Wouldn’t you think that California would be devastated by the housing crash? After all, California has had some of the nation’s most unaffordable housing, along with one of the heaviest concentrations of subprime mortgages. Housing sales and construction have fallen through the floor.
Yet the overall economy is rolling along just fine, dude. “California Is Rolling With the Punches” is the title of an analysis released today by Mark Vitner and Adam York, economists at Wachovia Corp., the big North Carolina-based banking company. “We estimate that California’s real GDP grew at a 2.8% annual rate during the third quarter and rose 3.7% over the past year,” they write.
Remarkable, considering that Wachovia is expecting permits for housing construction to fall 28% this year to 111,000, and sales of existing homes to fall 20% to 370,000.
The explanation, in a nutshell:
“Several other areas, including health care, education, leisure and hospitality, and wholesale trade and distribution, continue to do quite well. Defense, aerospace and the state’s key technology sectors also continue to expand.”
Wachovia is less bullish over the long term:
“High housing costs and rising energy bills are nudging many businesses and residents to neighboring states …. Overall population growth has slowed significantly and will likely remain sluggish over the next few years….”