Bay Area should escape worst of the state's economic slump

California's economy is headed for a rough patch as the housing slump intensifies, but the Bay Area should fare much better than the rest of the state, according to a widely watched forecast.

A spreading housing downturn, marked by a construction slowdown, falling sales and prices, and rising foreclosures, will be the main drag on the economy, the UCLA Anderson Forecast predicts in its quarterly outlook set for release today. The construction and real estate finance sectors are already shedding jobs, and UCLA economists expect more of the same over the next year.

Jobs outside the farm sector should grow an anemic 0.6 percent next year and 1.1 percent in 2009, the UCLA forecast projects. That compares with 1.9 percent payroll growth in 2006, California's strongest year since the technology bust at the beginning of the decade.

Still, California should be able to avoid a recession thanks to strength in other areas, especially the Bay Area's now-thriving technology sector.

"We still think we're just going to get grazed by the bullet," UCLA economist Ryan Ratcliff said.

Residential real estate presents a grim picture.

Market rebound seen in 2009

Statewide, UCLA forecasters expect home building permits issued to drop to around 115,000 or less this year and next, just a little over half the 2004 level. Construction jobs will fall to 878,000 in 2008, down 5.2 percent from 2007, they project. The forecasters don't expect California's housing market to improve until 2009.

Despite the Bay Area's notoriously high home prices, the housing slump won't be as acute as in the rest of the state because supply and demand are in better balance, especially in the inner counties of San Francisco and San Mateo. Combine that with expected solid performances in such key sectors as technology and tourism, and the region should weather a slowdown well, UCLA forecasters say.

"Real estate losses in the Bay Area will not be that bad, and the rest of the economy should be doing pretty well," Ratcliff said. "The Bay Area is positioned to do better than the rest of California for the next few years."

Builders slash jobs

That's not to say that the housing downturn won't take a toll here in lost homes and lost jobs. Local builders are hunkering down.

"We've cut back, and we're still in the process of cutting," said Kile Morgan, chairman of Ponderosa Homes in Pleasanton.

A few years ago, Ponderosa was building 250 to 300 single-family homes a year, with a median price of about $850,000. Now it's down to fewer than 150 homes and has slashed its workforce to 50 from about 65, Morgan said. Its subcontractors, who do actual construction, have shrunk similarly.

Bargain Bites

In the 11 years we've been putting together Bargain Bites, we confront the task each summer with a combination of excitement and dread.

After all, what better way to earn a paycheck than to explore new restaurants and fill our bellies at some of the Bay Area's best ethnic and neighborhood spots?

It's all - or, mostly - good. At the same time, it can be completely overwhelming, both conceptually and on the digestive system.

New bargain places continue to open, and of course we revisit past favorites.

This year we've added more than 60 restaurants to this year's selection of 107.

We sorted through at least twice that number, many of which were your suggestions. We take each tip seriously, checking out dozens of restaurants our readers recommended.

We updated this year's Bargain list in other ways, too. Reflecting the reality of ever-increasing menu prices, we increased the maximum price of dinner entrees to $12, from the $10 we've held firm to for the previous 10 years. Yet, despite the increase, some favorites, such as Tajine on Polk Street, have dropped off because prices had risen above the limit.

We've also organized the restaurants in a way we hope is more user-friendly. As well as listing them under five traditional regions - San Francisco, East Bay, Peninsula/South Bay, North Bay and Contra Costa County - we've broken out neighborhoods, areas or cities that are particularly rich in bargains. After settling on these - which range from San Francisco's Tenderloin to Oakland's International Boulevard - we ate our way through them, sometimes block by block, until we settled on our top picks.

While trying to offer a diverse selection of cuisines, we also aimed to represent an area's specialty, which is why Santa Clara is rich with Korean spots, and the Napa Valley with taquerias.

To fit in more restaurants, we've shortened the descriptions and omitted reservation info (most bargains are walk-in). However, we still note if a restaurant is cash only or does not serve alcohol.

As always, we still didn't have enough room to include all the restaurants we wanted, which is why you'll find more at sfgate.com/food/bargains. In addition, that's where you'll find interactive maps of each region and more photos. And be sure to read 96 Hours each Thursday for a more detailed report on a newly visited Bargain Bite.

Finally, we'd love to hear from you. E-mail food@sfchronicle.com (subject line: Bargains) to let us know if we've missed your favorites. We can still check out your beloved local sushi joint for our weekly Bargain Bite in 96 Hours or for next year's roundup - as soon as we get our appetites back.