The Backyard Economy: Florida

— -- The story of Florida's economy can be summed up in one word: housing.

Nowhere has the collapse of the housing market played out more visibly than in the Sunshine State. As a result of steep declines in prices, sharp increases in foreclosures and significant numbers of brand-new, ocean-facing condos sitting empty, economists believe the state is clearly in a recession.

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"We are in the worst recession the state has seen since the mid-seventies," said Hank Fishkin, an economist with Fishkin and Associates whose firm specializes in real estate.

The state's economic woes could last for some time.

"Florida's economy will contract throughout the year before it begins to recover in 2009," wrote Chris Lafakis an economist with Moody's Economy.com wrote in a recent report.

Dave Denslow, a professor of economics at the University of Florida agreed: "In the short run, I think we are in for a tough time and I think that will continue on until November."

Home prices in Miami have dropped nearly 22 percent in the past year according to the S&P/Case-Shiller Home Price Index. Prices in Tampa are off more than 17 percent. As prices have fallen, homeowners now face paying mortgages worth more than the value of their home.

Many homeowners stretched themselves financially to buy a home in Florida when prices soared and now, they are unable to make their payments as interest rates have reset higher.

As a result, Florida led the nation in March in the percentage increase in homeowners more than 90 days late making their monthly payments. Already, 0.4 percent of homes were in foreclosure in March compared to only 0.1 percent last year according to First American CoreLogic.

In Fort Lauderdale alone, one out of 73 residents received a foreclosure filing; and in Miami, it was one out of 81 homes, according to RealtyTrac.

Is Florida to blame for the nation's current economic downturn?

"Partly yes and partly no," Denslow said. "If it was only Florida going down, we wouldn't have a financial crunch." He added that Florida "is helping to lead the nation into recession, but we ourselves couldn't do it on our own. The fact is that everyone is going down at once in the housing market."

What will eventually pull the state out of recession will be its solid economic base that will recover from the current crisis, and more important, an influx of new residents from other states who will eventually buy up the surplus of empty homes.

For that to happen, however, Florida will have to wait for the national economy to improve and with it, home prices in other cities. Baby Boomers retiring in Boston won't be able to move to Orlando until they can sell their homes.

"Until they can do that," Fishkin said, "we can't see a stronger recovery."