Transcript Alan Gin USD PowerPoint

National and Local
Economic Outlook
Alan Gin
Associate Professor of Economics
School of Business Administration
National Economy in a
Severe Recession
U.S. GDP Growth
(2000 - 2009)
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
00
01
02
Source: Bureau of Economic Analysis
03
04
05
06
07
08
09
Change in Employment
2000 - Present
500
400
300
Thousands
200
100
0
-100
-200
-300
-400
-500
-600
-700
-800
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
National Unemployment Rate
2000 - Present
9.0%
8.5%
8.0%
7.5%
7.0%
6.5%
6.0%
5.5%
5.0%
4.5%
4.0%
3.5%
2000
2001
2002
Source: Bureau of Labor Statistics
2003
2004
2005
2006
2007
2008
2009
Falling
housing
prices
Fiscal
problems for
governments
Foreclosures
Problems
with financial
institutions
Tight
credit
markets
Glut in
housing
market
Loss of
real estate
related jobs
Plunge in
stock prices
Weak
housing
demand
Job losses,
economy in
recession
High gas
prices
Slow auto,
retail sales
Imports
Exports
Economic Policy

Stimulus package

Tax cuts and credits

Aid to the poor

Spending on infrastructure and targeted areas

Relief for state governments
Economic Policy

Aid to the housing market

Relief for homeowners in difficulty

Tax credit for first-time homebuyers

More aid to financial institutions to free up
credit – TARP, TALF

Huge deficits, big expansion in national debt
Fed aggressive with interest rates
Interest Rates
Short-Term vs. Long-Term
8
7
6
5
%
4
3
2
1
0
2001
2002
2003
Federal Funds
Source: Economagic
2004
2005
2006
10-Year Treasury
2007
2008
2009
30-Year Mortgage
National Economic Outlook

Continued negative GDP growth through the
first two quarters of 2009

Pickup in housing market and various Federal
actions with stabilize economy in second half
of 2009

Growth still negative for the year as a whole

Slow growth of 1.0% - 1.5% expected in 2010
San Diego Economic Outlook
Index of Leading Economic Indicators
San Diego County, 2006 - 2009
146
144
142
140
138
136
134
132
130
128
126
124
122
120
118
116
114
112
110
108
106
104
102
100
Down 35 of the last 36 Months
J06
J07
Source: Burnham-Moores Center for Real Estate, University of San Diego
J08
J09
Employment Growth
San Diego County (1991 - 2009)
60,000
50,000
40,000
30,000
20,000
10,000
0
(10,000)
(20,000)
(30,000)
(40,000)
1991
1992
1993
Source: Employment Development
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Employment Changes, San Diego County
March 2009 vs. March 2008
Health Care
Professional, Scientific and Technical Services
Government
Total Job Loss = 44,500
Real Estate
Credit Intermediation
Wholesale Trade
Leisure and Hospitality
Manufacturing
Retail Trade
Administrative and Support Services
Construction
-12000
-10000
-8000
-6000
-4000
-2000
0
2000
Unemployment Rate
San Diego County (2001 - Present)
9.5%
9.0%
8.5%
8.0%
7.5%
7.0%
6.5%
6.0%
5.5%
5.0%
4.5%
4.0%
3.5%
3.0%
2001
2002
2003
Source: Employment Development Department
2004
2005
2006
San Diego
2007
2008
2009
United States
Outlook for San Diego

Local economy to remain weak

Job growth negative in 2009, slightly positive in
2010

Unemployment to top 10%

Slow economic activity (retail sales, income growth)

Much depends on various federal actions
Real Estate Market Outlook
Real Estate Market Outlook

Housing market not likely to bottom out until late 2009
at the earliest

Sales picking up with lower prices and low interest rates
Home Sales
Jan/Feb 2008 vs. Jan/Feb 2009
5,000
4,500
+30.4%
4,000
3,500
3,000
2,500
2008
2009
Real Estate Market Outlook

Housing market not likely to bottom out until late 2009
at the earliest

Sales picking up with lower prices and low interest rates

Foreclosures to remain at high levels
Notices of Default and Foreclosures
January - March (2008 vs. 2009)
12000
10000
8000
6000
+13%
4000
2000
0
-16%
Notices of Default
2008
Foreclosures
2009
Real Estate Market Outlook

Housing market not likely to bottom out until late 2009
at the earliest

Sales picking up with lower prices and low interest rates

Foreclosures to remain at high levels

Continued downward pressure on prices
S&P/Case-Shiller Home Price Index
San Diego (2000 - Present)
November 2005
260
240
220
200
180
160
-41.4%
140
120
100
80
2000
2001
Source: Standard & Poor's
2002
2003
2004
2005
2006
2007
2008
2009
Real Estate Market Outlook

Housing market not likely to bottom out until late 2009
at the earliest

Sales picking up with lower prices and low interest rates

Foreclosures to remain at high levels

Continued downward pressure on prices

Supply getting tighter
Residential Units Authorized
San Diego County (1990 - Present)
20000
-24%
15000
10000
5000
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Source: Construction Industry Research Board
Single-Family Units Authorized
San Diego County (1990 - Present)
10000
-42%
8000
6000
4000
2000
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Multiple Family Units Authorized
San Diego County (1990 - Present)
10000
-3%
8000
6000
4000
2000
0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Real Estate Market Outlook


Housing market not likely to bottom out until late 2009
at the earliest

Sales picking up with lower prices and low interest rates

Foreclosures to remain at high levels

Continued downward pressure on prices

Supply getting tighter
Problems in commercial real estate could be the next
trouble area
Office Vacancy Rate
San Diego County (2006 - Present)
18.0%
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
06 Q1
Q2
Q3
Source: Grubb & Ellis Research
Q4
07 Q1
Q2
Q3
Q4
08 Q1
Q2
Q3
Q4
09 Q1
“May you live in
interesting times.”
- Chinese Curse