The national, state and local economies are poised for strong growth next year, with San Diego County expected to beat both the state and national averages for job growth, Point Loma Nazarene University's Dr. Lynn Reaser said in her annual economic forecast on Friday.
Reaser's rosy projections were echoed by federal jobs data released just hours before she unveiled her forecast, showing that the nation added a robust 321,000 jobs in November, accompanied by a slight but significant rise in wages.
"People are finally beginning to believe the recession is over and that it's not just something that economists are saying," Reaser said, speaking to several hundred business executives, academics and students at the Hyatt Regency in La Jolla.
Reaser, who is chief economist for PLNU's Fermanian Business & Economic Institute, projected that San Diego will add 35,000 jobs next year, slightly above the 34,000 she estimates will be added this year. Such job growth would push the local unemployment rate down to 5.4 percent by December 2015, compared to 5.5 percent for the nation and 6.7 percent for the state.
Other predictions included:
• Home prices: Reaser predicted a modest 4 percent rise in local home prices, or roughly the same as this year's rise. Although that might disappoint some homeowners or investors, who saw several years of double-digit growth as the economy rebounded from the Great Recession, Reaser said the moderation in price growth will help make the housing market's recovery more sustainable, allowing homes to stay more affordable for would-be buyers.
"First-time buyers have been the missing link in this recovery, as student debt burdens, lackluster wage growth and tight lending standards have combined with some cultural shift toward renting over purchasing a home," she wrote in a printed forecast distributed during the speech.
• Home construction: Residential construction permits will jump 10 percent next year, more by multifamily units than single homes, Reaser said. She predicted that housing permits will jump from about 8,700 this year to 9,600 in 2015, but roughly two-thirds of them will be for condos, apartments and other multifamily units.
• Commercial construction: Although commercial real estate has been lagging the residential rebound, Reaser said space is now getting tight enough to lead to more building activities. She projected vacancy rates in office buildings will drop from 11.3 percent today to 10.7 percent next year, with industrial space sliding from 7.2 percent to 6.9 percent.
But the real tightness is in the retail market. San Diego's 4.0 percent vacancy rate for retail space is third-lowest in the state after Silicon Valley at 3.5 percent and San Francisco at 3.2 percent.
Based on square footage, Reaser said she expects retail construction to grow 20 percent next year. And she added that growing demand for production and warehousing space from local craft brewers could fuel further tightness in industrial space, prompting more construction.
• Interest rates: With the economy rebounding and no sign of major inflation on the horizon, Reaser predicted the Federal Reserve will start slowly raising interest rates next summer, rising from the current rate of about 0 to 0.25 percent to as much as 1 percent by December 2015. That will trigger rises in other interest rates as well, with 30-year fixed mortgages projected to rise from the current level of around 4 percent to at least 4.5 percent by year-end.
Those interest rates are still near rock-bottom lows by historical standards, but they could lead consumers to speed up any big-ticket purchases in order to avoid future rate hikes.
Reaser's upbeat view on the economy in 2015 came on the heels of data showing that the nation, state and county performed much better in 2014 than she forecast last year.
She did well predicting low inflation rates, foreign economic growth and a rising dollar, including an exact match on her prediction of a 1.7 percent rise in consumer prices, but the national, state and local economies strongly outperformed her estimates on job growth, unemployment, stock prices and the bond market, while growth in home prices and the gross domestic product didn't match her rosier predictions.
In her handout, Reaser stressed that the broad overall theme of last year's projections — that the economic expansion would pick up the pace in 2014 — did prove to be true. She added that "despite the uncertainties surrounding all projections," it's important for consumers, businesses, individuals and agencies to have a baseline estimate that can help guide their planning.
Full list of predictions: Investment predictions for 2015
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May 4, 2015 -- George Chamberlin and Dr. Lynn Reaser, chief economist for Point Loma Nazarene University's Fermanian Business & Economic Institute, discuss the university's report on affordable housing.
Dec. 5, 2014 -- George Chamberlin speaks with Dr. Lynn Reaser, chief economist for Point Loma Nazarene University's Fermanian Business & Economic Institute, about how the economy fared in 2014 and what we can all expect to happen in 2015.
Nov. 20 1014 -- George Chamberlin speaks with Dr. Lynn Reaser, chief economist for Point Loma Nazarene University at the Fermanian Business & Economic Institute, and Leslie Kilpatrick, 2014 president of the Greater San Diego Association of Realtors, about recovery in the local real estate market.
Dec. 6, 2013 -- George Chamberlin speaks with Dr. Lynn Reaser, chief economist for Point Loma Nazarene University's Fermanian Business & Economic Institute, about the details of the institute's 2014 economic outlook report.
Sept. 26, 2013 -- George Chamberlin and Dr. Lynn Reaser, chief economist for Point Loma Nazarene University at the Fermanian Business & Economic Institute, talk about the San Diego Military Advisory Council's recent report on the military's economic impact on the San Diego region.