Despite a tepid and largely cautionary year for the San Diego economy, fueled by a slowdown in the residential real estate market, 2007 is being anticipated with optimism, according to local industry experts and economists. At the heart of the outlook is the hope that the worst of the housing cool-down has passed and that the national economy won't dip into recession. The discussion was part of an economic roundtable hosted by The Daily Transcript.
The event boasted a panel discussion from some of San Diego's most informed experts. Included were: Kevin Carroll, executive director of AeA; Charles Jolly, president of the San Diego Association of Realtors; Maria Chan of City National Bank; Gary Powers of the San Diego North Chamber of Commerce; Ed Mracek of Willis Allen Real Estate; David Susi, president of RSI Roofing; and Alan Gin, an economist with the University of San Diego. Gin said he sees an overall flattening out of the national economy in 2007, followed by some possible positive action in the second half. He expects the Federal Reserve to cut key interest rates by 0.5 percent to 0.75 percent in 2007 beginning as early as the second quarter. Making money cheaper to borrow could help shore up sagging home sales and stave off a potential downturn in the national economy. "Things will be tough -- in terms of the housing market -- in the first half of the year, with a possible pickup in the second part of the year," said Gin, adding that he anticipates 2.5 percent growth in U.S. gross domestic product in 2007. San Diego Association of Realtors' Jolly said he sees 2006 as a relatively "normal" year compared to what he's seen in over 30 years working in San Diego, and expects 2007 to be similar. Real estate isn't headed for a drastic correction, he said, because commercial real estate isn't "dead." "In a downturn, residential is the last sector to go and the first to come back when the recession is over. I haven't seen that or heard that," said Jolly. Willis Allen's Mracek sees the residential slowdown as a short-lived cycle fueled by the retreat from the market of speculators. "Once that (housing) speculating cycles out, the builders have pulled back, the inventory will get gobbled up and things will come back online and we'll be moving again." The cooling real estate market has triggered some downsizing in the local real estate services market and has contributed to a slowdown in construction business and employment, Gin said. But RSI Roofing's Susi said his business has been going strong at 10 percent growth for 13 consecutive years and he doesn't expect a significant divergence from that trajectory. He said a slowdown would actually be good news in order for his business to catch a breather. Manufacturers and distributors are expecting to have a pretty good year, according to City National Bank's Chan. "I see a lot of optimistic sentiment across our client base," she said. "I see a lot more companies increasing either the import or the export side of their businesses." The San Diego North Chamber of Commerce's Gary Powers said he sees growth in the health care sector, specifically in North County, shoring up any employment losses caused by the housing slowdown. He said he also sees construction buoyed by the growth in the remodeling sector.