Perspective on Real Estate


May 1, 2002

May 8, 2002

Supply and demand still determine pricing

The first quarter's economic numbers were high, just as most projections said they would be. The balance of the year is filled with mixed-up feelings as experts attempt to locate the truth and separate it from fable; it's not simple any more, since the new rule is that there are no rules -- except that the ratio between supply and demand still determines pricing.

The out-of-town projectors inform us that San Diego no longer just benefits from Mother Nature; now we are a legitimate economy with important attributes of quality of life, environmental sensitivity and beauty --recognized by out-of-state investors and other business interests. Our downtown is the melting pot of domestic and foreign developers. Where locals would not tread, out-of-towners discovered gold. Locals still ask, "How deep is that market, how long can it last?"

The strangers ask, "Where can I get some more high-rise land?" Pricing keeps reaching for new heights, seeming to defy gravity. But gravity doesn't rule pricing, supply vs. demand does.

The Goodkin Rule is: When the velocity of the marketplace is much greater than the velocity of government actions, supply keeps falling behind. There needs to be local government fast-tracking so that at least one department accelerates getting more supply to meet steady demand. That department concentrates full time on action. It is more important than an ethics commission, for it is the essence of ethical behavior to care about all neighborhoods, not just those that have more wealth or political power.

Another fact is that our population grew by some 40,000 people last year, most of which were natural births over deaths, within the reported reality of more people moving away. Immigration is still impressive and almost peculiar; peculiar because I wonder where they live or will live?

One answer is that there are more truly wealthy people than ever before, including older families. Yet the outward migration has reached significant numbers because so many have found that they can't afford any decent housing, along with a high cost of living here. That makes it peculiar because when an economy has been expanding -- theoretically offering job opportunities -- more people are attracted in. While that remains essentially true, even people with jobs move away when too much of their income is taken by their rental or purchase.

Is help on the way? Well, the issue has attracted more attention and visibility. Even the term "crisis" has been affixed to the situation, which it deserves. This will tend to focus more attention on the severity of the shortages. Whether actual action and creative use of land productivity also accelerate is another matter. That is where the crisis is, where the slow-plod of meeting after meeting takes place.

Crises are the result of political leaders who do not feel that they can be defeated at the next election. They are the ultimate arrogance of power. If action is postponed as squeaky wheels are assuaged, then costs are added. Inaction is costly. Psychologically, inaction beats up on the deprived while satisfying the selfish. "I got mine" is the result of ethical voids and political inaction. Nothing makes or kills a real estate market more than timing. It is much more important than location, location, location. The timing for land and housing trust funds and partnerships, between the deprived and the producers, is here and now. Get on with it!

Goodkin has been a business ethicist and housing analyst since 1956. He may be reached at


May 1, 2002

May 8, 2002