Saying he expects the strong local economy to weather a war with Iraq, a regional economist encouraged a roomful of Ventura County real estate professionals Wednesday by predicting a continued rise in local housing prices.
Speaking to more than 200 Coldwell Banker employees and clients, Bill Watkins of UC Santa Barbara said an increase in the number of well-paying jobs should help boost median home prices 10%, to nearly $405,000 this year.
The limited pace of construction in 2002 has helped push the average price of a new home in Ventura County to $528,000.
"This is the happiest group of people I've met recently," joked Watkins, executive director of the university's Economic Forecast Project.
"You people are making a small fortune."
The Federal Reserve is hinting it may lower interest rates further, which Watkins believes would fuel inflation and lead to steeper housing prices. "What do you invest in? The biggest house you can afford," he said.
But Watkins warned that nonstop price increases come at a cost. Too many high-priced homes result in increased traffic by employees who can't afford to live near jobs in those areas; a loss of young families earning $35,000 to $75,000 who are priced out of the market, and increased densities as more people are forced to pool resources to pay for housing.
Because living along the Pacific Ocean is a dream for millions, especially those in the East and Midwest trapped indoors by snow, there should never be a shortage of people willing to relocate to Southern California, said Watkins, a former banker and Fed economist.
"Even if things are bad here, as long as the U.S. economy can produce pockets of wealth, those people will move here and you'll do fine," Watkins said.
Watkins revisited several themes he discussed three weeks ago at UC Santa Barbara's annual forecast of the Ventura County economy:
The area's strong economy should continue to outperform the state and nation this year, provided a war in the Middle East doesn't result in a major recession.
Numerous risks -- from a prolonged military conflict to the state's unresolved $35-billion budget shortfall -- could hamper the region's outlook.
But unlike the state's housing recession in the early 1990s, Watkins said a postwar recession would most likely be milder, because interest rates are lower and mortgages are easier to obtain.
Median family income in Ventura County, which grew from $63,100 in 1998 to $74,700 in 2002, is predicted to rise 4.5% this year, to $78,100.
Ventura County's gross regional product -- the value of all goods and services produced locally -- is expected to climb 8.1% this year, to $44.9 billion, and continue to grow at a similar annual rate until it reaches $61.5 billion in 2007.