Bullard tells PLNU gathering investment hamstrung by housing glut, sliding prices

Dr. James Bullard, president and CEO of the Federal Reserve Bank of St. Louis, was in San Diego last week to deliver the keynote address at the fifth annual Fermanian Business & Economic Institute at the Point Loma Nazarene University (PLNU) Dealmakers of the Year Awards. In his speech “U.S. Monetary Policy at Another Crossroads” at the Sheraton Harbor Island, Bullard said he didn’t think “the Fed is out of ammunition” to help prop up the economy if it continues to weaken. “The Fed has potent tools at its disposal and is not now, or ever, out of ammunition,” said Bullard, who is at the forefront of debate on U.S. monetary policy. Last year, Bullard had the second-greatest impact on financial markets behind only Federal Reserve Chairman Ben Bernanke, according to Macroeconomic Advisers. Noting that the pace of economic recovery has been disappointing, Bullard said most components of real gross domestic product — like real consumption expenditures by consumers — have recovered to or beyond their levels in the fourth quarter of 2007, which was the beginning of the recession. However, he said, investment continues to hover about 16 percent below its 2007 fourth-quarter level, mainly because of weakness in residential investment and investment in nonresidential structures. “This looks like a collapsed real estate bubble,” Bullard said. “Investment is not recovering because we got a lot of houses and inventory.” According to DQNews.com, home sales in all of San Diego were up and prices were down in August over the same time last year. However, in coastal communities served by the San Diego Newspaper Group, some neighborhoods saw positive gains in the median price home sales. The median price of all home sales — single family, condominium and new homes — in Ocean Beach was up 31.4 percent and up 23.1 percent in La Jolla. In Point Loma’s 92106 ZIP code, the condominium market dragged median home prices down 21.9 percent. Likewise, in the Mission Beach, Pacific Beach area, the median price dropped 14.3 percent, and in downtown San Diego, the median price of homes dropped 5.6 percent. Bullard said he still expects modest and improving economic growth over the next year, although the current sluggish growth does leave the U.S. economy vulnerable to more negative shockwaves. Moving forward, Bullard said policy should be more “rules-based” and “less discretionary than it has been in the last three years.” PLNU President Dr. Bob Brower thanked Bullard for his “insightful, direct, clear and understandable” presentation on U.S. monetary policy and the economy. He said Bullard shows there is a “sense of forward,” and there’s “hope and prospect of making things better.” There is a prospect for “making short-term decisions in terms of long-term thinking,” Brower said. Bullard was introduced by his colleague, PLNU chief economist Dr. Lynn Reaser, an expert in the economy, economic outlook, the recession and financial markets. Reaser is former chief economist of the investment strategies group at Bank of America, and former president of the National Association for Business Economics. Fermanian Business & Economic Institute at Point Loma Nazarene University’s Dealmakers of the Year Awards are given to honor individuals, firms and collaborative deals that bring long-term value to the San Diego region. Recipients of the 2011 Dealmakers of the Year Awards are:
• Individual: Jeff Church. Church is an entrepreneur and Harvard MBA. His current endeavor, inspired by a family trip to Africa in 2007, is Nika Water. Nika donates all profits from sales of its water to charity and is certified as carbon neutral. • Firm: Organovo. Named as of the “Top 50 Inventions of 2010” by Time Magazine, Organovo built the world’s first production 3D bio-printer, providing surgeons with tissue on demand, helping to solve the global shortage of human organs. • Collaborative: Smart City San Diego. A public-private collaboration, Smart City San Diego works to improve the region’s energy independence — empowering consumers to use electric vehicles, reduce greenhouse gas emissions and drive economic growth. • Business Partner of the Year: The San Diego Daily Transcript, publishing in San Diego for 115 years.