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Roundtable Panelists Offer Mixed Bag on Economic Outlook for Central Coast in 2012

One expert predicts the housing market has yet to hit bottom, while another says commercial real estate is on the verge of recovery

The Santa Barbara Executive Roundtable hosted its monthly panel discussion, titled “Economic Recovery or Downturn on the Central Coast in 2012,” on Thursday morning at the University Club.

Panel members offered their outlook on business for the Central Coast region. Panelists included Prudential Realtor Dan Encell; Mark Schniepp, director and CEO of the Goleta-based California Economic Forecast; Kenneth Hyman, CEO of Partnervest Financial Group; and Jerry Beaver of Pacifica Commercial Real Estate.

During the past three years, the California housing market has seen a 40 percent decrease in the number of transactions and a 30 percent drop in home prices, according to Encell. He said the problems stem from the fact that there aren’t a lot of buyers who are willing to invest, and those who are willing can’t get loans.

“Other parts of the country are coming out of it, we are not,” Encell said. “I think the Western states still have not hit bottom, and most specifically our area hasn’t hit bottom. We probably won’t even next year.”

He said the silver lining is the affordability — it’s the best in the 23 years Encell has been selling real estate — which translates to better recruiting.

Schniepp said the housing market and overall recovery will continue to be slow until job creation returns, and that although it has been minimal, there has been positive job growth in the past 19 months.

According to Schniepp, other positive signs in Santa Barbara are in private sector employment, hotel occupancy rates that are back to pre-recession levels, professional services job growth, office sector growth, apartment vacancy decreases and lower rents.

“The problem is the unemployment rate is extraordinarily high, and that’s what zaps confidence so much,” said Schniepp, who expects most of the job market recovery in 2013. “But we don’t predict another recession.”

In terms of commercial real estate, State Street rents are down and vacancies are filling up, but deals are taking longer and there is more corporate scrutiny and an underlying sense of unease, Beaver said.

“I believe this down market is at a turn,” he said. “I believe by this time next year, unless Italy files bankruptcy, we’re going to have a real upturn in vacancies.”

But he said that if demand picks up, rents will continue to rise because of the limited supply.

“The problem that drives Santa Barbara value is the difficulty of getting things built,” Beaver said. “I think it’s a serious problem. There’s very little vacant land today.”

Noozhawk business writer Alex Kacik can be reached at .(JavaScript must be enabled to view this email address). Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.

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