10 stories that drove Florida's economy in 2009
By DOUGLAS HANKS for Miami Herald - December 29, 2009Economic gloom picked up steam in 2009, then retreated a bit in the face of renewed confidence. The real estate market may have finished its race to a historic new low. But employers continued slashing jobs, undermining an already battered economy. A great big cruise ship arrived to cheer up Fort Lauderdale's gloomy hotel market.
Economic gloom picked up steam in 2009, then retreated a bit in the face of renewed confidence. The real estate market may have finished its race to a historic new low. But employers continued slashing jobs, undermining an already battered economy. A great big cruise ship arrived to cheer up Fort Lauderdale's gloomy hotel market.
This was a grueling, volatile and action-packed year for business news. But which stories stood out from the thousands The Miami Herald covered over the past 362 days? See the answer below, as Business Monday presents its 2009 Money List -- the Top 10 Business Stories of 2009.
Yes, they're listed in order. Yes, we picked them. Yes, you can disagree with us online by visiting miamiherald.com/business.
We judged each story on three criteria.
• Critical to South Florida's economy. That was a big category, of course, covering everything from a steep drop in South Beach hotel rates to Wall Street's summer rally.
• Unique to South Florida. It needed to be a truly local business story. That got rid of stock market surges and interest-rate plunges.
• Unique to 2009. We wanted stories that made news for the first time in 2009. That eliminated big stories we saw last year, too: the rise of personal bankruptcies, rebounding home sales, etc.
From there, we polled reporters and editors, talked to experts, argued, scoffed, researched and gritted our teeth. These are our choices. Prove us wrong.
1. SHORT-SELLING SPREE
This was the year when lenders finally acknowledged their disastrous bets on South Florida's real estate market.
From the beleaguered new condo towers to posh mansions selling for seven figures, one bank after another agreed to write off their losses in 2009. That meant letting owners sell real estate for less than the mortgages attached to the property -- sales ``short'' of the debt lenders would otherwise be owed.
It was a significant turning point from 2008, when lenders generally refused to allow the kind of deep discounts a historic buyers' market ultimately demanded. The short-sales established new floors on pricing for distressed real estate, a key reckoning as owners come to terms with just how much value their properties have lost.
The retreat was most visible in downtown Miami, when gleaming new towers like Wind, Icon and Ivy slashed prices by more than 30 percent off their peaks during the boom time.
The result: a wave of sales at discounted prices, transactions marked by bidding wars and rapid closings. The latest monthly figures show condo sales up 26 percent in Miami-Dade and an astonishing 68 percent in Broward compared to a year ago as prices dropped about 30 percent.
The short sales allowed bulk buyers -- the so-called ``vulture funds'' -- to scoop up scores of condos in a single transaction, contributing to the steep reductions in unsold inventory present as 2009 comes to a close.
To some it harkens back to past go-go days of real estate, albeit involving a different strata of prices.
``I've have an agent who's going to net $100,000 this month alone,'' said Peter Zalewski, founder of the Condo Vultures brokerage and real estate consultancy. His brokerage's top customers? Foreign investors paying all cash for their condos amid a tight lending market.
``There is so much buying demand right now,'' he said.
2. UNEMPLOYMENT HITS DOUBLE DIGITS
Unemployment was a worry for South Florida at the end of 2008. In 2009, it became a serious problem with hints of a crisis.
South Florida's unemployment rate hit 10.9 percent (seasonaly unadjusted) in the fall, significantly worse than the 6.4 percent rate recorded at the close of 2008. Miami-Dade leads the decline, hitting 11.5 percent in October in seasonally adjusted figures.
Last year, South Florida could take comfort that it had more people employed than did the typical U.S. community. Not so in 2009, with the national unemployment rate at 10.2 percent.
In South Florida, a depressed construction industry -- the main engine for growth in the boom years -- continued shedding workers. And the pain spread to previously expanding sectors, like tourism and hospitality.
The growing ranks of South Floridians without jobs exacerbated an already struggling economy -- putting even more pressure on struggling retailers, teetering condo associations and home owners desperate for buyers.
The increasingly bleak employment picture in 2009 forced a new look at South Florida's role in the global economy, as Latin American commerce and European tourism failed to insulate the region from the U.S. recession.
3. SEIZURE OF BANKUNITED
The global credit crisis firmly planted its flag in South Florida on May 21 when federal regulators seized Florida's largest bank.
BankUnited rose high on the real estate boom, handing out mortgages that allowed borrowers to make minimal payments for the first several years.
Known as option ARMs (``ARM'' stands for ``adjustable rate mortgages''), the novel lending product soon was blamed for a wave of defaults across the country.
That was bad news for Bank-United, where regulators said option ARMs accounted for 60 percent of the Coral Gables-based bank's ``highly-risk tainted loan portfolio.''
The FDIC estimated Bank-United's failure would cost the national bank insurance fund about $4.9 billion, making it the second costliest bank failure in the country.
But the brand lives on: New York banker John Kanas led an investor group that bought the former BankUnited's deposits and brought in about $900 million in new capital. It now has plans to open 12 new branches in 2010 as it searches for acquisitions.
4. HOPE
When 2008 closed, the question was: How bad will it get? As 2009 closes, a new question has emerged: Is the worst behind us?
The University of Florida's monthly statewide survey of consumer confidence saw uneven gains throughout the spring and summer, and the latest reading of 69 was well ahead of the poll's grimmest reading of 59 in June 2008.
