida for Moody's Economy.com. "That would lead to lower demand."

Some real estate onlookers think Tampa Bay is near the bottom of the real estate bust. Prices are still falling, but they have reached levels that are enticing buyers off the fence.

Distressed properties make up the bulk of the sales, and the Bay area has plenty. Foreclosures and short sales — where the lender agrees to accept less than the mortgage — are driving down sales prices. The median sales price was $135,200 in April. Compare that with the peak of the local market in June 2006, when the median sales price was $239,600.

What would a hurricane do to the market's momentum?

"It would be a big setback," said Jack Rodriguez, president of the Greater Tampa Association of Realtors. "We're seeing positive changes in the market, and a hurricane is exactly what we don't need."

The amount of time a housing recovery would take depends on the severity of the storm. Mike Larson, a real estate analyst with Weiss Research in Jupiter, said the short-term problem would be fear — the kind that comes after every hurricane.

"Retirees wouldn't want to come to Florida for a while," he said. "They become afraid of other hurricanes and relocate elsewhere."

More troubling, he said, are insurance costs. Providers may steer clear of the state and would likely raise rates.

Despite lower home prices, some people might choose not to buy if insurance costs skyrocket, Larson said.

The other problem is foreclosed or abandoned homes that dot nearly every neighborhood. Who will take care of them?

After lenders take back a home in foreclosure, they are legally responsible for it. Community associations have complained that some lenders don't mow the lawn, so getting them to secure hurricane shutters or fix a damaged roof may be tough, Lafakis said.

Because the area has so many vacant homes, the local real estate market could actually be helped by a hurricane — if it hits elsewhere.

Federal Emergency Management Agency officials have said they are looking at possibly moving hurricane victims into some of the vacant homes.

"At least we'd have people living in them until we can get them sold," Rodriguez said.

Tourism

Visitors to Pinellas County spend $6.6 billion annually, so the hurricane threat is a major concern every year.

It's particularly worrisome this year, as the local tourism industry is trying to rebound from a direct hit by the downturn in the national and international economies. The number of overnight visitors in 2008 was down 2 percent, to 5.2 million, from 2007.

The hurricane threat stretches beyond potential physical damage to the county's 30,500 hotel and motel rooms, half of which are in communities along the Gulf of Mexico.

Resort destinations must contend with the long-term perceptions of visitors who don't want to make reservations at a place they think is susceptible to a storm. That fear could end up devastating business at many large hotels, where groups booking dozens of rooms account for more than half the business.

In a study of the impact Hurricane Charley had on tourism in Lee County in 2004, consultant Walter Klages reported a 19 percent decline in visitors from August through December following the Category 4 storm.

The next year, the eye of Hurricane Wilma passed within 50 miles of Sanibel, but the area's tourism industry was able to rebound despite widespread damage to beaches. The good fortune was attributed to heavy marketing, increased international tourism because of favorable exchange rates and Americans' pent-up demand for travel, area officials said.

It's not just storm paths that create financial havoc. So can hurricane preparations, which force evacuations hours in advance of erratic storms whose courses can take surprise turns.

The area's biggest problem: About 500,000 visitors and residents face evacuation from Pinellas' coast, an operation that requires hours of lead time because bridge travel is suspended after fierce winds begin to blow.

Last year, a miscommunication involving emergency management plans in Pinellas sent thousands of visitors and residents fleeing the path of Tropical Storm Fay. When the storm veered sharply to the northeast, Tampa Bay was spared physical damage, but the tourism economy still suffered. August overnight visitors declined 5.3 percent, to 378,400, compared with August 2007, and spending was down 3.3 percent, to $239.5 million, tourism consultant Klages reported.

In September, more than one out of two Pinellas hotel rooms was vacant, with the poor economy and hurricane threats taking a toll, pushing occupancy down 5 percentage points, to 47.1 percent, from September 2007, Klages reported.

If a storm threatens this year, Pinellas officials plan to broadcast the time when an evacuation should begin and a deadline for when people should be out.

Jobs

Hurricane Katrina's wrath drove away half of New Orleans' population and roughly a third of its jobs.

But the area's economy sprang back to life, as insurance money and federal aid poured into the city, and construction workers followed. Within two years, nearly nine out of 10 of the lost jobs had returned, according to the Brookings Institute.

Hurricanes have produced this boomerang effect before, and a recent study by the Tampa Bay Regional Planning Council suggests Hillsborough County would see it, too.

However, today's deep national recession raises a question about how far the boomerang would fly if this region is hit by a major storm.

David Lenze, an economist formerly with the University of Florida who studied Hurricane Andrew in South Florida, said the glut of houses in Tampa could hold back an Andrew-like recovery.

In February, the planning council issued a study on how a major hurricane might affect Hillsborough County's economy, including its labor market. It is planning similar studies for Pasco, Pinellas and Manatee counties.

No one can precisely predict a hurricane's impact, so the group's estimates of job losses and gains aren't set in stone, said Avera Wynne, planning director for the council.

Based on research from other hurricanes, Wynne's group projects 151,000 jobs might initially leave the county, as factories, stores and professional offices are shut down. That's out of a base of more than 800,000 jobs, counting full time, part time and the self-employed.

The employment estimates didn't factor in the recession.

Within a year, though, a mix of construction dollars and federal relief money would cause employment to surge. By the end of the first year, the number of jobs created by rebuilding could exceed the number of jobs that disappeared by 2,000 to 43,000 jobs, depending on how quickly the recovery moves, the planning council projects.

The county would have a surplus of jobs for the first three years, after which many of those construction projects would wind down and the jobs would leave. In years four through seven, the county would have a deficit of jobs. In year eight, the labor market would reach its normal rate of growth.

Lenze, the economist, draws some parallels between a potential hurricane in the Bay area and Hurricane Andrew because Miami was also experiencing a recession in 1992.

The Miami area saw some economic benefit after Andrew because many displaced homeowners used their insurance checks to leave the blighted Homestead area, where the hurricane struck, and rebuild in Broward County.

That level of rebuilding may not happen in Tampa, partly because there are so many homes for sale or in foreclosure, he said.

On the other hand, a major hurricane would create work for idle people and resources rebuilding public roads and buildings, he said.

"It's kind of funny," Lenze added. "Who wants that kind of employment gain?"

Reporter Shannon Behnken can be reached at (813) 259-7804.

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