Desert Hot Springs Economy

Transcription

1 Desert Hot Springs Economy Period of Adjustment, 2008 John Husing, Ph.D. Economics & Politics, Inc. 4/30/2008 1

2 Inland Empire Job Growth, 2006 Employment Change, California Markets Annual Average, Source: CA Employment Development Department 274,158 47, ,508 99,650 7,008 18,042 29,025 48,150 68,592 4/30/2008 Ventura Co.San Diego Co.Orange Co. Inland Empire L.A. Co. So. California California No. California2

3 Inland Empire Job Growth, 2008 Job Change, California Markets Inland Empire & Coastal Counties, March Source: CA Employment Development Department 57,700 3,200 (21,400) (21,300) (13,800) (6,000) (1,700) (3,300) (61,000) 4/30/2008 Inland EmpireOrange Co.Los Angeles Co. Ventura Co.San Diego Co.Imperial Co. So. California California No. California 3

4 Unemployment Exhibit 5.-Unemployment Rates, Annual, Inland Empire & California 12% 11% 10% 9% 8% 7% 6% 5% 4% A Housing Correction... Now is the Time But It Hurts! /30/ Source: CA Employment Development Department

5 How Coachella Valley Economy Has Worked? Secondary Tier Primary Tier 4/30/2008 5

6 Looking Ahead: 6 million more Southern Californians by 2030 Southern California Population Growth Composition, Foreign 871, % Natural Gain 1,131, % Domestic 7, % 4/30/2008 Source: California Department of Finance 6

7 People Prefer To Live Near The Coast 4/30/2008 7

8 Baby Boomers: Here They Come Born 1946 Current Age: 62! 4/30/2008 8

9 What is your ideal home? 86% Single Family Detached Would you prefer a detached home EVEN if you must drive? + = 66% YES 4/30/2008 9

10 Looking Ahead: Dirt Theory 1. Affordable Housing & Population Serving Jobs I 5 2. Industrial Projects & Blue Collar Jobs Ventura I 405 Los Angeles County State Hwy 2 I 15 I 215 State Hwy County Expensive Housing, Skilled Workers Rancho I-15 Cucamonga & Freeway High Mall Paying Site Jobs San Bernardino County I 605 State Hwy 91 State Hwy 215 I 10 I 110 Orange County Riverside County 4/30/ San Diego County

11 Not Enough Land Or Inadequate Zoning Prices Drive People Outward Home Price Advantage, Inland Empire & So. California Markets Median Priced New & Existing Home, 1st Quarter 2008 Median All Home Price Desert Hot Springs Advantage $453,000 $464,000 $485,000 $568,000 $354,000 $214,000 $303,000 $239,000 $250,000 $271,000 $89,000 Desert Hot Springs Inland Empire San Diego Los Angeles Ventura Orange 4/30/ Source: Dataquick

12 BUILD FREEWAYS & THEY LL COME Don t Build Them & They ll Come Anyway! 4/30/

13 Inland Empire Population Growth, ! Forecasted Population Growth, Inland Empire & Top 12 States (000) 8,335 7,783 7, U.S. 3,326 2,660 2,657 2,136 States! 1,839 1,538 1,454 1,201 1,091 California Texas Florida Arizona North Carolina Georgia Inland Empire 4/30/2008 Source: U.S. Bureau of Census, Southern California Association of Governments 2008 RTP 13 Virginia Washington Nevada Maryland Tennessee

14 Where Is L.A. s Edge In 2008? I 5 I 15 Ventura County I 405 Los Angeles County State Hwy 2 I-15 Freeway Rancho Cucamonga Mall Site I 215 State Hwy 247 San Bernardino County I 605 Metropolitan Southern California Now In Beaumont State Hwy 91 State Hwy 215 I 10 I 110 Orange County Riverside County 4/30/ San Diego County

15 Population Growth 42.0% Exhibit 2.-Population Growth Rates Coachella Valley & Other Major Areas, % 25.3% 11.2% 8.5% 7.7% Desert Hot Spr. Coachella Valley Inland Empire California Los Angeles County U.S. Note: Assumes Coachella Valley unincorporated grows at 16.5% of city growth rate in 2007 Source: CA Department of Finance, U.S. Census Bureau 4/30/

16 Desert Hot Springs Feeling L.A. Exhibit 1.-Population Growth Desert Hot Springs, , ,163 Up 6,962 or 42% 19,479 17,979 14,200 14,550 15,100 15,500 15,900 16,200 16,400 16,582 16,776 16,982 17,394 13,350 12,400 11, /30/ Source: CA Department of Finance

