San Diego County economy to grow slowly, panel predicts

By: BRADLEY J. FIKES - Staff Writer | Friday, January 13, 2006 10:09 PM PST ∞

SAN DIEGO ---- Slow growth ahead. That's the three-word summary of the outlook for 2006, according to panelists at the San Diego Economic Roundtable on Friday.

Although the panelists repeatedly said the outlook for this year is much the same as 2005, there were some significant differences. The biggest is that there's less talk of a bursting housing bubble and more concern about the increasing cost of residential and commercial construction.

Home builders, construction companies and local governments are caught in the squeeze. Construction materials cost more because of increased demand for them from China and other construction projects in California, the panelists said. Home builders can't just raise prices, because demand and therefore sales prices are moderating.

The local housing market is entering a temporary state of "burnout" because of high prices, said panelist Gary London, president of London Group Realty Advisors. With demand slackening and the supply ample for the time being, London predicted that housing prices would fall 5 percent this year.

Other panelists, while agreeing that the housing market is decelerating, said prices would increase by about 5 percent. One of those, Marney Cox, chief economist of the San Diego Association of Governments, said the difference in projections between London and the other panelists was relatively minor, because both amounted to relatively stable prices after years of heated growth.

What's not stable is the cost of public works projects, which Cox said is being strained by "unprecedented price increases in construction materials. Historically, they've been going up about 3 percent per year. Now we're at 7.5 percent on an average annual basis.

"Locally, we're running out of areas where we mine our own materials that go into asphalt," Cox said. "It's not so much that the materials aren't available, the places where we actually mine them are going out of business. So we're working with the local governments to extend the life of those aggregate/composite locations."

There are three major sources of these materials in the county, Cox said: Mission Valley, Escondido and San Marcos.

Cynthia Haas, Carlsbad's manager of economic development and real estate, who was in the audience of about 350, said her city has seen the evidence of rising construction costs.

"On public works contracts especially, the bids are coming in higher than we expected," Haas said.

But on the positive side, Cox and other panelists said unemployment is likely to edge lower, as San Diego County's economy remains relatively strong. That's what the roundtable predicted a year ago, and that picture was borne out by a slowly falling unemployment rate during 2005.

The event was sponsored by the San Diego Workforce Partnership, the San Diego County Board of Supervisors and the San Diego Union-Tribune. It was held at the County Administration Center in downtown San Diego.

Previous Stories

2005 Economic Roundtable forecast -- http://www.nctimes.com/articles/2005/01/08/business/news/14_32_331_7_05.txt

2004 Economic Roundtable forecast -- http://www.nctimes.com/articles/2004/01/09/business/news/1_9_0419_56_18.txt

Related Links

San Diego Association of Governments


http://www.sandag.com

Contact staff writer Bradley J. Fikes at (760) 739-6641 or bfikes@nctimes.com.

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