Fed Beige Book: Florida tourism cools and more homes sell below asking as Southeast growth stays modest

Florida's economy is still growing but losing momentum, according to the Federal Reserve's latest Beige Book, released Wednesday, Oct. 14. The Federal Reserve Bank of Atlanta, whose Sixth District includes Florida, reported that tourism and consumer spending grew only slightly, hiring was flat, and prices kept rising at a moderate pace, while more homes in the region sold below asking price, "especially in Florida."

The Beige Book is a collection of reports from business owners, bankers and other contacts in each of the Fed's 12 districts. This edition, based on information collected on or before Oct. 5, is one of the inputs Fed policymakers will have when they meet Oct. 27-28 to set interest rates.

The Sixth District at a glance

The Atlanta Fed said the Sixth District economy "grew modestly" over the reporting period. The district covers Alabama, Florida and Georgia, and parts of Louisiana, Mississippi and Tennessee, and the Atlanta Fed has branch offices in Miami and Jacksonville.

Compared with the previous Beige Book, released Sept. 2, the report shows several Florida-heavy sectors cooling while home sales picked up. The table below compares how the Atlanta Fed described each area in the two reports.

Tourism slows as forecasts are trimmed

For Florida, the tourism findings stand out. Tourism activity grew only slightly, and some contacts revised their forecasts for the year downward, the Atlanta Fed said. Hoteliers targeted luxury travelers to make up for a slowdown in group and business travel bookings, and economic uncertainty led some companies to tighten travel budgets, although business travel still outpaced leisure.

International travel to the district rebounded slightly but remained below historical norms. One hospitality company reported more activity at its economy extended-stay hotels, which some families were using as housing because they could not afford to rent or buy a home.

In the September report, the Atlanta Fed had described tourism as growing modestly, with demand concentrated at upscale properties and some hotel contacts saying World Cup-related rate increases may have priced out typical summer visitors.

Shoppers split by income

Consumer spending grew slightly, with strength in high-end retail offsetting flat or shrinking demand at other price points. Discretionary spending continued to pull back as rising fuel and food costs increasingly strained low- and moderate-income households, the report said.

Restaurants reported fewer customers, lower average checks and more promotional pricing. New car sales were largely flat, which contacts attributed to declining consumer creditworthiness and elevated interest rates. Some banks reported more "buy now, pay later" financing, mostly for dining out and groceries.

The pattern matched the national picture. Across the Fed's 12 districts, most reported little or no change in consumer spending, and more than half said spending was being driven by high-income households.

Florida homes selling below asking

Housing was the one area where the Sixth District reported faster growth. Home sales improved moderately across the district, and balanced inventory kept price growth stable. But compared with other parts of the country, more homes in the district sold below asking price, especially in Florida, and sellers offered discounts and incentives, according to the report.

Homebuyer confidence was especially weak among entry-level and move-up buyers, and many buyers had trouble qualifying for a mortgage. Some homebuilders said they expect mortgage rate buydowns to become a permanent sales tactic that gives new homes an edge over resales.

Borrowing costs help explain the strain. Freddie Mac reported that the average 30-year fixed mortgage rate was 7.40% as of Oct. 15, unchanged from the previous week and up from 6.27% a year earlier.

Florida Realtors data show the same leveling off. Statewide closed sales of existing single-family homes fell 1.4% from a year earlier in August, to 21,497, ending a streak of year-over-year gains, while the median price rose 1.2% to $415,000. Condo and townhouse sales fell 1.8%, and the median condo price was $298,000. Florida Realtors chief economist Brad O'Connor attributed the end of the growth streaks to the higher rate environment.

On the commercial side, the Atlanta Fed said multifamily demand rose slightly and vacancy rates fell, though rent concessions were still widespread. Office demand was stable, retail vacancies were unchanged, and data center construction kept driving industrial growth.

Hiring flat, wages lagging

Employment levels across the district were largely flat, and layoffs remained limited. Employers still reported shortages of specialized, technical and skilled trade workers, and more firms were using artificial intelligence tools to boost productivity, though most did not expect that to lead to significant job cuts in the near term.

Most contacts reported annual wage increases of 2% to 3%. Some said their employees were worried that cost-of-living raises were not keeping up with inflation, and many reported rising costs for employer-provided benefits and insurance, much of which was being passed on to workers.

Florida's own numbers have held up somewhat better. The state's unemployment rate fell to 4.5% in August from 4.6% in July, and Florida added 21,800 jobs that month, according to state data reported by news outlets.

Fuel and insurance push up costs

Prices rose moderately across the district. Transportation costs climbed notably as diesel prices rose, and steel and mechanical equipment for construction saw more frequent price increases. Auto, liability and health insurance costs continued to rise, a familiar pressure for Florida households and businesses.

Retailers reported weakening pricing power and said they were limiting themselves to "surgical" price increases. Firms that had received tariff refunds most often used them to offset other operating costs.

Nationally, the Beige Book said higher oil prices showed up in every district's report, and firms in several districts expected prices to rise further. The Bureau of Labor Statistics reported the same day that consumer prices rose 3.7% in the year through September, with gasoline accounting for more than half of the monthly increase.

What's next

The Fed's rate-setting committee meets Oct. 27-28, with inflation running well above its 2% target and regional reports pointing to slow growth. For Floridians, the outcome will help determine whether mortgage rates near 7.4% ease or stay high heading into the winter selling season.

The next Beige Book is scheduled for Nov. 25, ahead of the Fed's final meeting of the year on Dec. 8-9.