Inland Empire

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Inland Empire San Bernardino County 2009-10 A
Very Difficult Period!

• John Husing, Ph.D.
  
• Economics Politics, Inc.

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So. Calif. Job Change, 1984-2009
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Inland Empire Job Change, 1984-2009
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Worst National Unemployment Rates
22
16
4
2
5
Unemployment Can Get Stuck For Years
?not U or V
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What Happened?
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Shrinking Our Economy
10.6 Billion Hole In IE Economic Base
8.3 Billion From Residential Decline
8
Gold Mine Theory
-21.2 Billion Loss To The Economy
Secondary Tier
Another -10.6 Billion
Primary Tier
-10.6 Billion
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Prop 172 Changes Month Vs. Last Yr.Based On
California Retail Sales
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Housing Demand Rose With Population
CA Home Restrictions Slow Growth NIMBYs Endangered
Species Water
1997 18.3 million people/3.9 million SFR homes
4.66 1997-2007 Add 3.2 million
people Need 709,600 homes 4.66 1997-2007
Actual New homes
552,900 1997-2007 Shortfall
156,700 Annual Production Too Low
15,670 a year
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Prices Had To Take-Off To Eliminate Buyers
Exhibit 8.-Price Trends, New Existing Homes
Inland Empire, 1988-2008, Quarterly
420,000
400,000
380,000
360,000
340,000
320,000
1997-2003 12.9 per year
300,000
280,000
260,000
240,000
220,000
200,000
180,000
160,000
140,000
120,000
2003-2006 19.7 per year
100,000
80,000
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source Dataquick
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Sales Soars Until Late 2005 Back to 2002
78.1
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Inland Empire Has 1,080,328 Homes

• Home Traded 2004-7 Notices of Default Share
  of 2004-7
• 359,044 (33.2) 232,535
  64.8

Balance Are Future Issue Unemployed Piggy
Bank Loans
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Alt-A Option Adjustable
Sub-Prime Over
15

• Is There Any Good News?

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Supply Demand
Demand From Lower Prices
Supply From Foreclosures
vs.
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Demand gt Supply Price Rising
4.3
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Soaring Housing AffordabilityEasily Sets A Record
68
59
4.5 Times
15
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Some Market Normality Has Returned
July Foreclosure Sales Riv. Co. 59 down from
71 in Jan. SB Co. 61 down from 69 in Apr.
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Price Advantages/Disadvantages
Home Price Advantage, So. California Markets
Median Priced New Existing Home, 3rd Quarter
2009
Inland Empire Advantage
Median All Home Price
498,000
366,000
332,000
219,000
Inland Empire
Los Angeles
San Diego
Orange
Source Dataquick
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Standing New Home Inventory 2nd -2009
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Consumer Confidence In FutureAt Dec 2007 Level
(pre-Recession)
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Price Stability Now Likely
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259,200 Unemployed Nearly 3 times Normal
282,600
89,450
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Office Market
Housing Slowdown Hurts!
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Office Absorption
Exhibit 10.-Office Net Space Absorption
Moving 4-quarters, Inland Empire, 1991-2009
2,000,000
Absorption Fell With Housing Slowdown
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
(200,000)
(400,000)
(600,000)
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Source Grubb Ellis Economics Politics,
Inc.
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Office Vacancy Rate Has Jumped Dramatically
23.6
7.0
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Vacancy Rates By Area, 3rd-2009
Office Availability Rate, 3rd Quarter 2009
Inland Empire, By Market
Source Grubb Ellis
26.6
25.8
24.4
23.6
22.6
18.8
16.9
Class B
Class C
Class A
High Desert
Inland Empire
Temecula-Murr.
Riverside-Corona
Ont-R. Cucamonga
San Bdno-Redlands
Chino-Upland-Mtcl
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Office Vacancy Rate Up Everywhere!
2005 2009 Inland Empire 7.4
23.6 Orange County 8.8 18.0 San
Diego 7.0 18.0 Los Angeles
County 12.2 13.6
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Lease Rates Down!
2007 2009 Inland Empire 2.18
2.17 Orange County 3.13 2.50 San
Diego 3.20 2.87 Los Angeles County
3.28 3.06
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Why?

• Housing Finance
• Escrow
• Title
• Home Insurance
• Developers
• Engineers
• Planners

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Refinancing Is A Growing Issue

• High Vacancy Rates
• Falling Lease Rates
• Balloon Payments

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Blue Collar Industrial Jobs
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Why Blue Collar Jobs Important?
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Ports On West Coast Nearest Asia
Los Angeles
Long Beach
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Deep Water Ports As Ships Draw Over 50 feet of
Water
8,000-Container Post-Panamax Ships
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International Containers Thru So. Calif.Were 43
of U.S. But
Port Container Traffic
Ports of Los Angeles Long Beach, 1990-2008
Long Term (million TEUs)
Loss of 4 Market Share
15.8
15.7
14.5
14.2
13.1
11.8
10.6
9.5
9.6
8.2
7.5
6.5
5.8
5.4
5.1
4.4
3.8
4.1
3.7
1991
2001
1990
1992
1993
1994
1995
1996
1997
1998
1999
2000
2002
2003
2004
2005
2006
2007
2008
TEU20 foot equivalent container units
Source Ports of Los Angeles Long Beach
forecast Moffatt Nichol Engineers
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U.S. Economy Has Shrunk
-7,205,000 Jobs
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Ports Increasingly Regarded As Unreliable

• UP Buys SP, Trains Cant Move
• ILWU-PMSA Lockout/Strike
• 93 Ships Cant Be Unloaded Not Enough Labor
• Rains Wash-Out Rail Track
• Clean Truck Fees
• Employee Truck Mandate Law Suits
• Riverside Suing Ports
• LA Supporting Teamsters Legislation to Organize
  Ports

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The Diversion Fear 4-Corners Strategy
Loss of 4 Market Share
Panama Suez
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Port Imports Have Crashed
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Logistics Joined Blue Collar Job Losses
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(No Transcript)
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Logistics Gained 76,500 But Now Lost -6,900
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Industrial Absorption Has Stopped
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Industrial Vacancy Rate Soaring
11.8
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When Will Normal Start To Return?
2010 National
2011 California
2012 So. Calif. If Policies Work!
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While Waiting For Recovery.
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www.johnhusing.com