Analysis. Answers Riverside Rising Economic Outlook for the Region April 2015 Beacon Economics, LLC
California fact versus fiction Looking back a few years (2009 / 2010) everyone was saying that CA would fail like Greece or Detroit, but things look different now. What has happened to turn things around? California Hype: High taxes, Over regulated People / businesses fleeing Reality Cyclical issues being confused with structural ones Business Climate is not that important Certain industries more vulnerable than others, but others doing great State on top of growth again Biggest issue is resistance to growth, particularly in coastal regions 2
4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Job Estimates Year on Year Change California Payrolls Change Growth United States 3,212,000 2.4% New York State 156,800 1.8% California 498,000 3.2% Texas 392,900 3.5% 135 130 125 120 115 110 105 100 Index Payroll Employment 3 Jan 11 May 11 Sep 11 Jan 12 May 12 Sep 12 Jan 13 May 13 Sep 13 Jan 14 May 14 Sep 14 Jan 15 Jan 95 Aug 96 Mar 98 Oct 99 May 01 Dec 02 Jul 04 Feb 06 Sep 07 Apr 09 Nov 10 Jun 12 Jan 14 Old Revised California Balance US
IE Employment Trends SA Data Mar-15 Y-o-Y Gr San Jose 1,044,900 5.3% Fresno 323,000 4.5% Inland Empire 1,325,800 4.4% Orange Cnt 1,536,000 3.5% Santa Barbara 182,000 3.2% Stockton 213,500 3.1% Sacramento 909,400 3.0% San Diego 1,376,600 2.9% Modesto 164,800 2.7% Los Angeles 4,298,400 2.4% Bakersfield 260,600 2.4% East Bay 1,080,700 2.3% Sonoma 194,700 1.7% Ventura 296,400 1.5% Year over Year (%, SA) 5.5 5.0 4.5 4.0 3.5 3.0 2.5 2.0 Nonfarm Employment Growth Jan 13 Mar 13 May 13 Jul 13 Sep 13 Nov 13 Jan 14 Mar 14 May 14 Jul 14 Sep 14 Nov 14 Jan 15 Mar 15 Inland Empire California 4
Local Jobs Mar-15 YoY Gr Total, All Industries 1,340,800 4.2% Logistics 86,600 12.6% Administrative 94,200 11.1% Professional 43,700 7.4% Wholesale Trade 62,000 6.7% Construction 78,700 5.6% Financial Activities 44,700 5.4% Hospitality 153,000 5.3% Health Care 178,700 3.6% Other Services 44,600 3.5% Educational 20,300 3.0% Government 235,100 1.5% Manufacturing 90,900 1.1% Retail Trade 165,900 0.2% Information 11,200-0.9% 680000 660000 640000 620000 600000 580000 560000 540000 520000 County Jobs 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Riverside San Bernardino 5
Taxable Sales Riverside County ($ Bill., SA) 8.5 8 7.5 7 6.5 6 5.5 5 4.5 4 Riverside Taxable Sales 7.77 7.56 Q1 06 Q4 06 Q3 07 Q2 08 Q1 09 Q4 09 Q3 10 Q2 11 Q1 12 Q4 12 Q3 13 Q2 14 Category 2013 YTD 2014 YTD Change (%) Autos and Transportation 34.9 39.3 12.6 Building and Construction 21.5 23.7 10.0 Business and Industry 28.7 28.2 1.7 Food and Drugs 12.1 12.8 5.5 Fuel and Service Stations General Consumer Goods Restaurants and Hotels 28.6 29.6 3.6 50.2 52.4 4.4 23.6 25.2 6.6 Total 220.8 235.6 6.7 6
Other Measure Business Activity 120000 100000 80000 60000 40000 20000 Non Residential Permits Hotels 2013 2014 Room Rate Palm Springs $164.0 $174.7 Riverside $91.7 $97.5 Temecula $111.8 $116.5 Occupancy Palm Springs 60.4% 62.0% Riverside 67.2% 69.7% Temecula 73.5% 77.7% 450,000 400,000 Ontario Passenger Traffic (SA) 0 Jan 04 Apr 05 Jul 06 Oct 07 Jan 09 Apr 10 Jul 11 Oct 12 Jan 14 New Alterations 350,000 300,000 250,000 Jan 09 Jul 09 Jan 10 Jul 10 Jan 11 Jul 11 Jan 12 Jul 12 Jan 13 Jul 13 Jan 14 Jul 14 7
Business and Wages 150 Establishments (Indexed) $780 Weekly Earnings: Riverside 140 $760 $740 130 $720 120 $700 $680 110 $660 $640 100 $620 90 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 CA Riverside $600 $580 $560 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 8
The IE Economy Rank City GMP 01-13 Gr 17 San Diego 186108 2.0% 18 Denver 166150 1.9% 19 Portland 159266 5.1% 20 Baltimore 158746 1.9% 21 St. Louis 136519 0.6% 22 Charlotte 130318 2.9% 23 Pittsburgh 122891 1.0% 24 Inland Empire 118693 1.6% 25 Indianapolis 117312 1.7% 26 Tampa 115263 1.6% 27 Cleveland 114448 0.6% 28 Cincinnati 111279 1.1% 29 Kansas City 110278 1.3% Share LQ Government 19.3% 7.1% Retail trade 8.9% 3.2% Logistics 5.2% 2.4% Construction 5.3% 1.6% Real estate 15.5% 1.5% Other services 2.8% 0.7% Administrative 3.8% 0.7% Wholesale trade 6.6% 0.7% Health care 8.0% 0.7% Accommodation 3.2% 0.4% Arts, entertainment 0.8% -0.2% Educational services 0.6% -0.5% Information 2.0% -3.5% Manufacturing 8.1% -3.8% Finance 2.7% -4.2% Professional 3.3% -4.3% 9
