Builders say fees and restrictive laws are driving up home prices, but that isn’t stopping buyers. (alandeckerphoto.com)

Every year for the past quarter century, the sales and marketing council of the San Diego Building Industry Association has sponsored the Bull and Bear forum. Crowds in the hundreds have shown up annually to hear the Bear (always Don Bauder) and the Bull (me) debate on the future of San Diego.

Now we have a problem. Bauder has retired from the San Diego Union-Tribune and now makes his home in Colorado. Try as the council might, it has been unable to find another dyed-in-the-wool economic pessimist to replace him. That says a lot for San Diego and its economy. Even though Bauder was occasionally on target, there is truth to the saying that even a broken clock is correct twice a day.

Admittedly, an economic path that twists continuously upward is somewhat frightening. In the past century, there doesn’t seem to be a single 10-year continuity of positive growth. Typically, a decade has three years of a bad economy, four years of neutral and three years of good. Certainly the 1970s, 1980s and 1990s followed that pattern. Usually, the bad years are in the early part of a decade and the good years in the latter half.

Now we sit here staring at the first decade of the century and look to the stars for guidance. Not only did the last decade end with a raucous local economy, but this one in San Diego started with four smashingly good years. (Yes, 2000 is in this decade).

Better yet, 2004 is stacking up to be a repeat of the first four years and perhaps even better. We sense that our job growth is picking up once again; that interest rates will remain at a sensible level; inflation will be low; consumer confidence will be relatively high; and the supply of housing in all price ranges will be acceptable.

Why then should 2004 not be a winner? I remain a bull and here’s why: Job growth will be better than in the past two years, perhaps gaining as many as 25,000 jobs. Virtually all job gains will come as a result of expanding existing businesses rather than new firms coming to town. All seven of our basic industries will prosper, particularly the military and tourism. Manufacturing and high-tech employment will be stable.

The housing market will be buoyant, moving forward in all segments:

• When it comes to single-family housing, it is highly likely that our builders will complete 9,000 to 10,000 new homes, albeit at outrageous prices averaging close to $600,000. In addition, our builders will produce another 4,000 homes in South Riverside County for the benefit of persons who work here and suffer the Interstate 15 drudgery.
  
  
• The resale market for the fifth consecutive year will generate more than 40,000 transactions. Is it any wonder that most people who move here apply for a driver’s license and a real estate license simultaneously?
  
  
• Condominiums are once again in vogue as the national builders decide to move forward with thousands of low-density triplexes and four-plexes priced within the reach of the entry-level market — well, almost in reach. Most of these single-family alternatives will be in the far north and far south parts of San Diego County, but at least they are in the county.
  
  
• Condominium conversions will add 3,000 for-sale units to the market in 2004, offering real first-time buying opportunities for San Diegans. The profile of the conversion buyers tells the tale: young singles and couples, single parents and minorities. The typical conversion sells for $100,000 less than a new condominium. The smart cities welcome them with open arms, recognizing that ownership tenure brings stability to a neighborhood. The typical owner in the county moves every eight years. The typical renter every eight months. Ask the teachers.
  
  
• New apartments will number 2,000 to 3,000. The market is not strong enough to warrant production beyond that level. Overall vacancy rates in the county remain in the 4 percent to 5 percent range and that means a demand/supply balance. Rental owners will tell you that too many tenants are moving out to buy homes. Bad for rental owners. Great for San Diego.

No analysis of San Diego’s residential outlook would be complete without a word about Downtown, my favorite haunt. Big problem! Not enough condominiums in 2004. In each of the past three years, Downtown has averaged 1,000 new condominium sales. Looming in 2004, however, a severe shortage of new product. It is highly likely that the only two condominiums that can offer occupancy in 2004 will be Acquavista and Mills at Cortez Hill, both originally scheduled to be apartments but converted in mid-stream. Those two together have 500 units, but that’s not enough to satisfy the market. Worse, the projects scheduled to come on line in 2005 are nearing sellout. There does seem to be an adequate supply in 2006 but that’s a long time away.

Apartments Downtown are being absorbed at a reasonable pace and a few new units will be delivered in 2004. OliverMcMillan’s Lofts at 777 Sixth Ave., Intracorp’s Porte d’Italia, Barone-Galasso’s Palermo and Estrada are the only ones we see on the horizon. No doubt they will rent up at a brisk pace.

In terms of rising prices, they will. Prices may rise by no more than 10 percent this year, but there’s a fair chance that they could rise by more than 15 percent. It is economically unhealthy to have rates of growth five or six times the rate of inflation, but it is purely a function of supply and demand. When prices outrun income, they will slow down.

The economy and the housing market will be in balance in 2004. I should say almost in balance because housing will be in short supply. In the meantime I’ll keep looking for a bear to debate. Maybe Bauder will move back.

Alan N. Nevin is director of economic research with MarketPointe Realty Advisors (marketpointe.com), a consultancy providing real estate and demographic statistics, feasibility studies and litigation support to the California land use industry and legal professions. Nevin can be reached by e-mail at anevin@sandiegometro.com.