Santa Barbara County

1
San Luis Obispo City
Economic Outlook
Bill Watkins
June 24, 2005
2
The Economy is
Visitors Room Sales 40.2 million
3.6 billion GCP 35 of County economy
Median Home Price 581,000
1.1 billion in taxable sales 33 of County share
3
The Economy is
76 Service, Retail, Government 7
Manufacturing 6 F.I.R.E 11
Construction, Agriculture, etc.
4
Median Home Price Forecast Performance
Ventura County
Forecast
Actual
Santa Barbara County
Forecast
Actual
San Luis Obispo County
Forecast
Actual
actual came in lower than forecast
5
How Did We Do Last Year?
6
Outline

• Home Prices
• The Forecast
• United States
• California
• San Luis Obispo City
• Today
• The Forecast
• The Retirement Industry

7
Houses and Bubbles
8
Will home prices collapse and cause the end of
the world?
9
Bill Says
The problem is you need a triggering event, and
triggering events are unpredictable.
10
Two Californias
11
Coastal California
12
Everywhere Else
13
Ten Least Rapidly Growing Counties in California
(2000-2004)
14
Ten Most Rapidly Growing Counties in California
(2000-2004)
15
Why Are Home Prices Going Up?

• Coastal California is not a local market
• Demographics
• Wealth accumulation
• Interest rates
• Taxes
• Supply

16
What About Interest Rates?
17
Greenspan Says
Its a conundrum.
18
Interest Rates
Fed Funds Rate
30-yr Conventional Mortgage Rate
19
What About Rents?
20
What About Commercial Property?
21
United StatesEconomy
22
Greenspan Says
Fiscal Discipline
One Trillion Dollars New Debt
23
Real GDP Growth
United States
4.5
4.4
4.2
4.0
3.7
3.7
3.3
3.0
2.7
2.5
1.9
0.8
-0.2
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
24
How High Are Oil Prices?
25
Real Oil Prices Normalized by Wealth
26
Californias Economy
27
Frank Zappa says
Sometimes you got to get sick before you can
feel better.
28
California Issues

• Budget
• Energy
• Housing costs
• Workers Compensation Insurance

• Health Insurance
• Tort Law
• High Costs
• Onerous Regulation

29
Californias Great Migrations

• Latinos
• Baby Boomers
• Generation X
• Business

30
California Manufacturing Percentage of All Jobs
16
15
14
13
12
11
10
1990
1992
1994
1996
1998
2000
2002
31
5-year Total Employment Growth
2004
Agricultural Production
-8.3
Mining Quarrying
-12.8
24.1
Construction
Durables Manufacturing
-17.8
Non-durables Manufacturing
-13.4
Information Services
-6.8
Transportation, Warehousing, Utilities
-5.1
4.1
Wholesale Trade
Retail Trade
7.1
Finance, Insurance, Real Estate
13.8
Professional Business Services
-1.0
Education Health Services
14.2
Leisure Hospitality Services
11.2
Other Services
6.6
Public Sector
6.7
32
Bill Says
Actually, California has been doing better than
expected.
33
Real Gross State Product Growth
California
34
San Luis Obispo City
35
Population
Comparison
Index (1991 100)
117.8
San Luis Obispo City
San Luis Obispo County
105.1
100.5
1992
1994
1996
1998
2000
2002
2004
36
2004 Population Growth
for Cities in San Luis Obispo County
1.6
1.5
1.4
0.6
0.3
0.3
-0.2
Arroyo
Atasca-
Grover
Morro
Paso
Pismo
San Luis
Grande
dero
Beach
Bay
Robles
Beach
Obispo City
37
2004 Median Age (in years)
for Cities in San Luis Obispo County
47.8
46.6
42.6
38.2
35.2
33.3
27.1
Arroyo
Atasca-
Grover
Morro
Paso
Pismo
San Luis
Grande
dero
Beach
Bay
Robles
Beach
Obispo City
38
Employment Distribution (jobs)
San Luis Obispo County - 2004
Agriculture
4,058
Mining and Construction
7,150
Durable Manufacturing
3,475
Non-Durable Manufacturing
2,850
Trans., Warehousing Utilities
3,658
Information
1,500
Wholesale Trade
2,392
Retail Trade
13,475
Finance, Ins. Real Estate
4,658
Other Services
38,050
Government
21,867
39
Employment Distribution (jobs)
San Luis Obispo Metro Area - 2004
Agriculture
398
Mining and Construction
1,516
Durable Manufacturing
1,514
Non-Durable Manufacturing
1,384
Trans., Comm., Utilities
1,556
Wholesale Trade
686
Retail Trade
7,982
Finance, Ins. Real Estate
2,406
Other Services
13,211
Government
8,093
40
2-Year Employment Growth by Industry
San Luis Obispo Metro Area - 2004
-2.2
Government
Other Services
0.4
-0.9
Finance, Ins. Real Estate
Retail Trade
3.7
-2.7
Wholesale Trade
-0.8
Trans., Comm., Utilities
-10.2
Non-Durable Manufacturing
Durable Manufacturing
2.5
Mining and Construction
1.7
8.0
Agriculture
41
2004 Median Household Income
for Cities in San Luis Obispo County
54,368
53,972
52,259
43,650
43,044
37,945
33,918
Arroyo
Atasca-
Grover
Morro
Paso
Pismo
San Luis
Grande
dero
Beach
Bay
Robles
Beach
Obispo City
42
Hotel / Motel Room Sales
City of San Luis Obispo
43
2004 Real Retail Sales
for Cities in San Luis Obispo County
millions
810
458
257
239
130
100
61
Arroyo
Atasca-
Grover
Morro
Paso
Pismo
San Luis
Grande
dero
Beach
Bay
Robles
Beach
Obispo City
44
2004 Real Retail Sales Per Capita
for Cities in San Luis Obispo County
Arroyo
Atasca-
Grover
Morro
Paso
Pismo
San Luis
Grande
dero
Beach
Bay
Robles
Beach
Obispo City
45
2004 Owner-Occupied Housing
for Cities in San Luis Obispo County
69.8
65.4
61.7
59.0
55.4
50.9
41.7
Arroyo
Atasca-
Grover
Morro
Paso
Pismo
San Luis
Grande
dero
Beach
Bay
Robles
Beach
Obispo City
46
San Luis Obispos Strengths

