Five years ago this month, the Great Recession began. Which leads to this question: How much longer until South Florida can erase the damage?
Officially, the recession ended in June 2009. According to the National Bureau of Economic Research, the national economy began contracting in December 2007 and did not grow again for 19 months. Using taxable sales figures, its probably safe to say South Florida experienced a longer downturn. Overall spending contracted for the first time in South Florida in March 2007 and didnt post a year-over-year gain until February 2010.
Miami was at the forefront of the housing boom and bust, said Karl Kuykendall, an economist who follows South Florida for IHS Global Insight. Its no surprise Miami was early into the recession and somewhat late coming out.
But whatever the actual duration of the downturn, it doesnt take much math to realize the economy still feels shaky. South Florida lost its first net job in more than two years in October, when a tiny decline of 300 payroll slots interrupted 26 months of consistent expansion. The upcoming November report out Friday will show whether the losing streak continues.
And while unemployment is off near-record highs set in April 2010, more than 180,000 South Floridians were listed as officially out of work in the last count. Thats almost 90 percent more than the 98,000 people listed as out of work in the first month of the recession.
Tourism posted an early recovery, particularly in Miami-Dade, where foreign visitors helped hotels shake-off a sharp drop in U.S. vacationers and business travelers. But the recession lingers in Browards tourism industry, which is just now retiring past records.
Housing suffered the most dramatic crash throughout the recession and was also the last of the major indicators to begin its recovery. The Case-Shiller real estate index pegs May 2006 as the peak of the bubble in South Florida. Although each neighborhood is different, the average South Florida house worth $200,000 that month would have fallen down to $97,600 by the time the market hit bottom just over a year ago, in November 2011.
Values have recovered 9 percent since then, meaning the same house should be worth just over $105,0000. Thats a loss of 47 percent over six years.
Recovering from that kind of crash takes time, and five years clearly isnt enough. To give a hint of the progress underway, Business Monday checked into businesses and residents on the frontlines of the recovery. The reports follow:
After fending off a foreclosure and battling to get out from under an onerous option ARM mortgage, Marie and Wilson Destin recently worked out a loan modification on their 4-bedroom, 2-bathroom house near Miami Lakes.
With the help of Neighborhood Housing Services of South Florida, a nonprofit agency that helps people navigate the Byzantine home financing landscape, the Destins cut their monthly mortgage payment to $1,500 from $1,900 under a new fixed-rate loan.
In 2006, when the housing market was booming, the Haitian-American couple had taken out an option ARM loan on the property, which they had owned for several years.
Somebody came to the house and approached me with an option ARM loan, said Wilson Destin. They said I would pay less.
The option ARM which has triggered financial woes for thousands of homeowners during the downturn allowed for flexible payments and negative amortization, practically encouraging people to defer payments.
The loan became a burden after it reached the mortgage cap, or maximum loan amount, and it was time to pay the piper. Their mortgage payment jumped sharply.
The Destins understood they would be able to convert to a fixed-rate mortgage. But their home equity was wiped out in the housing market crash and the lender balked at refinancing, said Wilson Destin, 49, who works in security as a site supervisor.
I paid a lawyer to help me, he said. The lawyer was not able to do anything. The staff at Neighborhood Housing Services of South Florida helped them prepare and submit the paperwork for a loan modification, and the couple just completed a three-month trial period demonstrating they can meet the new payments.
The loan modification process took from August 2011 until October 2012, said Mordy Lafortune, director of homeownership preservation at Neighborhood Housing Services, who is confident the couple will obtain the permanent loan modification.
They may be eligible for additional help down the road.
We feel better about where we are, compared to where we were up until this point, Wilson Destin said. Much better.
After the financial crisis hit, there wasnt a whole lot of demand for hibachi chicken, sushi and Korean beef at Soo Woo Japanese & Korean Steakhouse in Doral.
Before owner Bok H. An knew it, sales at the Asian restaurant plummeted about 30 percent in 2009. The downturn couldnt have come at a worse time. An was finishing a long-planned expansion to double the restaurants size. The bank cut off the credit line before renovations were complete.
We were freaking out, said An, 40, who grew up in the restaurant industry. It was either do or die. If we continued at that volume, our days were numbered. We werent going to last.
Struggling to pay his bills, An laid off about 10 percent of his employees and negotiated a deal with the landlord to cut his rent. But the real focus was on finding ways to generate more traffic. An decided the only option was to focus on value with a $9.95 lunch buffet and a $19.95 all-you-can-eat dinner special.
Initially it worked. Business in 2010 jumped back to where it was pre-recession and the restaurant was once again profitable. But then came the problems. Customers complained about declines in quality and long wait times. Even Ans loyal customers were refusing to return.
Even though sales were good, I was getting too many complaints, An said.
Thats when An knew he had to go back to his regular sit-down menu and find other ways to draw in traffic. In 2011, An focused heavily on marketing and promotions, including social media. He came up with a weekly calendar of events like Ladies Night on Tuesdays, $1 Beer on Wednesdays and kids eat free on Sundays.
That year was the turning point. By 2011, business at Soo Woo had climbed about 10 percent higher than it was pre-recession. Customers started feeling better about going out to eat again. An is on track for another 10 percent jump this year.
Feeling good about the economy, An launched an aggressive expansion plan. Since the summer, he has opened three new restaurants, in Kendall, Pembroke Pines and Hollywood. All were spaces where another restaurant went out of business during the recession.
Once again, the progression is bumpy. The Hollywood restaurant is already profitable, but the one in Kendall is only breaking even and An is losing money in Pembroke Pines. At the two struggling locations, An is bringing back the all-you-can-eat specials at $11.95 for lunch and $17.95 for dinner. This time An thinks it can work because his food costs are dramatically lower due to increased buying power.
