UCLA Anderson Forecast's Outlook for San Diego County: Economic ''Tug-of-War'' to Continue

LOS ANGELES--(BUSINESS WIRE)--In its annual economic forecast for San Diego County released today, the UCLA Anderson Forecast describes the economic “tug-of-war” between job loss in real estate and weak growth everywhere else in the San Diego economy. The report was presented at the UCLA Anderson Forecast San Diego Conference to hundreds of San Diego business attendees.

“Our forecast for the next two years looks for real estate weakness to gain the upper hand in the next two quarters, leading to small losses in non-farm payroll employment, a modest spate of increased unemployment, and very weak growth in incomes and local output”

“Our forecast for the next two years looks for real estate weakness to gain the upper hand in the next two quarters, leading to small losses in non-farm payroll employment, a modest spate of increased unemployment, and very weak growth in incomes and local output,” said Ryan Ratcliff, economist, UCLA Anderson Forecast and Alan Gin associate professor, University of San Diego, both authors of the San Diego Forecast report. “By the end of 2008, we should start to see the light at the end of the tunnel, as real estate job losses taper off and the housing market begins to stabilize.”

Ratcliff and Gin noted that San Diego has experienced bigger declines in real estate related employment than the state as a whole, thanks to a major contraction in construction and a high concentration of mortgage finance jobs. However, above average weakness in real estate has been offset by above average growth in government and tourism employment, leaving overall job growth in San Diego essentially flat since August 2007.

The Forecast argues that the high rates of job growth and home price appreciation in the early parts of the decade were in part due to a substantial influx of US residents moving to San Diego. For several years, new home construction lagged behind this population growth. But just as home construction caught up in 2004, population growth slowed, and this mismatch provided the beginnings of San Diego’s real estate troubles, almost a year ahead of the rest of the state.

The report also notes that the median sales price of an existing home in San Diego has dropped between 8-16% from its peak, depending on which measure is used. The Forecast blames a resale market dominated by distress sales. “In the first quarter of 2008, the number of homes repossessed by lenders actually exceeded the volume of home sales,” the report states.

Ratcliff expects that foreclosures will continue to dominate the market through at least the end of the year. “San Diego’s foreclosure nightmare still has a ways to go, but the change in lending behavior in 2007 suggests that we should see things getting better by the end of the year,” said Ratcliff. There will undoubtedly be an unsettled period even after the foreclosure problem has run its course – it may very well be the middle of 2009 before we see a housing market that starts to look “normal.”

About UCLA Anderson Forecast

UCLA Anderson Forecast is one of the most widely watched and often-cited economic outlooks for California and the nation and was unique in predicting both the seriousness of the early-1990s downturn in California and the strength of the state’s rebound since 1993. More recently, the Forecast was credited as the first major U.S. economic forecasting group to declare the recession of 2001. Visit UCLA Anderson Forecast on the Web at http://uclaforecast.com.

About UCLA Anderson School of Management

UCLA Anderson School of Management, established in 1935, is regarded among the very best business schools in the world. UCLA Anderson faculty are ranked #1 in "intellectual capital" by BusinessWeek and are renowned for their teaching excellence and research in advancing management thinking. Each year, UCLA Anderson provides management education to more than 1,600 students enrolled in MBA, Executive MBA, Fully-Employed MBA and doctoral programs, and to more than 2,000 professional managers through executive education programs. Combining highly selective admissions, varied and innovative learning programs, and a world-wide network of 35,000 alumni, UCLA Anderson develops and prepares global leaders.