17 Population Growth By City, Exhibit 4.-Population Growth By City Coachella Valley Communities, Indio 22,538 La Quinta 14,646 Coachella 12,483 Cathedral City Palm Desert 8,434 8,384 Desert Hot Spr. 5,429 Palm Springs Rancho Mirage 3,632 3,423 Indian Wells 1,049 4/30/ Source: CA Department of Finance, U.S. Census Bureau

18 Population By City, Coachella Valley Exhibit 3.-Population By City Coachella Valley Cities, 2007 Indio 77,146 Cathedral City Palm Desert Palm Springs 46,858 52,115 49,752 La Quinta Coachella 38,486 41,092 Desert Hot Spr. 23,544 Rancho Mirage 16,944 Indian Wells 4,942 4/30/2008 Source: CA Department of Finance, U.S. Census Bureau 18

19 Desert Hot Springs Area Growth Forecast City Only 19,386 Population Growth Forecast Desert Hot Springs Area, ,206 71,136 77,872 84,364 90,964 50,922 31, /30/2008 Source: Southern California Association of Governments,

20 Home Prices Declining $375,000 $350,000 $325,000 $300,000 $275,000 $250,000 $225,000 $200,000 Existing Homes: -38.5% vs. IE -27.1% 4/30/2008 Source: Dataquick Exhibit 25.-Existing Home Prices, Quarterly Desert Hot Springs, Not Seasonally Adjusted, By Quarter, $175,000 $173,621 $150,000 $125,000 $100,000 $75,000 $50,000 $25,000 New Homes: -9.3% vs. IE -19.2% $ $318, $282, $350,

21 Remember: Foreclosures Now Driving Market 38.4% of CA Sales In March /30/

22 Housing Volume Setting A Floor 32, ,000 28, ,000 24, ,000 20, ,000 16,000 14, ,000 10, ,000 6, ,000 2, Existing Exhibit & New Homes 22.-New Sales, Home Inland Sales Empire Data Desert Hot Seasonally Springs, Seasonally Adjusted, by Adjusted, quarter, By Quarter, A -60.3% v % /30/2008 Source: Dataquick , , Source: Dataquick, Economics & Politics, Inc. Seasonality

23 Market Shares By Area Share of Southern California Home Sales Inland Empire, % 32% 34% 34% 37% 36% 37% 40% 20% 22% 22% 21% 24% 26% 26% 27% 45% 28% 48% 50% 52% 28% 31% 32% 54% 32% 45% 45% 28% 32% Orange Co. 18% to 9% San Diego Co. 23% to 18% /30/2008 Source: Dataquick 23 LA Co. 15% to 25%

24 Housing Prices Took Off For Sound Reasons Demand Rising With Demographics Supply Restrained Prices Had To Take-Off To Eliminate Buyers Exhibit 13.-Price Trend, New & Existing Homes Inland Empire, , Quarterly 460, , , , , , , , , , , , , , , , , , ,000 80,000 New Existing % per year 4/30/ Source: Dataquick

25 Real Problems Sub-Prime & Now This We Financed Have High Cut This Supply Prices 4/30/

26 We re Confused 4/30/

27 Housing Forecast What If Price Went Up At 6% per year in 2004, 2005 and 2006? ow much must Prices Fall, to get to where they would have been by 2007? New Homes: 13.6% lower Developers Can Adjust Home Size Existing Home Prices: 20% lower Home Owners Forced to Sell Remember: Every Home Sale Right Now Is A Distressed Sale 4/30/

28 Fed Trying to get Mortgage Rates Down. But, Lender Fear is Keeping Rates Unusually High. Exhibit Year Mortgage Rate & 10 Year Bond 9.00% 8.50% 8.00% 7.50% 7.00% 6.50% 6.00% 5.50% 5.00% 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 30 Yr. Fixed Mortg. 10-Year Bond Difference /30/ Sources: Federal Reserve Bank, Federal Home Loan Mortgage Corporation 5.88%

29 Home Financing after Home Price & Interest Rate decline $214,190 Local 1st Time Buyers Afford Home, 10% Down 5.88% Fixed 30- Rate, 30% of Income, 2008 $53,243 $44,887 $1,122*12=$13,466 Median Home Price Annual Payments Income Needed Median Income 4/30/2008 Source: CA Association of Realtors 29

30 New Affordability Levels 53% Share Able To Buy Median Price Home Inland Empire, % 58% 35% 18% DHS 4/30/2008 Source: CA Association of Realtors & John Husing 30

