Business

Ouch! Cost squeeze tightens

Just in time for the holidays: repair costs from Hurricane Wilma, hefty property-tax bills and gasoline prices hovering near $2.50 a gallon.

After ringing in the New Year, expect higher power bills, increases for home insurance and healthcare hikes.

Christiane Gunn, a Pembroke Pines high school teacher, is facing a $117 jump in her mortgage bill because her variable-rate loan has moved up with rising interest rates. She'll also see a $60 hike in homeowners association fees to cover higher utility and insurance costs, and her own electric bill could go up $20 a month following Florida Power & Light's request to recover its storm repair costs.

She boosts her annual base pay to $65,000 by teaching an extra period each day and working Saturdays and summers doing teacher training. Yet, this single mother can't afford insurance for the contents of her Sunrise town house.

``I can't imagine being a brand-new teacher, making $35,000 a year, because you can't afford'' to live here, says Gunn, who initially thought that living in Florida would be cheaper than living in her native New York City.

If it seems that the costs of living in paradise are out of this world, consider this: New data from the government show that consumer prices in South Florida are rising nearly 50 percent more than the national average. The main culprits: higher energy prices and the booming housing market.

CLOUDY OUTLOOK

Economists say that these rapidly rising prices eventually will cause a drag on consumer spending and could slow South Florida's economy.

Rising interest rates could be one of the biggest problems that many South Florida residents will face, especially those who opted for adjustable-rate loans in order to afford homes in recent years.

In the second half of last year, 63 percent of all mortgages written nationwide were adjustable-rate loans, with many being interest-only debt, according to the Mortgage Bankers Association. As rates move higher, the monthly payments also move up.

``The people who are in variable-rate mortgages, or those who don't have the skills that are [in demand] in the economy at the time, will suffer'' more with the cost of living, says Tony Villamil, chief executive of the Washington Economics Group and chairman of the Governor's Council of Economic Advisors in Florida.

Villamil sees a slowdown coming in discretionary spending on vacations, restaurants, even car purchases. He wouldn't be surprised to see some residents move to areas of Florida with lower costs of living or leave the state.

PORTENT OF TROUBLE

The telltale signs of trouble have been in the South Florida economy for some time.

Inflation has been rising at a more rapid pace in the Fort Lauderdale-Miami area than nationwide since 2003. Median home prices have more than doubled in the past five years. Medical-care costs have ballooned more than 30 percent in the same period.

Last month, two key components of consumer confidence slipped dramatically - Florida consumers were less certain that it was a good time to buy a major household item, and more had a negative outlook about their personal finances.

``People have to balance discretionary spending against necessities such as gasoline and electricity,'' says Chris McCarty, director of the University of Florida's Survey Research Center, which tracks Florida consumer confidence.

LOW UNEMPLOYMENT

That squeeze is coming when South Florida's jobless rate is at an all-time low, meaning that more people than ever are working.

For Miami-Dade County, the October jobless rate of 4.2 percent, released Friday, is the lowest since the state began to keep local records in 1983. It stood at 5.9 percent the preceding October. Broward County's unemployment rate of 3.2 percent matched the record low last seen in 2000. It dropped from 4.5 percent a year earlier.

South Florida is also adding jobs at a faster pace than the rest of the state, which has been outpacing the rest of the nation in employment growth.

But here's the rub.

Salaries haven't kept pace with rising costs. Median household income in Broward and Miami-Dade has been flat or has even lost ground since 2000.

According to a Brookings Institution report in mid-2004, Miami-Dade ranked 91st out of the nation's 100 largest counties in median household income. Together, the Miami-Fort Lauderdale region has one of the lowest median incomes in the Sun Belt.

``There are nurses that are making $40, $50 an hour in California for what I'm doing,'' says Margaret Goodman, who earns $30 an hour as a nurse in the intensive-care unit of Parkway Regional Medical Center.

Goodman isn't sure how she'll afford to fix roof damage to her mother's Opa-locka home as a result of Hurricane Wilma. She moved back to Miami five years ago to care for her mother, who suffers from Alzheimer's disease, and had been fixing up the house to sell it. ``Life is on hold until I can get things settled,'' Goodman says.

CUTTING BACK

Consumers are making difficult choices.