• Great beach town
• Downtown
• Cal Poly
• Location between Los Angeles San Francisco
• County seat
• Hearst Castle

47
Obstacles on San Luis Obispo Citys Horizon

• Housing prices
• Remote
• Hearst Castle
• Reliance on Government sector

48
Forecast
49
Nominal Median Home Price
City of San Luis Obispo
737,900
658,300
584,200
517,900
442,900
397,000
331,600
267,800
221,300
197,800
176,700
1995
1997
1999
2001
2003
2005
2007
50
Real Median Home Price Growth
City of San Luis Obispo
19.8
17.2
16.5
13.2
9.6
9.5
9.4
9.3
9.0
8.8
0.3
-1.1
-1.5
1995
1997
1999
2001
2003
2005
2007
51
Nominal Gross Regional Product
San Luis Obispo Metro Area
billions
52
Real Gross Regional Product Growth
San Luis Obispo Metro Area
9.8
9.5
5.7
4.2
3.3
2.9
2.6
2.5
2.2
2.1
1.5
-0.4
-0.7
1995
1997
1999
2001
2003
2005
2007
53
Real GP per Worker Growth
San Luis Obispo Metro Area
10.9
5.4
5.0
3.2
2.9
0.8
0.7
0.7
0.4
0.2
-0.9
-4.5
-9.4
1995
1997
1999
2001
2003
2005
2007
54
San Luis Obispo Metro Area
Output Share of San Luis Obispo County
55
Total Employment (jobs)
San Luis Obispo Metro Area
40,720
39,604
38,780
38,717
37,448
32,853
31,417
31,418
29,440
1995
1997
1999
2001
2003
2005
2007
56
Total Employment Growth
San Luis Obispo Metro Area
14.0
6.4
4.6
4.0
3.4
2.1
1.4
1.4
0.7
0.3
-0.2
-0.6
-6.1
1995
1997
1999
2001
2003
2005
2007
57
Real Average Salary Growth
San Luis Obispo Metro Area
10.1
4.2
3.3
2.9
2.8
2.5
1.1
0.6
0.4
0.3
0.1
-0.4
-6.2
1995
1997
1999
2001
2003
2005
2007
58
Real Retail Sales per Capita Growth
City of San Luis Obispo
59
The Retirement Industry
60
Think of retirees as tourists who just stay
longer.
Bill Says
61
Retirees who migrate are the healthiest,
wealthiest, and best educated of all retirees.
Mark Fagan says
Jacksonville State University sociologist
62
Older Migrants Classified

• Amenity
• Return
• Dependency

63
Amenity Migrants

• Younger
• Married
• Educated
• Homeowners
• Wealthy

64
Top Three Requirements

• Safety
• Health Care
• Amenities
• Active Downtown
• Climate
• Lifestyle Activities

65
Advantages of Amenity Migrants

• Works like a clean export industry
• Bring lots of capital
• Dont strain
• School systems
• Welfare systems
• Criminal justice systems

66
Advantages of Amenity Migrants

• Income is discretionary and spent locally
• Income is not cyclical or seasonal

67
Advantages of Amenity Migrants

• No infrastructure needed
• No investment needed
• No tax concessions needed

68
Winners

• Health care industry
• Financial services
• Recreation providers
• Entertainment sector
• Retail sector
• Other service sectors

69
Losers

• Tradable goods producers
• Agriculture Industry
• Generation X

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