Thursday, February 12, 2009

New Yorker Roundup: Florida Ruins Everything.

The most recent New Yorker is not completely a John Updike tribute (although there is quite a bit of that). Yesterday, Fosco called your attention to the amazing Steven Millhauser story (that didn't seem a hit with the commenters...); today, he wants to share another titbit with you.

The best article in this current issue is George Packer's reporting on Florida as the ground zero of the mortgage crisis (unfortunately, you must be a subscriber to read the full text). The area around Tampa has been hit the hardest. Packer describes why Florida has been uniquely susceptible to this crunch:

The state's economy depends almost entirely on growth--that is, on new arrivals and the wealth they generate in construction and real estate. "Until two years ago, this was a growth machine that was the envy of the world," said Gary Mormino, a professor of history at the University of South Florida, in St. Petersburg, which is across the bay from Tampa. "Florida, in some ways, resembles a modern Ponzi scheme. Everything is fine for me if a thousand newcomers come tomorrow. The problem is, except for a few road bumps--'73, '90, and they were really minor--no one knew what would happen if they stopped coming."

Only Nevada has a lower population of native residents than Florida. The state's growth machine did not depend on higher education or high-paying professional jobs; it depended on real estate and sunshine. Tourism and migration allowed Florida to become a low-tax, low-wage state, where living was relatively cheap. "The Florida economy has been based on selling Florida," David Reed, who runs the Florida operation of an investment fund called CapitalSouth Partners said. "Our growth is all about population growth. When you take that away, what have you got?"
Apparently, pretty much everyone bought into this bubble of insanity:
By 2005, the housing market in Florida was hotter than it had ever been, and the frenzy spread across all levels of society. Migrant farmworkers took jobs as roofers and drywall hangers in the construction industry. Nearly everyone you met around Tampa had a Realtor's license or a broker's license or was a title agent. Alex Sink, the state's chief financial officer and a Democrat, said, "When the yardman comes and says he's not going to mow your lawn anymore because he's going to become a mortgage broker, that is a sure sign that something is wrong." Flipping houses and condominiums turned into an amateur middle-class pursuit. People who drew modest salaries at their jobs not only owned a house but bought other houses as speculators.


Jim Thorner, a real-estate reporter in the Tampa office of the St. Petersburg Times, said, "There were secretaries with five to ten investment homes--a thirty-five-thousand-dollar salary and a million dollars in investments. There's no industry here, only houses."


Karen Johnson-Crowther, another real-estate agent in Fort Myers, showed me the sales history of a property in an upscale gated community which she had recently bought at a foreclosure auction. Building had begun in 2005. On December 29, 2005, the house sold for $399,600. On December 30, 2005, it sold for $589,900. On June 25, 2008, it was foreclosed on. Johnson-Crowther bought it in December for $325,000. I said that the one-day increase in value must have been some kind of record, and she looked at me pityingly: "No."
What we have here is an entire state that drove off the cliff of irrational exuberance--and took billions of dollars in "wealth" with them.

And you know the strangest part? I can't understand why anyone would want to live in Florida in the first place...

1 comment:

kungfuramone said...

I hear THAT, renegade!

I'd rather live in, say, the Yukon Territory than Florida.