``I think we are in somewhat of a turnaround,'' said Chris McCarty, director of the survey research center at UF's Bureau of Economic Research. ``We're nowhere near where we were in the late summer and early fall of '08.''
5. HOTELS GET HAMMERED
This year South Florida's signature industry suffered through the worst hotel downturn in a generation -- surpassing the tourism fall-out from the 2001 terrorist attacks.
That didn't seem inevitable at the end of 2008, when hotels were holding tight on room rates and vacancy rates crept up only a little.
But as consumer spending tanked in early 2009 and corporations all but eliminated lavish conferences in resort destinations, hotels saw profits drop, too. A key industry barometer, revenue-per-room, fell between 18 percent and 22 percent through October.
Bookings picked up toward the end of 2009, and hotels think South Florida's role as the 2010 Super Bowl host should help. Recently, forecasters said they were more optimistic about the market than they were when the fall season began. But hotels aren't expected to see room revenues grow again until 2011.
6. HOUSING PRICES FLIRT WITH A BOTTOM
The start of 2009 brought a real estate milestone: housing prices actually gained ground.
Compared to 2008 levels, values for houses in South Florida are down 16 percent in Broward and 28 percent in Miami-Dade.
But March brought Broward's single-family home market its first consecutive price increase since January 2007.
Miami-Dade hit the same milestone in June, its first back-to-back gain since July 2007.
It was the first hint of a turning point for a historic collapse in one of the country's most heated housing markets.
In June the S&P/Case-Shiller Index, a reliable chronicler of South Florida's real estate debacle, reported the first increase in single-family home values since December 2006.
The free fall in house prices -- down about 50 percent from their peak in 2007 -- finally seems to have stopped.
``Prices aren't falling any further -- or if they are, it's not by much,'' said David Dabby, a real estate consultant and president of the Dabby Group in Coral Gables.
Not everyone agrees, with some forecasts calling for drops next year in real estate prices up to 30 percent. Even bullish analysts warn the bottom could fall out again in 2010 if banks get aggressive in selling foreclosed units or unemployment worsens dramatically.
7. PONZI SCHEMERS
Police busted Bernie Madoff at the end of 2008.
But the full impact of his $20 billion Ponzi scheme in South Florida came to light in early 2009 with the list of roughly 600 alleged victims from both Broward and Miami-Dade counties, including auto magnate Norman Braman and former Fontainebleau owner Stephen Muss.
Then came two rivals for Ponzi infamy:
• Allen Stanford, a Houston banker with a Coral Gables mansion accused of a $7 billion swindle that relied on over-valued Caribbean real estate and certificates of deposit sold out of his Miami office.
• Scott Rothstein, a high-flying Fort Lauderdale lawyer charged with running a $1.2 billion scam involving fictitious settlement payouts with legal clients.
The Madoff scandal ravaged South Florida's philanthropic circles, with top charities finding key donors far less wealth in an instant.
Stanford struck at the heart of a crucial investor constituency: Latin Americans seeking safe financial havens in Miami. The Rothstein collapse hit a string of small businesses and briefly shut down the former Versace mansion in South Beach, one of his many joint ventures.
But the biggest impact may have been a reminder that South Florida remains one of the nation's most fertile grounds for scams -- and how often swindlers seem to find their way here.
8. FLORIDA IDLES ITS GROWTH ENGINE
In August, the Sunshine State shrunk for the first time in 60 years. That was when the University of Florida reported the state's 18 million population decreased by a total of 58,000 people.
The last time Florida lost residents was in 1946, as World War II soldiers cleared out of their bases.
Such a dramatic shift seemed unimaginable just a few years ago, when South Florida real estate agents habitually ticked off trivia about Florida's popularity with newcomers. Among their common refrains: 1,000 people move to Florida each day.
In South Florida, estimates released in 2009 showed the population continued to grow -- up 19,000 since 2007. But the statewide shift signaled the end of a remarkable era for Florida's boom-town reputation. In 2010, we will discover whether the drop signaled a pause or a sea change.
9. OASIS ARRIVES
When the world's largest cruise ship tossed its lines on the docks of Port Everglades Nov. 13, tourism officials ferried reporters out on a speed boat to document the arrival.
No wonder.
By landing the Oasis of the Seas, Fort Lauderdale secured the title of Cruise Ship Capital of the World -- decisively edging out nearby rivals Miami and Orlando.
``We honestly expect to double the number of overnight stays we get from the cruise business,'' Broward tourism director Nicki Grossman said of the new Royal Caribbean ship, estimating that the mega ship will account for about 200,000 overnight stays at hotels in the area.
International hype about the biggest ship also renewed interest in cruising just as the national economic picture brightened. Across the South Florida-based industry, executives expressed confidence that profits would increase in the coming year as they looked forward to two new megaships, NCL's Epic, due out next summer, and Allure of the Seas, sister ship to the Oasis.
10. CONDO ASSOCIATION MELTDOWNS
Condo living -- a staple of the South Florida lifestyle -- became a nightmare for many in 2009 as owners abandoned their units and stopped paying condo association dues.
The wave of deadbeat condo owners came from foreclosures and the twilight time between buyers leaving their units and banks actually taking possession. Association lawyers accused banks of delaying the process, since lenders must pay overdue fees once they actually foreclose on units.
But as the lawyers battled, associations this year filed for bankruptcy, saw their lights and water shut off and scaled back services in a vicious cycle that made it even harder to get dues-paying residents back into the vacant units.
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