The good old days when you just opened a restaurant and had a successful business by having good food and service are gone, An said. Now you have to really work at it and adapt to what the location wants. Certain neighborhoods are still struggling.
Jorge Arroyo, 49, had been through this before losing his job in the worst economy since the Great Depression. The forklift operator was laid off in 2008, and was out of work for a year. Unable to pay his bills, he got some relief when his nephew moved into his Miami home and helped pay the bills.
Then came a job offer at a warehouse, and three years worth of steady paychecks. Like the economy, Arroyos personal finances were on the upswing. Until the economy failed him again, and Arroyo lost his second job in four years.
It looks like the economy is getting a little bit better, but I dont see it, Arroyo said from his seat before a computer at a state-funded employment center in northwest Miami.
Next to him was a spiral notebook, with the details of seven jobs he had applied for that day. There are three pages of entries already, and Arroyo had room for just one more before having to turn yet another page in his hunt.
There are so many people applying for everything, he said, looking up from the screen, one of 15 occupied in the center at 79th Street and Northwest 27th Avenue.
The centers director, Delphine Brown, said candidates like Arroyo face a much less discouraging landscape than they did in the depths of the recession.
The last few years have been the hardest in my 19 years, said Brown, who started working at job centers in the early 1990s. Theres been so much uncertainty. The companies were in fear.
Now, the job postings are higher that at any time since the recession started. And its not just the old stand-bys of tourism, retail and healthcare. Were even seeing construction jobs picking up, she said. Thats exciting.
The recession was rough on the Cavalier Hotel, and so was the recovery. But owner Ralph Abravaya remains optimistic.
He thought the worst was behind him after buying the 46-room Ocean Drive hotel in 2002, when the industry was reeling in the aftermath of the Sept. 11 terrorist attacks. But court records show hes in a fight with lenders now. August brought a bankruptcy filing for the Cavalier, thanks to an overdue mortgage taken out on the cusp of the recession.
In filings, Abravaya said the hotel makes enough to continue mortgage payments on the $6.5 million loan secured in the middle of 2007. But the lender, BPD, said the hotel wasnt worth enough to refinance the debt when the loan came due in 2010 a time when Abravaya was struggling to pay the bills.
In order to protect ourselves, we had to go into Chapter 11, even though weve never missed a mortgage payment, Abravaya said. Were still making mortgage payments. Its a technical default.
In 2009, revenues dropped about 20 percent. Abravaya slashed rates to $79 per night at a hotel just a few steps away from the sand of South Beach. And he beefed up staffing at the hotels restaurant, the Cavalier Crab Shack, in hopes extra money from drinks and seafood would fill the revenue gaps each month.
It worked, and by the end of 2010, revenues were climbing again.Abravaya described 2011 as the boom year. In October, the Cavalier posted its 57th straight sold-out weekend. Thank God we survived, Abravaya said.
Still, the foreclosure fight looms. Now hes in the process of trying to force a resolution with the lender that doesnt end with him losing the hotel. His plan: bring an investor to pay off the mortgage. It will give me peace of mind, Abravaya said. Its well within our reach.
Abravaya became a hotel owner and operator after other careers, but his father and grandfather both owned hotels in Miami Beach at some point. With the benefit of history, he knows there will always be demand for Miami Beach. And, if reservations are any indication, for the Cavalier Hotel.
Rooms are all sold for the New Years holiday, and hes expecting good crowds for the Jan. 7th BCS National Championship Game maybe even patrons who will order the expensive items from the restaurant menu.
Our reservations are very good, he said. Were ahead at this point of where we were last year, which is encouraging.
His main concern: another downturn sparked by Washington if Congress and the White House cant reach agreement on debt reduction before automatic spending cuts and tax hikes hit on Jan. 1. Its a fear shared by economists, who say the United States going over the so-called fiscal cliff for an extended period of time would send the United States into a second recession.
It should be a good year, he said. If they get a deal.
When the bottom fell out of construction in South Florida, architecture firms like Nichols Brosch Wurst Wolfe & Assoc. felt the blow.
Founded in 1967, the Coral Gables firm had grown over the years, designing hotels, office buildings and condominium towers, primarily in Florida.
Among its local projects: The Plaza on Brickell, Quantum on the Bay and 1450 Brickell.
For us the recession hit probably later than for a lot of people, because of the nature of our work, said Bruce Brosch, president of NBWW. Large-scale projects take a long time to cycle through, to design and document a project, and a long time to build. If all systems are go, it takes three to three and a half years.
So, even though several projects were put on hold at the start of the recession, the firm was able to sustain itself with two major ones: Met 2 in Miami and the former Seville Beach Hotel in Miami Beach.
Those two helped us cushion the blow, if you will, Bosch said. But we were certainly affected.
Revenue fell by 20 percent each of first few years of the recession, down a total of about 60 percent at the lowest point, said Brosch, declining to provide figures.
And the firm, which had peaked at 70 employees in 2008, fell to just 25 architects and support staff by 2010. It used the down time to upgrade its technology to three-dimensional drawings.
Now, at the five-year anniversary of the recession, NBWW is on the mend.
Clients started calling again, Brosch said. Most of our work is repeat business, for developers weve known for years.
The firm just completed the James Royal Palm, is currently working on a major project in Panama City, Panama, and is starting Met 3 in Miami, as well as doing more additions at the Fontainebleau Miami Beach.
Over the past 18 months, NBWW has been able to start rebuilding its staff, and is now up to 35 employees.
It feels good to be hiring, Brosch said.
Revenue is also on the rise, though not yet at its pre-recession peak.
A lot of projects are in the design stages, he said. And if a significant percentage takes it to working drawings, we will be back at our height.