1. U.S. & Florida Economic Update Sarasota, FL July 11th, 2013

2. U.S. Forecast

3.  A Pall of Uncertainty Hangs Over the Economy  Health Care Reform  Impact on labor market  Dodd-Frank Financial Regulatory Reform  Impact on credit flows  Fiscal Cliff  Tax cuts  Sequester  Euro

4. U.S. Forecast  A recent paper has created an index that quantifies economic policy uncertainty and analyzes its economic impact:  Measuring Economic Policy Uncertainty By Scott R. Baker Nicholas Bloom, and Steven J. Davis

5. U.S. Forecast  The index has three components: 1.Newspaper coverage of policy- related economic uncertainty. 2.Number of federal tax code provisions set to expire in future years 3.Disagreement among economic forecasters (Survey of Professional Forecasters)

6. U.S. Forecast  The economic impact of economic policy uncertainty The results of the statistical analysis in the paper show that higher policy uncertainty causes: 1.Lower private investment 2.Lower industrial production 3.Much lower employment

7. Economic Policy Uncertainty Index

8. U.S. Forecast  Depleted Housing Wealth  Still Weak Labor Market  A continuing ballast on consumer spending

9. U.S. Household Wealth (Trillions of $) 2005200620072008 2009 Q1* 2013 Q1 Total Assets 71.378.679.566.6 62.8 83.7 Financial Assets 42.949.051.442.2 39.6 57.7 Home Equity 13.212.810.37.0 6.1 9.1 Net Worth 59.165.1 52.4 48.7 70.3

10. U.S. Forecast

12. U.S. Economic Outlook 2012 Q4 2011 Q1 2013 Q2 2013 Q3 20132014 GDP % Change, Annual Rate 0.41.81.61.91.72.5 Consumer Price Index % Change, Annual Rate 2.20.20.41.31.51.8 Consumer Sentiment 79.476.479.880.1 83.1 Consumption % Change, Annual Rate 1.82.61.81.91.82.5

13.  Monetary Policy  Fed Funds rate unchanged until unemployment rate hits 6.5%  QE III  Open ended purchase of mortgage backed securities  Is inflation a worry? U.S. Forecast

18. A Slippery Subject  What is the Fate of the Euro?  Bailouts, haircuts, ECB bond purchases  Ongoing concerns (CPIIGS?)  Euro still facing greatest threat since inception  Two possible outcomes for the Euro zone in the long run.  Does the political will to implement the necessary changes exist in Europe?

19. The Euro and the Tacoma Narrows Bridge A Slippery Subject

20. U.S. Forecast

21. Florida’s Housing Market  Housing market finally showing signs of life  Has housing market found a solid bottom for prices?  Distressed vs. Traditional  Investor role in distressed market  Housing finance problematic

22. Florida Housing Market

24. May 2013May 2012 Percent change Closed Sales22,37518,88418.7% Median Sale Price $171,000$147,50015.9% Median Days on Market 5565-15.4% Inventory ( Months Supply ) 5.07.5-32.7% Florida Housing Market

25. Closed Sales Percent change Year ago Median Sales Price Percent change Year ago Traditional15,76834.8%$205,90011.9% Foreclosure/REO3,342-2.6%$100,0009.7% Short Sale3,265-13.1%$125,30011.9% Florida Housing Market Distressed Market Share of Total Market Declining

26. Florida Housing Market  Housing market recovery continues to unfold  Prices have gained traction  Can the momentum be maintained?  The growing investor role  Housing finance still problematic

27. Florida Forecast

28. Florida Housing Market  Investors are back in Florida residential real estate  Evidenced by high share of cash transactions  Private equity & hedge funds  Is this a good thing or a bad thing?

29. Florida Housing Market  Housing Finance  Unsustainably high share of cash transactions  Mortgage availability has been restricted by  Dodd Frank  Capital Standards  Underwriting Standards  Limited Private Securitization  Demise of Mortgage Brokering  Shell shock  Is this a good thing or a bad thing?

30. Florida Forecast  In 2010 the economic recovery began Real GSP growth 1.4% that year In 2011 the economy limped further along 1.3% Real GSP growth  In 2012 we expect 1.6% growth  Job growth has limped alongside but only starting late in 2010.

31. Florida Forecast  Economic and job growth doesn’t gain significant altitude until 2014 and 2015  Real GSP growth:  2014 = 3.3%  2015 = 4.0%

32. Florida Forecast

35. 2013-2016 Averages; Q2 2013 Forecast Florida Sector % Average Annual Growth Construction7.3 Professional & Business Services 4.0 Trade, Transportation & Utilities 3.2 Education-Health Services2.2 Leisure & Hospitality2.0 Information1.1 Manufacturing0.9 Financial0.7 State & Local Government0.3 Federal Government

36. Existing Single-family May 2013May 2012 Percent change Closed Sales7316699.3% Median Sale Price $189,950$163,44516.2% Median Days on Market 4450-12.0% Inventory ( Months Supply ) 4.45.8-25.1% Sarasota Housing Market

37. Sarasota Forecast

40. 2013-2016 Averages; Sarasota Forecast Sarasota Sector % Average Annual Growth Construction9.2 Professional & Business Services 4.7 Education-Health Services2.0 Trade, Transportation & Utilities 1.3 Information1.3 Leisure & Hospitality1.0 Manufacturing1.0 Financial0.6 State & Local Government0.6 Federal Government-1.4

41. Sean M. Snaith Sean M. Snaith, Ph.D.Director Institute for Economic Competitiveness (407) 823-1453 Sean@SeanSnaith.comWWW.IEC.UCF.EDUwww.facebook.com/seansnaith Twitter: @seansnaith Thank you