Real Estate Blog

Florida should end Ponzi scheme based on growth, economist says

April 1st, 2009 2:25 PM by Sherry Lee

Florida can no longer afford to rely on an economic model built on adding more homes and attracting more people, a Ponzi growth scheme that is "collapsing all around us," University of Central Florida economist Sean Snaith said today in his latest forecast for the state and 12 metro areas.

Snaith, ranked as one of the nation's leading economic forecasters in recent years, said Florida needs to grab all the federal stimulus money it can to help prop up an economy that clearly relied too much for too long on strong population growth.

"Any Ponzi scheme can be sustained as long as new investors continue to be added to the pyramid," Snaith said in his report this morning. "But we're seeing a breakdown in the financing of government across Florida. This steady influx of population that provided the additional revenues need to prop up the system has evaporated, and the pyramid is collapsing all around us."

Snaith said he expects the state's housing construction sector will finally bottom out in the second quarter this year, ending June 30, at a low point "deeper than many expected." Construction likely will fall to annual rate of 38,250 housing starts, a level that would be only 13 percent of the peak during the boom that crested in the fourth quarter of 2004.

Unemployment statewide will continue to rise, he predicted, and likely will remain above 10 percent for most of 2010 "before beginning a very slow decline from its peak."
Posted in:General
Posted by Sherry Lee on April 1st, 2009 2:25 PM



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