by Calculated Risk on 10/07/2005 12:24:00 PM

Reuters reports: San Diego economy flat as housing market cools

An index that tracks economic activity in San Diego, California slipped in August from July, weighed down in part by fewer permits issued for building new homes, according to a report issued on Thursday.

San Diego County's housing market is one of the most closely watched in California because home prices, sales and building activity there had increased in advance of a statewide housing boom.

Many analysts believe California's broad housing market mirrors the San Diego market and expect the state's torrid market is poised to cool, with home prices that have more than doubled since late 2001 flattening and home building and sales slowing as they have in San Diego in recent months.

San Diego's homes market is "correcting," said Alan Gin, the University of San Diego professor who wrote the index report.

"It's going to take longer to sell houses and the number of sales overall will slow," said Gin, noting the university' economic index for San Diego County fell 0.1 percent in August from July, reversing an 0.1 percent rise in July from June.

The index has been essentially flat in recent months, pointing to "continued modest growth through the end of the year and into the first half of 2006" for the local economy, according to Gin.

The San Diego economy might be showing the early effects of a slowing housing market. If San Diego follows the UK experience, the next step will be less equity extraction and lower retail sales, followed by lost jobs in the construction and retail fields.