• Printer friendly
• E-mail to a friend
• 0 comment(s)
• Recommend

  ( 0 )

• 

Victor Maccharoli - Real estate economist Kirk Lesh speaks at the University of California Santa Barbara Economic Forecast Project Thursday at the Mosher Alumni House.

Cube Ad

UCSB economist gives grim forecast

By COLBY FRAZIER — Jan. 16, 2009

Economists for the UC Santa Barbara Economic Forecast Project gave a presentation yesterday on the national and state economies, and suffice to say, there was little good news.

“It’s just as bad as it gets,” said Bill Watkins, executive director of the Economic Forecast Project.

Watkins said the drying up of credit, widespread housing crisis, colossal banking failures and, when it’s all said and done, more than a trillion in federal bailouts, made last September “the most fascinating month, I hope, in my lifetime.”

Watkins said the economic crisis runs so deep, the light at the end of the tunnel is still a long way off.

He said the first quarter of 2009 would probably be one of the worst in history. Watkins also predicted two years of declining economic activity, fueled by decreasing investment in inventory, failing retailers and widespread job losses.

Kirk Lesh, a real estate economist for the Economic Forecast, said he too feels 2009 is going to be rough.

He said it’s likely fewer homes will be built throughout this entire year than were built in the first quarter of 2007.

“It’s going to be an extremely rough market for at least the next 12 months,” he said, adding that the pool of potential buyers has shrunk due to the requirement of more money down on loans and demands for higher credit scores.

But in the long run, Watkins said his might not be such a terrible thing. While he acknowledged it isn’t a popular thing to say, he said, “There are some people that just shouldn’t own a home and when I was 20 I was one of those people.”

He said the national home ownership rate usually hovers around 64 percent.

“When it gets above that we get problems,” he said, noting that prior to the housing meltdown, it climbed to 69 percent.

While things are bad, and possibly getting worse, Watkins, as he has in past forecasts, said Federal Reserve Chairman Ben Bernanke knows so much about the circumstances surrounding the Great Depression, that he won’t allow it to happen again.

So will could the U.S. slip into a depression anyway?

“I really don’t think so,” Watkins said, adding that in today’s dollars, the U.S. is a far wealthier society than it was then, and even if consumption drops to levels seen in the 1980s, that’s “a lot better than starving.”

Watkins said one of the main triggers of the Great Depression was an effort to block imports. He said everyone else in the world blocked U.S. imports, and “that really caused the problem.”

Barring an effort by the U.S. to do this again, Watkins said he doesn’t see a depression on the horizon.

But when the U.S. economy does rebound, Watkins said the huge amount of debt the country has assumed, which he said is by far the largest with the exception of World War I and World War II, will provoke inflation and prompt tax increases.

“Eventually we gotta pay the piper,” he said.

After his report on the nation, Watkins moved on to discuss the state of California, which he said “isn’t what it used to be.”

There are many reasons for California’s economic woes, but he noted that for 11 of the past 18 years, domestic migration to the state has been negative.

He said the state, first and foremost must solve the structural deficit and make the tough decisions that need to be made. However, Watkins said he’s worried lawmakers in Sacramento have “lost the will power” to do it.

“My concern is that we’re really not that concerned about our economic future,” he said.

Asked about city and county deficits, Watkins said he wouldn’t be surprised if some municipalities fold.

But at least at these smaller levels, Watkins said he feels officials are trying to work the budget difficulties out.

Watkins did have a bit of advice, but forewarned the audience at the Mosher Alumni House at UCSB, not to take it out on him if they lose money.

He said he’d try to find a place in California that won’t overbuild, and buy real estate.

 “I hope your year’s a lot better than we forecast,” he said.

Comment on this article

Subject:

Body:

Poster:

Enter text seen above: