La Jolla feels “some of” the economic pinch
Signs of a troubled economy confront us whether filling up at the gas pump, shopping for groceries or watching the evening news. Across the nation, unemployment is up, home sales are down and the lending industry has tightened credit almost to the point of economic suffocation.
In the microcosm of La Jolla, residents are feeling the impact but not necessarily in ways that mirror the larger economy.
Undoubtedly the most significant area of concern for most Americans is real estate and home ownership. “Foreclosure” is the catchphrase of the day. However, Alan Nevin, a real estate economist with Marketpointe Realty Advisors, said the La Jolla real estate market is “unchanging.”
In the first quarter of 2008, the median price for a single-family home in La Jolla was $1,662,500. Nevin reported that, for this same timeframe, 42 single-family homes were sold, none of them foreclosures. Of the 51 condominiums sold in La Jolla, six were foreclosed properties.
Nevin pointed out a significant caveat of this fact: The median price for the foreclosed condos was $366,000, while the median value for the non-foreclosed units was $820,000.
“The better-quality condominiums in La Jolla have felt no impact whatsoever from the foreclosure market,” Nevin said. “In the entire county, in the first quarter, we had 600 foreclosures, which means La Jolla had exactly 1 percent of the foreclosures in the county, which isn’t so bad.”
Nevin attributed the market stability to the community’s higher-than-average income level, combined with the sale of homes to cash-paying foreign nationals.
“In La Jolla, we continue to get buyers who are buying second homes,” he said.
While the La Jolla housing market may have escaped the brunt of foreclosures and slow sales, business owners and residents have had to develop strategies to overcome the fiscal fallout.
Tiffany Scherer, executive director of Promote La Jolla, said that anecdotally, spending is down. Some blame it on the decrease in disposable income and absent tourists, kept from visiting La Jolla by prohibitively high fuel prices.
Rent and traffic flow are huge factors in attracting and keeping businesses, Scherer said.
“Our rents are comparable to that in Fashion Valley, and the foot traffic and sales-per-square-foot are not on par with Fashion valley,” she said. “As a business owner, you’ve got to go where the sales are.”
Victor Canto, economic consultant and chairman of La Jolla Economics, an institutional investment research firm, said, overall, La Jolla is faring well because of a few unique demographics.
The household income is higher than average, giving families greater fiscal flexibility and creating a safety net of sorts. Individuals who can afford to buy property in La Jolla are generally not “entry-level buyers,” the group most impacted by sub prime lending limits.
Canto said La Jollans may be impacted indirectly by national trends, but they are much better suited to endure economic ups and downs.
And, unlike some regions that have been devastated by both stalled real estate sales and decreasing employment security, such as Detroit, Mich., La Jolla’s biotech industry has remained stable.
“Our specialty is still fine,” Canto said.
As near as Rancho Santa Fe, a region known as something of a real estate and mortgage investment mecca, business owners are struggling.
Well-to-do La Jollans do have one economic vulnerability, said Canto.
“The one exposure it has to La Jolla and the La Jolla people is on the investment side,” he said, adding that diversity is key to protecting assets.
He also cautioned against the potential repercussions if tax rates are increased.
There is no arguing with the reality of higher prices when it comes to gas and food, but even there La Jolla offers advantages for consumers. Canto called it “the European lifestyle.”
Each afternoon he walks his dog to the grocery store where he buys whatever is in season or on sale for dinner, he said.
“You have to be disciplined and have a long-term plan, always,” Canto said.
Merchants depend on local patronageLike many restaurateurs, Kevin Smith, owner of Extreme Pizza, 834 Kline St., is caught between a rock and a hard place.
The rock is the rising cost of raw supplies such as flour and dairy products. The hard place is consumers cutting back on extras, such as dining out, to keep up with the increased cost of living.
“People aren’t giving everything up, they’re just cutting back on things,” Smith said, adding that other Village business owners are experiencing the same trend.
A pound of cheese Smith was buying for $2.15 is now $2.60. So far, he hasn’t raised his prices.
“I really don’t want to raise my prices,” he said emphatically. “I really don’t want to, but I’m thinking about it.” Customers, he said, are “now spending on gas.”
The continuous spike in fuel costs contributes not only to higher prices for shipped goods like meat and produce but leeches profits from delivery services. For Smith, who said pizza delivery accounts for about 60 percent of his business, it’s almost like he’s losing money through a giant hole in his pocket.
“I think everyone’s realizing the gas prices are here to stay,” he said. “This isn’t going to go away; it’s only going to keep going up and up.”
A relative newcomer - Extreme Pizza opened about a year ago - Smith is hoping La Jollans will patronize local businesses, both to save gas and to support local entrepreneurs during tough economic times.