Perspective on Real Estate

January 8, 2003

January 15, 2003

February 5, 2003


Prognostications and puzzles by pundits, politicizing

Tis the season for forecasts and conferences, which bring forecasters together to unload unsure minds. Between the uncertainties of war, Venezuelan oil, water cutoffs, the proposed tax cuts and the economy, how could mere mortals come to logical conclusions? The objectivity of media makes this worse as they attempt to report all sides: What the devil feels, what the hypocrites do and what the "experts" forecast.

The builders trade organization forecasts a slight drop in both new home starts and sales this year, though both would remain very high. National unemployment held at 6 percent last month. Some 273,000 people dropped out of the labor force, usually because they were discouraged about prospects. There was a drop in jobs of 104,000, including the continuing hemorrhaging of manufacturing jobs, losing 65,000 more (592,000 for the entire year).

November job reports showed that the state was about the same (not seasonally adjusted) with San Diego growing by some 22,400 jobs (we continue to do comparatively well but with far less annual new jobs); Our region is suffering an erosion in occupancies and office space leased; but with a torrid home-sale market.

San Diego is a powerful place that has one key drawback: the cost of rental and for-sale housing. This is a real impediment standing in the way of more rapid real estate demand. Developers of very large commercial projects are taking more time to proceed with construction, waiting for a more foreseeable deeper recovery.

The "Inland Empire" was more robust with 25,700 new jobs. It continues to be an impressive economic area in which more companies are locating and with solid ratios in supply-demand of office space. This is a logistically powerful geography, which I've been touting for many years. It was once known only for cheap land, but is much more mature with solid growth prospects the balance of this decade.

Orange County has some growing problems with expanding vacancies in its office sector. It has been a very powerful economic unit simply suffering the residue of overbuilding, recession and poor management. Many observers have postponed their 2003 optimism to the following year. Distance always brings with it a feeling of more comfort in making projections even though there is less clarity one of the idiosyncrasies of "experts". Most recent trends show a slowing job growth, though logistically it is still impressive, lying between L.A., Inland Empire and San Diego counties.

The only other positive growth regions were Bakersfield, Fresno and Stockton/Lodi. I have always projected the growth of "middle-California" because of land availability and rural niceties that more families seek.

The employment situation across the country, and particularly in the West, was a mixed bag.

Colorado lost 35,200 jobs; Florida gained 43,400 new jobs (low-cost land and homes); Phoenix was up slightly by 5,700 jobs; Atlanta lost 30,000 jobs; Nevada kept growing by 29,000 jobs with 24,900 in Las Vegas alone, a far cry from past years, but still growing and affordable and unique; Montana expanded by 9,000 jobs; New Mexico climbed by 7,400 jobs; Oregon grew slightly though Portland lost 7,100 jobs; Texas lost 40,600 jobs with key ones in Dallas, Ft. Worth, though Houston managed to grow a little; Salt Lake City lost 13,000 jobs and Seattle/Bellevue/Everett fell by 35,300, continuing their trend.

I am much more concerned with the complete politicizing of the economy, with one party wishing to bring Ronald Reagan's policies back and the other seeking weakness, which would return it to power. We are caught in the middle, puzzling over the deeply differing columnists' interpretations. It has enhanced my pessimism concerning growth prospects for this year and the expanding -- if not exploding debt/deficit -- which is enveloping us. The political hacks do not know or care as long as their finger can point in the opposite direction.

Goodkin has been a business ethicist and housing analyst since 1956. He may be reached at sanford.goodkin@sddt.com.


January 8, 2003

January 15, 2003

February 5, 2003