Page last updated at 13:08 GMT, Sunday, 20 April 2008 14:08 UK

The credit crunch hits Miami

By Jonty Bloom
BBC News, Miami

Miami building site
New construction in the US is at a 17-year low

At first sight there seems to be little sign in Miami that the turmoil in the financial markets is having any effect on the real economy.

There are plenty of cranes on the horizon, working on multi-million dollar blocks of condominiums.

All along the seafront of Florida workers are building new blocks of flats, many sold to speculators and investors, hoping to hire them out to holidaymakers.

But first impressions can be deceptive, because after a while you realise that although there are plenty of cranes finishing off blocks, there are precious few foundations being dug.

We find the most vulnerable of the sellers and we go in there and try and steal the property from them legally and ethically
Peter Zalewski, owner, Condo Vultures

"There is no question that housing starts and the commercial sector have scaled back," says Ray Melendi, president of the Builders Association of South Florida.

"That is hurting everybody, from the big contractors to the 'mom and pop'-run companies, they are all sufferingż

"In Dade County, business is down 40%."

Vultures circling

But even in the toughest of times there are some people that prosper.

At the moment that means people like Peter Zalewski, the owner of Condo Vultures, a real estate company in Bal Harbour in Florida that specialises in buying property from people who are desperate to sell.

And he is pretty blunt about what he does.

"We find the most vulnerable of the sellers and we go in there and try and steal the property from them legally and ethically," he says.

"We recently bought a property that was $2.5m (£1.25m) at the height of the market for $800,000."

Mr Zalewski uses some pretty hard tactics, pitching one seller against another to force down the price.

He targets those who have already cut their sale price by 10% and offers them even less on the grounds that they must be desperate to sell. He tells them he can do that because there are five years worth of unsold properties on the Miami market at the moment.

Fewer treats

The slump in prices and the number of new developments means jobs are hard to come by in construction.

House for sale in Miami, Florida
I think we will be working this out for the rest of 2008 and the first half of 2009.
Dr Tony Villamil, former US under secretary of commerce.

Many building workers are looking for work elsewhere, but even that is becoming increasingly difficult.

Jobs in manufacturing, for example, are not going to be any easier to find, according to one clothing producer.

Capital Clothing specialises in making child-sized police and firefighter uniforms for birthday parties and tot-sized gamekeeper outfits for sale in the local zoo.

The trouble is, that while in a recession real firefighters and zookeepers still need uniforms, parents are taking their children out for treats far less often.

"It's slow at the moment," production manager Simon Behar says.

"People aren't buying like they used to even though there is a big discount in all the stores. People only have money for food, our production is down 25%".

Empty sites

That is bad news for America's huge retail sector.

Many of the shopping centres in Miami look busy enough, but there are a surprisingly large number of empty sites in amongst all the big stores.

The Falls mall is targeted at the wealthy middle classes, with its massive water feature and branches of Macy's and Bloomingdale's department stores.

In this economic downturn, even the wealthy are feeling the pinch, according to general manager Julie Goldman.

"I think it affects everyone," she says. "People who have means made some investments that looked good at the time and then we all know the market changed and surprised everyone."

When even the wealthy of Miami are feeling the pinch you know that the American economy must be really suffering.

It all adds up to a real recession, with falling demand across the economy, lack of investment, job losses and real pain for many people.

Pulling back

And it isn't going to end soon, Miami-based economic consultant Dr Tony Villamil believes.

"Consumers make up two thirds of spending in the US and they have pulled back," Dr Villamil, the former under secretary of commerce for economic affairs says.

"As a result we are seeing a recession.

"I think we will be working this out for the rest of 2008 and the first half of 2009."

Although this downturn may have started as a credit crunch and a mortgage crisis, it is now hitting Americans where it really hurts.

Jobs are going in sectors across the economy, output is falling and the American love affair with the shopping mall is undergoing a trial separation. There will be some tough times ahead for the American economy.

You can hear Jonty Bloom's full report on the state of the US economy on Monday, 21 April, on BBC Radio 4's The World Tonight at 2200. On Tuesday night, you can hear his report on the US healthcare system.

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