Henri Cohen, a 35-year-old salesman for a Hollywood firm that makes DJ

equipment, decided to cut back on coverage for his Miami Beach condominium when the hurricane

insurance premium nearly quadrupled earlier this year. Insuring the condo for $60,000 instead of $98,000 brought his premium down to $781 from the $1,500 he was initially billed.

Holy Cross Hospital nurse Jeanne Kos and her partner already have shelled out $13,000 to repair damage to their Coral Springs house caused when a tree fell on it during Hurricane Wilma. Christmas will be leaner this year, Kos says.

Gladys ``Chickie'' Olsen, 59, has tapped her life savings to make storm repairs that her insurance won't cover in her Pompano Beach home and to pay other expenses. ``Those of us that are baby boomers, we have to reach into our retirement to survive the present day,'' Olsen says.

South Florida's rising cost of living could dampen business expansion and recruitment.

Frank Nero, president of the Beacon Council, Miami-Dade's economic development agency, points out that South Florida is still a bargain compared to other corporate centers such as Boston, New York, Los Angeles and even European cities such as Barcelona.

However, he and James Tarlton, his counterpart at the Broward Alliance, fear that South Florida's increasing costs could have an impact.

``Our consultants have told us that we need to be more worried about housing affordability than the hurricanes,'' Nero says. He admits that there are certain types of employees that his agency won't bother recruiting, such as workers for call centers, because their salaries are not high enough to meet South Florida's cost of living.

CREATIVE ANSWERS

Still, consumers and employers are striving to find solutions.

U.S. Century Bank, with branches in Miami-Dade and Broward, is providing employees with a $100 stipend each month to help cover higher gasoline costs. Carnival Cruise Lines helped organize employee carpools to deal with fuel shortages and rising costs after Hurricane Wilma came through last month.

Armando Martinez, a travel-agent liaison at Carnival, is still carpooling with coworkers from Kendall, saving about $85 a month in

gasoline. He has even

downgraded from a high-speed Internet connection to dial-up to save a few extra bucks. He wants to buy a house.

HOUSING HELP

``Owning a home is very hard nowadays in Miami,'' says Martinez, 25, who has thought about moving.

To help new employees deal with higher housing costs, Holy Cross Hospital in Fort Lauderdale is renovating a block of apartments within walking distance of the hospital to serve as temporary housing for newly hired nurses. It is also considering offering extra dollars, as part of a signing bonus, that could be used as a down payment for a house.

In the short term, there isn't much relief for South Floridians who feel the big squeeze. Manuel Lasaga, head of Stratinfo, a Coral Gables economic research firm, says there is no doubt that the storms and subsequent repairs this season have sapped consumers.

``We're all feeling our pockets a little more empty,'' Lasaga says. ``That will be a negative for South Florida.''

HOW PRICES ARE PINCHING

* Gasoline: You're paying twice as much as you did just two years ago.

* Electricity: Your bill will go up 18.5 percent or more next year.

* Home insurance: Since 2000, most premiums increased at least 50 percent; some have doubled.

* Homes: You need about three times the median income to afford the median-priced S. Florida home.

* Inflation: It is running nearly 50 percent above the national rate.

For more on your costs of living, see Page 27A.

* Check out Florida Power & Light energy- and money-saving tips such as cooling your home at 78 degrees, replacing AC filters each month, and turning off fans when you're not in the room. Take a home energy survey online for more tips. FPL's tips are on herald.com; click on Today's Extras.

* Carpool to save on gasoline. Ride-sharing information is available on herald.com; click on Today's Extras.

* To find cheapest local gasoline options: Miamigasprices.com or www.gaspricewatch.

* Have a hurricane mitigation inspection done on your home to certify that you have storm shutters, hip roof and several other measures that can reduce damage and qualify you for discounts. Information at www.floridawindincentives.org and www.ibhs.org and check with your insurer.

* Look for bundled packages for phone, cable, wireless and Internet access that offer discounts for subscribing to several services from one provider. Information at www.bellsouth.com and www.comcast.com.

* Keep your driving record clean to keep auto insurance rates in check. Comparison-shop for the best rate, too.

* To help manage healthcare costs, enroll in a flexible spending account if your employer offers it.

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