31 25.0 Months of Supply: Housing Inventories 44 mos Months of Housing Inventory mos So Cal Coast San Francisco Cent Cal Coast Reno, NV San Diego Las Vegas Salt Lake City Denver Sacramento Atlanta Maryland Colorado Spgs Minneapolis South Florida Raleigh-Durham Northern Virginia Northern Colorado Inland Empire Boise Chicago Phoenix Cent Cal Valley Austin Tampa Dallas/Ft Worth Charlotte Orlando Naples 4/30/ Northern Virginia-C Maryland-C Sarasota Houston Albuquerque/Santa Fe San Antonio Jacksonville Tuscon

32 Months of Finished Vacant Inventory Months of Supply of Finished 8.0 Vacant New Units 4/30/

33 Interest Rates Decline Will Help, But: FHA Loan Guarantees Rise From $362,790 to $500,000 BUT Does Not Have The Staff For The Huge Volume FNMA, Freddie Mac, Ginny MAE: $417,000 to $500,000 BUT % for loans over $417, % if Market has dropped 3% +0.25% if FICO Score Under % if don t have 20% equity 4/30/

34 U.S. Congress: Ideas FHA Given Greater Funding To Insure Questionable Mortgages Lower Loan Balance To Value of House Note Would Give Upside Back to Lender If Home Value Restored 4/30/

35 Route Out of Housing Recession Real Difficulties Resolved Market Psychology Changes Federal Action To Reduce Foreclosures Refinancing As Interest Rates Fall & Loan Guarantees Rise Affordability as Prices & Interest Rates Fall, Income Rises Underlying Housing Shortage Means Pent-Up Demand 4/30/

36 Assessed Valuation, Exhibit 43.-Assessed Valuation (millions) Desert Hot Springs, July 1, Assessed Valuation Growth $1.6 billion or 346.5% Inflation: 27.9% $1,697 $2,115 $997 $363 $400 $434 $460 $477 $488 $476 $477 $453 $456 $474 $500 $544 $603 $ /30/ Source: Riverside County Assessor's Office

37 Assessed Valuation Growth Exhibit 44.-Assessed Valuation Growth Desert Hot Springs & Coachella Valley Cities, Desert Hot Springs Coachella Valley 70% 39% 19% 25% 19% 21% 16% 13% 9% 10% 10% 8% 6% 6% 6% 4% 2% 4% 0% 2% 2% 0% 1% 7% 13% 12% 12% 11% 10% 11% 9% 4% 6% -0% -2% -5% /30/ Source: Riverside County Assessor's Office

38 Population Migration Slowing Domestic Migration Inland Empire, ,406 84,496 80,630 64,486 60,289 68,241 39,928 34, /30/ Source: CA Department of Finance, Demographic Research Unit

39 Soaring Oil Prices Apr-08 $ West Texas Intermediate Crude Oil Prices Monthly Average $115 $105 $95 $85 $75 $65 $55 $45 $35 $25 $15 $5 Jan % $ /30/

40 Total Taxable Sales, Exhibit 33.-Taxable Retail Sales (000) Desert Hot Springs, $44, Retail Sales Up $33.1 million or 52.1% Inflation: 22.7% $44,390 $46,919 $50,228 $48,924 $50,033 $47,935 $49,665 $52,998 $58,491 $63,475 $66,584 $65,974 $71,943 $82,056 $94,182 $96, /30/2008 Source: CA Board of Equalization 40

41 Taxable Sales Growth Rates, Exhibit 34.-Taxable Sales Growth Desert Hot Springs & Coachella Valley, Desert Hot Spr. Coachella Valley 15% 14% 14% 14% 15% 9% 6% 0% 6% 1% 7% 3% 3% 2% 4% 6% 4% 9% 7% 11% 10% 9% 5% 3% 3% 11% 9% 9% 3% 5% -6% -3% -4% -1% /30/ Source: CA Board of Equalization

42 Are Weak 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% -2% -4% -6% -8% -10% -12% -14% California Riverside San Bernardino Taxable Sales Growth Rates Quarterly, California & Inland Empire, /30/ Source: CA Board of Equalization, CA Dept. of Finance, SANBAG, RCTC

43 Blue Collar Jobs About Dirt 4/30/

44 Adult Educational Level, 2006 Share of Adults, No College Class & BA or Above Southern California Counties, People 25 & Over, % 52.1% 50.9% 48.0% 36.9% 36.3% Palm Spr. Sch. Dist. San Bdno. Riverside Los Angeles Orange San Diego Source: 2006 American Community Survey 4/30/

45 Exactly What Shippers Want To Distribution Centers AndMade by Trucks Shipped inat Containers Transported on Trains International Supply Goods in Asia Unloaded our Ports Chain Management 4/30/

