Analyst upbeat about economy

It's not nearly as bad as some have been saying.

In fact, 2006 could be a better year for the economy than anyone had been predicting, said Keitaro Matsuda, senior economist for Union Bank of California. The San Francisco-based economist, who advises the bank on Western markets and Asian influence, was in Seaside last week to share his projections for the year ahead.

Matsuda addressed the impact of hurricanes and higher oil prices on the U.S. economy as well as the Monterey County region.

Nationally, said Matsuda, the gross domestic product rose 4.3 percent for the third quarter of 2005, a surprise to many economists who had projected a GDP of about 4 percent. That growth increase happened despite the economic impact of Hurricane Katrina, and the fears it generated about long-term impact on the economy, which has proved resilient on many levels.

"We can still feel pretty good about the U.S. economy," Matsuda said. Looking at the state's economic outlook, Matsuda said California has bounced back from a slump in early 2000 and continues to perform well. The state unemployment rate echoes that of the nation, although California tends to have more young, immigrant and dynamic workers, so job turnover tends to be more rapid.

The strongest area of job growth from October 2004-05 has been in construction, due mostly to the housing boom. Service sector jobs have also reported strong growth. Compared to the rest of the state, Southern California reported relatively stable job growth, with steady upward movement. The Central Valley employment growth is booming, and Monterey County falls in the middle of those other regions, said Matsuda. The county's jobless rate for October was 5.3 percent, compared to 4.4 percent for the greater Los Angeles region and 5.4 percent for the Santa Clara region.

Matsuda also offered nonfarm payroll employment growth as an alternative measure of the local economy. From October 2004 to October 2005, 1,000 payroll jobs were created, mostly in retail, followed by construction, leisure and hospitality, and financial activity. The agricultural sector also fared well, adding 1,500 jobs.

Matsuda said he dislikes the word "bubble" in reference to the state housing market, saying more realistically, it's a correction in an overheated market.

California is no longer the nation's hottest housing market, as Nevada, Arizona and Hawaii have moved ahead of California in terms of home-price appreciation.

That's hardly bad news for Californians, who have seen home prices appreciate 109 percent in the past five years, and 457 percent since 1980.

The median home price for the Monterey region rose 13.5 percent from October 2004 to October 2005, to $717,030. Matsuda said it is important to look not only at home prices and appreciation, but also its affordability index, which measures the ability of an area's residents to buy homes there. Monterey, said Matsuda, has one of the lowest rates -- 9 percent. That compares to 19 percent in Santa Clara and 12 percent in San Francisco.

"We are forcing ordinary people," said Matsuda, "to take extraordinary risk to become homeowners."

dding to those concerns are projections that Monterey County's population could grow as much as 58 percent from 2000 through 2040. Salinas already has one of the nation's worst density rates, said Matsuda. And Monterey County's population, said Matsuda, is just going to keep growing.

What are people saying about mortgages today:

Rates on 30-year mortgages edged down last week to a seven-month low. Mortgage-giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages fell to 6.3 percent, down slightly from 6.31 percent two weeks ago. It put rates at the lowest level since they were at 6.24 percent the first week of March.

Bank of Hawaii, Central Pacific Bank, Territorial Savings Bank and Wells Fargo Home Mortgages all cut their 30-year mortgage rates to 5.75 percent this week.

Most people think of a mortgage as a means to an end. After all, you buy a house, not a home loan. But a mortgage is much more than the path to homeownership. It is a financial instrument that must be managed, just like any other financial investment.