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E-mail StoryRecession concerns top economic summit
| Wednesday, Mar 26 2008 1:52 PM
Last Updated: Wednesday, Mar 26 2008 2:03 PM
Midway through Wednesday’s Kern County Economic Summit, speaker and California Real Estate Journal Editor Michael Gottlieb took an informal survey of the crowd’s mood.
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“How many think we’re already in a recession?” Gottlieb asked.
A lot of hands shot upward.
The specter of a recession hung over this year’s annual economic event, which drew about 500 attendees from many of Kern’s leading businesses.
“These are the thoughts and fears and concerns that are at the forefront of the minds of everyone in the business community,” emcee Barry Zoeller, a spokesman for Tejon Ranch Co., later said.
Several speakers addressed the prospects of a recession, and weighed in on the uncertainty in the residential real estate sector.
• Cal State Bakersfield economics professor Abbas Grammy said local consumer and business owner confidence both fell during the first three months of 2008.
Business owner confidence was at its lowest point in 10 years.
Rising food and fuel prices, and the state’s budget cuts will negatively effect economic growth, Grammy said.
But high prices for crude petroleum and commodities such as fruit, vegetables, milk and grain will bolster Kern’s economic growth, he predicted.
“Our local economy is less likely to follow the national trend for falling into a recession,” Grammy said.
In one of the summit’s more surprising moments, Grammy also apologized for “incorrect” economic forecasts he delivered last year.
“I did not know the depth of the subprime crisis and the housing market recession,” he said.
For 2008, he is predicting a 5.6 percent decrease in median home values.
“I believe 2008 and 2009 will be difficult years for us,” Grammy said. “But our economic fundamentals are strong enough to take us through these difficult years.”
• The residential housing market has “been bumping along the bottom” for about a year now, said Castle & Cooke Mainland Communities President Bruce Freeman.
“This foreclosure wave will continue throughout this year and a little through 2009,” Freeman said.
He predicted the “vast majority” of large, master planned communities approved in recent years will be delayed for at least three, if not seven, years.
The commercial real estate market is one of the economy’s “good news stories,” Freeman said.
The retail, office space and industrial markets are doing well, and have absorbed some of the displaced employees from the residential side, he said.
Office and industrial real estate markets are particularly strong, he said, with retail demand starting to slow slightly along with the national economy.
“The national tenants in the retail area are getting nervous about the recession,” Freeman said.
But he doubts Bakersfield will feel a recession as strongly as it has in the past.
• The economy is tipping into a short-lived, but “very nasty little recession,” said self-described economic “bear” Christopher Thornberg, a Los Angeles-based economist and principal of Beacon Economics consulting firm.
Thornberg gave the summit’s most dire forecast, predicting California’s home prices might tumble as much as 40 percent.
In the last three months of 2007, .75 percent of homes in Kern County were foreclosed on, he said.
“It’s a total mess,” Thornberg said. “It’s only going to get worse.”
But Kern is hanging onto job growth — and it’s one of the few California counties to do so, he said.
But the shocks that have roiled the financial and housing markets may continue in other sectors.
“The commercial market is due for its own hit,” Thornberg said.
The coming recession will be as bad as that of 1991, he said.
“Play your cards right, survive the downturn,” he told the crowd.
Recessions are a time for businesses to focus on increasing market share, he said.