46 1. Soaring International Containers Thru So. Calif. Exhibit 6.-Port Container Traffic Ports of Los Angeles & Long Beach, & 2025e (million TEUs) % U.S. Imported Containers 25.4% U.S. Exported Containers TEU=20 foot equivalent container units 4/30/ Source: Ports of Los Angeles & Long Beach; forecast: Moffatt & Nichol Engineers e

47 2. Ports On West Coast Nearest Asia Los Angeles Long Beach 4/30/

48 3. Deep Water Ports As Ships Draw Over 50 feet of Water 8,000-Container Post-Panamax Ships 4/30/

49 4. Competitors Much Smaller L.A.-Long Beach Ports Triple NY-NJ, the second largest complex 4/30/

50 Air Cargo Increase by 4-Fold Exhibit 61.-Changing Shares of Trade Los Angeles Customs District, (billions) Breakbulk Ship $ % 2005: $293.9 billion Air Cargo $ % Land Based $ % Breakbulk Ship $ % 2030: $796.2 billion Air Cargo $ % Land Based $ % Containerized Ship $ % Containerized Ship $ % 4/30/2008 Source: Los Angeles Customs District & Economics & Politics, Inc. 50

51 LAX Near Cargo Capacity Exhibit 17.-Air Cargo Tonnage For SCAG Area Airports 2030 Constrained Demand (1,000s tons) 2,252 2, ,024 1,092 1, % 2006: 2, % JWA BUR PSP LGB SCLA PMD SBD MAR ONT LAX 4/30/2008 Source: SCAG 2004 Regional Transportation Plan 51

52 Low Cost Industrial Dirt (400,000 SF) $412,000 Difference in Lease Rate = $8.2 million in 5% Return On Sales Orange-South San Diego-Escondido L.A. - North San Diego-San Marcos San Diego-Vista L.A. - South Bay Orange-West Orange-North Orange-Airport L.A. - Mid Cities San Gabriel Vly LA-Central Industrial Space Costs Southern California, Sub-Markets, 400,000 SF, December 2007 $4,032,000 $3,648,000 $3,600,000 $3,408,000 $3,120,000 $3,072,000 $3,072,000 $2,976,000 $2,736,000 $2,688,000 $2,496,000 $4,512,000 Inland Empire $2,084,000 nnn=net of taxes, insurance, common area fees 4/30/2008 Source: Grubb & Ellis 52

53 Quarterly Industrial Absorption, Exhibit 17.-Industrial Space Gross Absorption Inland Empire, (moving 4-quarter total) 47,500,000 42,500,000 37,500,000 32,500,000 27,500,000 22,500,000 17,500, million Sq.Ft. 12,500,000 7,500, /30/2008 Source: Grubb & Ellis & Economics & Politics, Inc

54 Inland Empire, 82.1% of So. Calif. Industrial Construction Market Exhibit 15.-Industrial Space Under Construction Southern California Market, December 2007 Inland Empire 23,139, % Orange County 703, % San Diego 1,197, % Los Angeles 3,134, % 4/30/2008 Sources: Grubb & Ellis 54

55 Industrial Vacancy Rate Very Low 26% 24% 22% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Exhibit 8-2.-Industrial Space Availability Rate Inland Empire, /30/ Source: Grubb & Ellis % 2008

56 East Valley Winning So Far Exhibit 19.-Location of Increased Industrial Occupancy Inland Empire Sub-Markets, June 2005-Dec (Sq. Ft.) 44.6% 28.8% 20.7% 3.0% 1.7% 1.1% East Valley Westend-SB March JPA Corona SW Riverside Co. High Desert Source: Economics & Politics Inc. using Grubb & Ellis data 4/30/

57 Where Industrial Space Being Built? Where is Industrial Space Being Built Inland Empire, December 2007 Westend 7,744, % High Desert 430, % East Valley 9,528, % March JPA 8,391, % Sources: Grubb & Ellis 4/30/

58 Where Is L.A. s Edge In 2008? I 5 I 15 Ventura County I 405 Los Angeles County State Hwy 2 I-15 Freeway Rancho Cucamonga Mall Site I 215 State Hwy 247 San Bernardino County I 605 Industrial In SB-Redlands & March JPA I 110 State Hwy 91 Orange County State Hwy 215 I 10 Riverside County 4/30/ San Diego County

59 Coachella Valley Is Not In The Goods Movement Discussion It Needs To Be 4/30/

60 Colorful History Powerful Potential Future! 4/30/

61 . 4/30/