San Diego Recession Watch 2008
Fox6 asked a great question the other day, “Is San Diego Heading Into a Recession?” The network aired a story that started, “Some of the nation’s leading economists say the U-S is already in a recession. So is San Diego also heading in the same direction?” The rest of the story warned that San Diego could be at the national unemployment rate (5%) by the end of the year. Other areas of concern were the rise of foreclosures and fewer homes being built (hurting the construction industry).
The North County Times ran a story last weekend about the sad state of the economy and the hope of keeping a recession at bay (”Consumers cut back, and economists are gloomy“). Regarding consumer spending, the article had this to say:
“Sales of new cars and trucks, which typically account for more consumer spending than any other type of product, almost certainly fell again in 2007. Spending on furniture and other home-related items began falling in late 2006, a trend that one business owner in the industry says appears to have accelerated through the end of last year. Even the Christmas season, normally a bright spot for shopping centers, provided only a dim twinkle, according to an industry report last week.”
The article goes on to blame the decrease in consumer spending on the housing market: “Rising home values allowed San Diego-area homeowners to tap growing home equity from the mid-1990s through 2006 and go on a decade-long shopping spree… Several economic studies have concluded that a $100,000 increase in home value leads to an average increase of about $6,000 in consumer spending…” I would add that it’s not just the cash flow that encourages people to buy less, it’s the mindset that goes along with hearing consistent bad news of the falling market and rise in foreclosures. It’s like birth control for your wallet.
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