35 30 25 20 15 10 5 0 Commuting Outbound Commuting 350,000 Riverside Household Payroll Gap 300,000 250,000 200,000 150,000 100,000 50,000 0 10 Commute out of Home County (%) 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
The Commuter Base 700,000 600,000 500,000 400,000 300,000 200,000 100,000 Median Homes Prices Jan 11 May 11 Sep 11 Jan 12 May 12 Sep 12 Jan 13 May 13 Sep 13 Jan 14 May 14 Sep 14 Jan 15 Los Angeles Orange Riverside San Bernardino Who are the Commuters? By Income Local Commuters Under $20k 41.4% 24.0% $20k to $50k 34.6% 34.3% $50k to $100k 18.3% 31.9% $100k plus 5.7% 9.8% By Education Local Commuters No High School 17.1% 13.2% High School 26.8% 22.8% Some College 35.6% 36.4% Bachelors Degree 13.1% 18.8% Grad./Prof. Degree 7.3% 8.8% 11
550,000 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 Residential Real Estate Median Home Prices 14,000 Existing Home Sales 12,000 10,000 8,000 6,000 4,000 2,000 Q1 05 Q1 06 Q1 07 Q1 08 Q1 09 Q1 10 Q1 11 Q1 12 Q1 13 Q1 14 Riverside County California 0 Q1 05 Q4 05 Q3 06 Q2 07 Q1 08 Q4 08 Q3 09 Q2 10 Q1 11 Q4 11 Q3 12 Q2 13 Q1 14 Q4 14 Riverside (SA) 12
18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Residential Real Estate Distressed Mortgages Housing Inventory 14 12 10 8 6 4 2 0 Q1 94 Q3 95 Q1 97 Q3 98 Q1 00 Q3 01 Q1 03 Q3 04 Q1 06 Q3 07 Q1 09 Q3 10 Q1 12 Q3 13 Jan 00 Jan 01 Jan 02 Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Months of Supply Defaults Foreclosures Riverside Orange County 13
Residential Real Estate Monthly Rent 1,150 1,100 1,050 1,000 950 900 Inland Empire Apartment Market Q4 04 Q4 05 Q4 06 Q4 07 Q4 08 Q4 09 Q4 10 Q4 11 Q4 12 Q4 13 Q4 14 9 8 7 6 5 4 3 2 Vacancy Rate (%) 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 Riverside County Permits Rent Vacancy Residential Units 14
Supply Demand Imbalances 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% State Housing / Population Imbalance 1995 1997 1999 2001 2003 2005 Share Population 2007 2009 Share Residential Permits 2011 2013 2013 Vacancy State Owner Renter Both Florida 2.5% 9.2% 4.9% Texas 1.6% 7.9% 4.0% Illinois 1.8% 6.2% 3.3% New York 1.6% 4.2% 2.8% California 1.3% 4.2% 2.6% MSA Miami 2.1% 7.4% 4.2% Dallas 1.4% 7.2% 3.7% Inland Empire 1.9% 6.5% 3.7% Chicago 1.9% 5.6% 3.2% New York 1.6% 4.3% 2.9% San Diego 1.4% 4.1% 2.7% Washington, DC 1.0% 5.1% 2.5% Los Angeles 1.0% 3.7% 2.4% San Francisco 0.9% 3.0% 1.9% 15
Population Population (Millions) 2.4 2.2 2 1.8 1.6 Riverside County Population Annual Growth (%) 6.0% 5.0% 4.0% 3.0% 2.0% Population Growth 1.4 1.0% 1.2 1 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 0.0% 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Riverside County California 16
1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 Forecast 16.0 450 14.0 14.0 12.0 10.0 8.0 6.0 4.0 2.0 17 Nonfarm Employment (000s, SA) Q4 04 Q1 06 Q2 07 Q3 08 Q4 09 Q1 11 Q2 12 Q3 13 Q4 14 Q1 16 Q2 17 Q3 18 Q4 19 Unemployment Rate (%) Median Price ($000s, SA) Labor Market Forecast Nonfarm Employment Forecast Unemployment Rate Forecast 400 350 300 250 200 150 100 50 12.0 10.0 8.0 6.0 4.0 2.0 Q4 04 Q4 05 Q4 06 Q4 07 Q4 08 Q4 09 Q4 10 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 Q4 16 Q4 17 Q4 18 Q4 19 Q4 20 Sales (000s, SA) Residential Real Estate Forecast Sales Forecast Median Home Price Forecast
10.0 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 Forecast 400 350 300 250 200 150 100 50 0 18 Residential Permits (000 Units, SA) Q4 04 Q1 06 Q2 07 Q3 08 Q4 09 Q1 11 Q2 12 Q3 13 Q4 14 Q1 16 Q2 17 Q3 18 Q4 19 Nonres Permit Values ($ Millions, SA) Construction Permit Forecast Residential Permits Forecast Nonresidential Permits Forecast 14,000 12,000 10,000 8,000 6,000 4,000 2,000 Taxable Sales Forecast Q4 16 Q4 17 Q4 18 Q4 19 Q4 20 Q4 04 Taxable Sales ($ Millions, SA) Q4 05 Q4 06 Q4 07 Q4 08 Q4 09 Q4 10 Q4 11 Q4 12 Q4 13 Q4 14 Q4 15 Taxable Sales Forecast
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