Another Housing Bubble?

By: Dr. Lynn Reaser
With housing prices rising at a double-digit pace, such as in San Diego, along with multiple bids, the housing market is starting to look a little frothy.  Are we headed for another bubble?

For now, the housing market is still in its early stages of recovery.  A slowly healing job market, a dramatic improvement in affordability due to lower home prices and interest rates, and a shift in the economics toward ownership versus renting have boosted demand.  Meanwhile, inventories of homes for sale are being constrained by the reluctance of homeowners to put their homes on the market along with a still low level of new homebuilding.

Another bubble could certainly develop within a few years, particularly if the Federal Reserve is too slow in withdrawing its aggressive easing and in raising interest rates.

Although we usually say, “never again”, housing will probably always be vulnerable to cycles, especially in California.

Image Credit: http://www.sdhomedatabase.com/home/

Work Which Expresses Our Faith

By: Randy Ataide

One of the unique things about our work at the FBEI is that we have such a diversity of projects to tackle, relationships to build, and deadlines to meet. Over the past years, we have tackled a dizzying array of tasks, some small, some big but nearly all interesting. We are grateful to the many clients, supporters, advocates, partners and stakeholders who have assisted us in this work.

On Tuesday May 28th, at the Jacobs and Cushman San Diego Food Bank, we had the privilege of presenting the original research report San Diego’s Food Bank Population: Profile, Analysis, and Solutions. Original field research done by PLNU undergraduate and MBA students, ably led by FBEI Manager Emily Gallentine and FBEI Business & Economic Research Associate Dieter Mauerman and research assistant Mark Undesser, met with Food Bank clients as they waited in line at their particular distribution site. Thirteen sites were visited and well over 500 clients were talked to in several languages. This work succeeded in providing Chief Economist Lynn Reaser the necessary data to “put a face on hunger.”

The work of the San Diego Food Bank is mind boggling. At a 152 regional distribution sites, in 2012 they distributed nearly 18,000,000 pounds of food representing approximately 14,000 meals! They serve about 350,000 San Diegans per month and the study has unequivocally demonstrated that those with hunger in our midst are seniors, children, military families, and often single or two income households. This means that the issues of underemployment and/or low wages are primary drivers of hunger in San Diego.

Speaking for all of us at the FBEI, we are hard pressed to think of a more important issue than one of hunger among the citizens in our community. This has not just been an economic project but one of high personal and professional interest for all who worked on the study. And this interest furthers some of the core values of PLNU, namely:

The stewardship of resources – We are caretakers of all that has been entrusted to the University (people, facilities, money, and knowledge). We are to use these resources in a way that reflects the purposes of God and protects the goodness of God’s creation.

Service as an expression of faith – We are stewards, not owners, of our time, talent, and selves. Part of our call as Christians is to serve the world, working to better the condition of humankind both locally and globally.

This project has been an expression of our own faith at the FBEI, and I think shows how PLNU’s faculty, staff, students and alums are an absolutely unique and indispensable resource for our community. We invite you each to take the time to read the study and to also consider getting involved in supporting the Food Bank or any other group or organization that will help to feed our community. Let’s make San Diego an even greater place for all!

To read the complete study please click here.

San Diego Exports—A Potential to Be Realized

By: Dr. Lynn Reaser

President Obama set a goal in his State of the Union speech in early 2010 to double U.S. exports in five years.  Although U.S. exports have displayed considerable strength, San Diego has lagged behind.  A recent study conducted by the Brookings Institute severely criticized our region for its shortcomings.

Although San Diego does face constraints from both its seaport and airport facilities, our region holds enormous promise for exports.  San Diego has great potential for exporting agricultural products, manufactured goods, and services in the period ahead.  Mexico’s manufacturing renaissance affords San Diego firms an exemplary opportunity to export various parts and components.  San Diego merchants can also benefit from rising incomes in Mexico and the preference for cross-border shopping. 

Our exports of produce and consumer goods should find receptive markets in the growing Asian economies.  High-tech electronics, medical equipment, pharmaceuticals, sporting goods, and other products hold bright export prospects.  Finally, the strength of our tourism, higher education, software development, and engineering talents can boost San Diego’s important service exports.

Perhaps the biggest road block to realizing our export potential lies in the reluctance of many small and midsize firms to tackle markets away from home.  But those fears should be overcome as exports provide enormous promise for ongoing growth.

Image Credit: http://www.kpbs.org/news/2013/may/13/san-diego-could-be-exporting-more-brookings-instit/

FBEI Commencement Farewell: Part 2 – A Landmark for a New Chapter

By Dr. Lynn Reaser

May 4, Graduation Day at PLNU, of 2013 will forever be burnished in my mind as a glorious day but also as one of some regret.  I am so proud of Cathy Gallagher on completing her BA, of Dieter Mauerman with his MBA, the 60 MBAS, James Garcia, and the others earning their degrees.

I had anxiously anticipated being part of the academic procession and hugging all of my students and friends on that wonderful day.  But, alas, God had other plans and I remained in the hospital until late that day.  Please know, however, that my heart and spirit were with all of the students that day and I pictured them vividly in my mind.

It has been only a short while that I have been teaching an MBA class at PLNU but it has been such a joy to see students embrace the power of economics and how it provides a prism to help view the world.  I treasure my students and my colleagues as dear friends and hope those friendships will continue throughout our lives.

And so, although May  4, 2013, was a bittersweet day for me, much more importantly, it was a landmark for our students as they begin new chapters in their lives.  I am so very proud of all of them and only offer whatever I can do to support them and their followers in the future.

