dr. john husing – inland empire real estate economic update | may 30
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John Husing, Ph.D.
Economics & Politics, Inc.
Chief Economist, IEEP
Inland Empire Economic Growth . . .
Building An Expansion
After Losing 8.71 Million Jobs …U.S. Jobs Almost All The Way Back
-670,000 Government Jobs+9,239,000 Private Sector
(106.1%)
U.S. & CA Unemployment History
Cold War Ends Great RecessionPrime Rate: 21%
California Job Gains/Losses2008-2010-1,066,400
DefenseCutbacks
Dot.Com
GreatRecession
2011-2013+965,700
2013 Short-100,700
Unemployment Rates, March 2014
Interior CA
Unemployment Falling, But High
Inland Empire
Worst U.S. Metropolitan Area Unemployment Rates
Primary Tier
Secondary Tier
Economic Development … Increase The Economic Base!
How Regional Economies Work
Three Step Growth ProcessBased On Interaction Of:
• Population
• Preferences
• Dirt
Prices Force Decisions
Southern California Population Growth, 2000-2012
People Prefer To Live Near The Coast
As a homeowner, would you prefer to move closer to work if it involved a townhouse or condo?
(I-15 & Sr-91 Commuters, 2008)
72.3% No
Same question to Renters:
87.5% No
Answer stable over 5 years
Importance of Blue Collar Sectors
• People forced to move inland for affordable homes
• Population Serving Jobs Only
• High Desert & I-215 South are current examples
Stage #1: Rapid Population Growth
Commuting Bad, But Stable Over Time
1,650,384 Total Jobs
1,156,313 Inside IE
494,071 Commute Outside County
154,845 Between IE Counties
339,226 Outside IE
20.6% Commute Outside the IE
16.3% Orange County Commuters
Construction & Real Estate:Finally Some Hope
Share of Underwater Homes Plunging
Direct Investor Purchases of Foreclosures
Notices of Default At Low Levels
Home Price Trends
61.5%
43.1%
50.3% less for Existing home -34.7%
2014
Long Term Competitive Price Advantage Still Exists
Affordability To Median Income Family19
88
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
0%5%10%15%20%25%30%35%40%45%50%55%60%65%70%75%
0%5%10%15%20%25%30%35%40%45%50%55%60%65%70%75%
Inland Empire Orange County Los Angeles
Source: CA Association of Realtors
Exhibit 14.-Housing Affordability, Southern CaliforniaShare of Families Afford Median Priced Home, 1988-2014
FICO Score Average Is Easy A Little
Feb-2014Approved
724
Feb-2014 Denied
689
Sub-Prime Loans 2007
621
Volume Stagnant
Inland Empire’s In-migration From Coastal Counties Has Not Yet Recovered
-27,324
Not Bringing Skills, Wealth, Income & Spending
Why Low Volume
• Less Foreclosures
• Buyers Want or Need High Prices
• Continued Wall Street Acquisition of Large Share of Foreclosures
• Credit Hurt By Foreclosures
• Higher FICO Scores
• FHA Lowering Conforming Mortgage Ceiling From $500,000 to $350,000
• Fear
Permits: Finally A Little Hope
Construction & Mining Job Growth
Assessed Valuation Finally Growing (6.1% for SB County)
6.3%Inflation
Firms Prefers The Coastal Counties
Stage 2: Strong Industrial Growth
Industrial Construction
Logistics Flow of Goods
Port Container Volumes
Fulfillment Centers
E-Commerce Growth RatesYear Over Year by Quarter
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
-15.0%
-10.0%
-5.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
Source: Bureau of the Census
U.S. E-Commerce Growth RatesQuarter over Same Quarter Prior Year, 2000-2013
2013
Job Growth: Logistics
19% of All Inland Jobs … During 2013
Manufacturing: Could Be A Major Growth Source
U.S. Manufacturing Job Creation
CA Manufacturing Job Creation
Job Growth: Manufacturing
Health Care
Health Care Demand Set To Explode
People Without Health Insurance (2012) 828,431 (19%)People Will Age, Already Those 55 & Over 926,696 (21%)
Population Growth Will Resume (2000-2013) 1,075,807 (33%)
Inland Health Care Workers Handle More People Than CA (28%)
Job Growth: Health Care
Stage 3.-Office Based Firms Follow Their Workers
Skilled Workers Migrate InlandFor Better Homes
High End Homes
$553,051
$421,581
$474,176
UPLAND
EASTVALE$469,814
$484,332
$449,797
CORONA
$437,038
TEMECULA$341,339
8$399,759
Office Absorption Finally Starting to Recover
High-End Jobs Follow Workers
into the Area
Office Vacancy Rates Improving But Still Very High
18.2%
Growth:Office Based Jobs
Primary Tier
Secondary Tier
How Regional Economies Work
Retail Sales Almost Back
13.7%Inflation
Job Growth: Population Serving & Lower Paying
Job Growth: Government & Education
Where Will IE Be In Its Job History?
2011-201381,733 of 143,108 lost or 57.1%
2011-2014121,833 of 143,108 lost or 85.1%
21,275 Jobs To Go
Forecast: Review
2014 Better Than 2013• Construction Returning• Logistics Strong• Manufacturing Weak• Health Care Set To Take-Off• Office Sectors Modest• Pop. Related Group Gaining• Govt & Education Crawling• Unemployment Drops to 8.5%• Growth Looking Normal• A Little Below Pre-Recession
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