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via: NCTimes.com/Eric Wolf
San Diego County's economy is poised to rebound, and it will outpace a sluggish national recovery, US Bank CEO Richard Davis said Friday.
The national economy is at "halftime," Davis said. The worst of the recession is past, but it will be five to seven years before jobs and GDP have recovered, Davis said at an annual real estate conference held by the Burnham-Moores Center for Real Estate at University of San Diego. In a post-speech interview, he said San Diego, with its diverse jobs sector and experience with the boom and bust cycle, was ready to start growing again.
"California is already stronger and coming back faster than the rest of the country," Davis said in his interview. "And San Diego is one of the stronger communities in California."
The recession that hit the national economy in 2007 grew out of the financial sector, largely thanks to bad loans and bad securities. Such recessions take far longer to cure than a traditional recession, Davis said. Thus, recovery will be slow.
But he said California was already starting to come back, and San Diego, thanks to its diverse economy of biotech, high tech, and military businesses, is one of the stronger communities in the state. He also said that San Diego has long experience in dealing with booms and busts in the economy, which helps local businesses know what to do in these situations.
He particularly praised the multi-family sector, because it's attracting investment and creating construction jobs. San Diego County is expecting to see 1,991 new apartment units built this year, which is about five times as many as last year, according to MarketPointe Realty Advisers. But he also said low-interest rates have protected the commercial sector from the kind of foreclosure implosion that ruined the housing market.
The housing market has a tough road ahead of it, though, Davis said. Lending standards tightened dramatically after a foreclosure crisis began in 2007. Since then, banks limited their loans to the most qualified candidates. Many real estate agents say standards have tightened too much, and even their most qualified clients can't get loans.
"That's not likely to get better soon," Davis said.
A recent mortgage settlement, plus new rules for dealing with customers who stop making mortgage payments, dramatically raised the risk of mortgage lending, he said. Plus, new rules make it hard for banks to raise interest rates on risky customers. Combined, those rules and risks motivate lenders to only give loans to the least risky customers. He said that the current state of affairs should persist for at least three years, after which he hopes the housing market will have started to grow more consistently, and lending standards can loosen.
He expressed particular concern for housing in the Inland Empire, including Southwest Riverside County. He said high gas costs, and a trend toward apartment renting in big cities, could suppress house values in exurban markets ---- like Temecula and Murrieta.
"We may have to raze a lot of houses," he said. "We may have built a lot of houses in the wrong place."
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