Image Credit: 2013 PLNU Commencement by Marcus Emerson

Taxes on Internet Transactions–A Loophole We Should Lose?

By: Dr. Lynn Reaser

The Senate has moved to require that local sales taxes be levied on internet transactions.  Is this a good idea?

The answer is “yes”.  First, it represents good fiscal policy by broadening the tax base.  In California, for example, the state is dependent on personal income taxes for about 70% of its revenue.  Personal income taxes are subject to wide cyclical swings.  Second, it recognizes the major shifts in technology and consumer tastes to purchasing over the Internet.  Third, it levels the playing field and reduces the tax bias currently directed against brick and mortar stores.

Spending constraint remains vital but should not stand in the way of making the tax code more fair and rational.

Photo from: crimeprevention.rutgers.edu

Gold Prices Plummet—Cause for Alarm?

 By: Dr. Lynn Reaser

Gold prices have suddenly plunged by 30% from the high reached in September.  What does this mean and should we be alarmed?

Gold prices are subject to violent price swings because of the influence of commodity traders and hedge funds.  Some of the recent decline reflects concern that China’s economy might slow abruptly.  While the Chinese economy is unlikely to grow at the double-digit pace of recent years, substantial growth of around 8% per year is still likely.  Some of the drop in gold prices also reflects a lessening of concerns about U.S. and global inflation.  Hopefully, the Federal Reserve and other monetary authorities will be able to maintain that trust.

Gold is often sought as a refuge driven by fear.  We should be more concerned if gold prices were skyrocketing.

Image Credit: http://spectrum.ieee.org/nanoclast/biomedical/devices/gold-nanoparticles-offer-nontoxic-treatment-for-eradicating-lymphoma

A Dumb Idea

by: Dr. Lynn Reaser

As Congress and the President struggle to find ways to reduce the deficit, the General Accounting Office (GAO) has proposed that replacing paper dollar bills with coins would save the government $4.4 billion over thirty years.  While an average savings of $147 million is tiny relative to budget deficits that have been running $1.0 trillion or more annually, perhaps any savings should be investigated.

Unfortunately, this idea should be rejected quickly.  Consumers and businesses have shunned the dollar coin in the past.  Currently, 1.4 billion of them are stored in Federal Reserve Bank vaults, which is enough to satisfy commercial demands for the next 40 years.

Dollar coins are more expensive to produce than dollar bills, with each costing less than $1.00.  The alleged “savings” accrue because the government would book as a “profit” the difference between the face value of the current dollar bill and the coin’s production cost.  This is a curious way to book budget savings.  A better way to reduce costs would be to encourage the growth of electronic exchange.

Bill vs. Coin. 2012. Picking PodcastsWeb. 29 Jan 2013.

Any Hope for Workers in 2013?

By: Dr. Lynn Reaser

While many employees are grateful just to have a job, some are frustrated that the days of sizable raises seem to have disappeared.  Many workers may feel that they are “treading water”.  What is likely to happen on the wage front in the year ahead?

Most private sector workers can expect about a 2.0% wage increase in 2013, a slightly faster rise than in 2012.  Professionals in high demand, such as software engineers, will command considerably larger Increases.  In contrast, budget pressures will limit pay raises in the public sector.

A continued high level of unemployment and companies’ need to control costs will constrain wage increases for at least another year.  Higher taxes, health care costs, and inflation will offset pay raises for many.

Yet, many organizations will try to reward their high performers so that 2013 should still be a year to do your best.

“Man on Tightrope”.2011.goodriskgovernancepay.January 30,2013

Election Over—Now What?

By: Dr. Lynn Reaser

While votes in some parts of the country are still being counted, the overall outcome is clear.  The Democrats still control the White House and the Senate, while Republicans are in charge in the House.
The economy remains the number one concern of Americans.  What is the most important action that must now be taken?

Resolve our debt crisis
Americans and financial markets demand that the U.S. finally put its financial house in order.  This does not need to be done over night, but a credible plan is critical.  That plan must include:  (1) Tax reform to broaden the tax base and remove inequities, distortions, and inefficiencies; (2) Entitlement reform to rein in the future growth of spending, especially for Medicare and Medicaid; (3) Rules to force Congress to pass a budget on time each year.

The U.S. economy is healing, with an upturn in housing that is likely to help drive better growth in 2013.  What business and consumers need is greater certainty that our government is working.

Obama.2012.US News. January 30,2013

The Perspective of Voters: Better or Worse?

By: Dr. Lynn Reaser

As Election Day approaches, many believe the outcome may hinge on whether voters believe they are better or worse off than four years ago.

The overall economy and financial markets have healed significantly since Election Day 2008 following a near meltdown of global credit markets.  GDP growth has turned from negative to positive, and the real estate market has recovered from its depths.  Key determinants of wealth, including stock prices and home values, have also climbed from their lows.  October’s national jobs report was also better than expected. 

Yet, many Americans feel the recovery has left them behind.  Indeed, many of the indicators that matter to most individuals have worsened.  In San Diego, 40,000 fewer people are working than four years ago and the jobless rate has increased by a third.  Household incomes are down and the cost of some of the most important items to many consumers–gasoline, health care, and education–has soared. 

The more important question for voters than how the economy has fared over the past four years is how they will be four years from now.  Voters will decide on Tuesday which candidate can best achieve the better outcome.  That decision will be shaped by the electorate’s view on whether the economy will perform better with a larger or smaller role of government.

“One Way”.2010.thesalesblog.January 30,2013