The London Group

Overall State of the Economy

Updated January 2007

Overall, San Diego's local economy is still healthy. If anything, there is more certainty going into 2007 compared to the start of 2006. One year ago we knew the residential market was peaking and interest rates were on the rise, the question was, how high will the Fed go? Most of the inflationary pressures came from the rapid appreciation in the housing market and oil, these factors have now calmed and there does not appear to be any significant worries of rising inflation. The Fed has left interest rates unchanged for several meetings now, and the economy is growing it's GDP at an annual rate of 3.3%.

San Diego's employment rate is 3.9%, compared to the U.S. statistic of 4.2%, and added 19,500 new jobs in 2006, which is in the same realm as 2005.

On the residential side, we are seeing a market that is figuring itself out. Buyers are less enthusiastic and sellers are in denial. The buyer pool has been reduced to those who absolutely need to buy. And sellers who may be in denial will ultimately decide to take their home off the market and wait. There will inevitably be pockets of decline in the coming year, but overall, it's likely to be a stagnant year.

On the commercial side, investment capital is still hungry for San Diego's best properties. While smaller investors and funds are beginning to turn to other markets for opportunity, large institutions (pensions, REITs, insurance companies) that are highly capitalized see the current lending environment as an opportunity to purchase high quality commercial product for the long-term.

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Overall State of the Economy

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The London Group Realty Advisors, Inc. tracks the San Diego real estate market through the availability and cooperation of key sources, including First American Real Estate Solutions, CoStar and Innovest. Please contact us or any of these firms directly for more detailed information.