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New home construction in Florida indicates growing economy

Over the last year, there have been an average of more than 4,600 housing starts monthly in our state. Privately-owned housing starts in Florida have grown, and are now more than double the rate of the recent low point in March 2009, when only 1,806 private single housing units were started in the entire state of Florida.

Private Single-Unit Housing Starts in Florida

Florida’s current housing start numbers are still below historical numbers, but the trend is positive and it has substantial positive implications for the Florida economy.

Housing Starts: A Leading indicator

Housing starts are an indicator of the health of the economy as they show builders’ commitments to new construction activity and increases in housing starts indicate rising consumer demand. They also lead the national and the state economies which is why this statistic is often used in the construction of leading indices for state and national economies. For each of their State Leading Economic Index series, the Philadelphia Federal Reserve uses state-level housing permits for 1 to 4 units as one key indicator, along with other economic data such as interest rate spreads, initial unemployment claims, and average hours worked in manufacturing as well as other data.

In Florida’s case, seasonally-adjusted housing starts began to drop steeply in April 2006, a full year before the Florida recession started, in April 2007. In a similar manner, Florida housing starts bottomed out in March 2009, while the Florida economy stayed in recession until January 20101. Since the recovery of homebuilding from the lows in early 2009, housing starts have remained lower than historical levels, but they have shown steady increases and an acceleration in growth rates since early 2012.

Housing Starts Lead the Florida Economy

1   Florida TaxWatch. Florida’s Business Cycle. June 2011.

» NEXT PAGE: The forecast for single family housing starts, with chart

The Forecast for Single Family Housing Starts

Using the March 2014 Florida & Metro Forecast for 2014-17published by the Institute for Economic Competitiveness at the University of Central Florida, the future for housing starts is expected to continue its positive trajectory. (chart, below)

This forecast shows that, compared to actual 2013 levels, housing starts for single-family homes are expected to double by 2016, with substantial increases during 2014 and 2015. This would create a substantial amount of economic activity in terms of construction jobs, furniture purchases, and many indirect and induced jobs. Multi-family housing is also expected to more than double, from 2013 actual numbers to 2017.

Florida Annual Housing Starts Historical and Forecast

Conclusion

Florida’s home construction industry continues its strong recovery from the Great Recession. Recent increases in home construction indicate future improvement in Florida’s economy given the role of that statistic as a leading indicator of the direction of future growth.

This Florida TaxWatch report is also available in PDF format:
"Florida's Home Construction Recovery"

This trend of a recovery in residential construction, along with an increase in commercial construction will help improve job creation and increase tax receipts for the state of Florida. As shown in a previous Florida TaxWatch report2, increases in Private Domestic Investment lead economies out of recessions, and drops in that same statistic lead economies into recession.

Knowing the importance of spending on new homes and new commercial buildings in private domestic investment, a healthy construction industry is a large component of a healthy recovery from recession. The construction industry provides jobs for many Floridians, as well as contributing to the growth of other sectors such as housing services, home improvement stores, furniture retailers, realtors, and title companies.

Given the forecasts of even healthier future growth in home construction in both single-family and multi-family construction, along with positive indicators such as record Florida tourism, lower unemployment rates, and increasing consumer confidence, Florida is well-positioned to increase its growth rate and create even more jobs for Floridians.

2   Florida TaxWatch, When Will Economic Growth Accelerate?, March 2012.

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TAXWATCH CENTER FOR COMPETITIVE FLORIDA ADVISORY BOARD

Florida Tax Watch

BOARD CHAIRMAN
SENATOR GEORGE LEMIEUX
Chairman of the Board, Gunster

BOARD MEMBERS
MR. JOHN B. ZUMWALT III

President, thezumwaltcompany
Florida TaxWatch Chairman & Immediate Past Chair, CCF Advisory Board

This Florida TaxWatch report is also available in PDF format:
"Florida's Home Construction Recovery"

WILLIAM E. CARLSON, JR
President, Tucker/Hall

MR. MARSHALL CRISER, III
President, AT&T Florida
Immediate Past Chairman, Florida TaxWatch

MR. DOUG DAVIDSON
Market Executive, Bank of America Merrill Lynch

MR. J. CHARLES GRAY
Chairman, GrayRobinson Law Firm

MR. JON FERRANDO
Executive VP & General Counsel, AutoNation, Inc.

GOVERNOR BOB MARTINEZ
Sr. Policy Advisor, Holland & Knight

MR. DAVE MCINTOSH
Trustee, BlueField Ranch Mitigation Bank Trust

MR. JAMES M. REPP
Senior VP, AvMed Health Plans

MS. MICHELLE A ROBINSON
President, SouthEast Region, Verizon

MR. DAVID A. SMITH
Former Chairman, Florida TaxWatch

MR. MICHAEL SOLE
VP for State Governmental Affairs, Florida Power & Light

TRACY WILLIS
Vice President, The Walt Disney Company


Economic Commentary written by
Jerry D. Parrish, Ph.D., Chief Economist, and Executive Director of the Center for Competitive Florida

Robert Weissert, Chief Research Officer
Chris Barry, Director of Publications

John Zumwalt, III, Chair, Florida TaxWatch
Sen. George LeMieux Chair, Center for Competitive Florida
Dominic M. Calabro, President, CEO, Publisher, and Editor

Florida TaxWatch Research Institute, Inc.
www.floridataxwatch.org
Copyright © Florida TaxWatch, April 2014