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Annual conference delivers message to owners: ‘Act now’

Posted: May 1, 2011 1:55 a.m.
Updated: May 1, 2011 1:55 a.m.

Mark Schniepp, principal of California Economic Forecast, delivers the keynote speech at the 2011 Economic and Real Estate Outlook presentation at the Hyatt Regency Valencia in Valencia on Thursday.

 

“Act now” was the final message from keynote speaker Mark Schniepp, principal of California Economic Forecast, at the 2011 Economic and Real Estate Outlook conference.

More than 250 people attended Thursday’s conference at the Hyatt Regency Valencia, presented by the Santa Clarita Valley Economic Development Corp., and co-sponsored by College of the Canyons.

Economic analysts said indicators definitely point to the recession having ended, that Santa Clarita is in a good position not only for recovery but for expansion and that only new-housing construction remains an obstacle to a complete recovery and accelerated job growth.

Officially, the country’s recession ended in 2009, said speaker Jerry Nickelsburg, senior economist with UCLA Anderson Forecast. That call was made by foreign economists while California’s unemployment rate still stubbornly remained over 12 percent.

Schniepp, who has been watching trends in northern Los Angeles County, told conference attendees that despite perceptions, a more significant change is becoming evident, and the economy will not only sustain recovery, but expand.

Only housing starts are hampering further economic growth, Schniepp said. He cited an improved job market, evidence of banks doing more lending, businesses recording stronger profits, corporate profits eclipsing previous peak-profit levels, the stock market up 15.5 percent over a year ago, increased consumer spending, strong vehicle sales and soaring industrial production and manufacturing.

But he predicts the new-home construction sector will rebound this year. When it finally takes off, the growth will be explosive, he said.

“There’s nothing but upside potential in this sector,” Schniepp said.

Suffering from the equivalent of an economic hangover, businesses still lack confidence in the economy despite positive indicators, both economists said. That perception has slowed job growth.

“Once we see employment growth, there’ll be renewed demand for housing,” Nickelsburg said.

Job Growth
National economic expansion is under way, but Schniepp said fragile growth will be more substantial in fourth quarter of 2011.

“One-third of all jobs created in the U.S. are created in Southern California,” Nickelsburg said.

Studying data from the Santa Clarita Valley, Schniepp cautioned that the unemployment rate in Santa Clarita is not reflective of whether the economy is doing well.

Population growth and record-high numbers of local high school graduates keeps the job market full of job seekers, he said. Twelfth-grade enrollment numbers at local schools was the highest ever recorded in 2010.

“The local population has grown by over 12,000 people since 2006 with very little new housing starts or job growth during the recession,” Schniepp said.

Local office and industrial vacancy rates are recovering, he said, which will result in the creation of more jobs. He projects the job market will be much better in 2012.

There has been private-sector job growth in the U.S. for 13 consecutive months, and the last two months were stellar, Schniepp said.

Excluding public-sector jobs, he said, the nation was on pace to create 2.5 million jobs this year. Unemployment rates will remain higher because previously discouraged workers will return to the job market seeking work.

Housing
A healthy new-home construction industry is necessary to fully lead out of the recession. It would mean a significant number of jobs and could help fully restore confidence in the economy.

Mortgage rates remain historically low, and affordable housing prices will draw buyers back into market, Schniepp said.

Pent-up demand for housing is on the horizon; the number of people per household has increased every year since the recession began. An all-time high average of 3.2 people per every home was recorded in 2010.

With sufficient recovery in the job market, this phenomenon will lead to more customers shopping for their own homes.

Surprisingly, despite the damage inflicted on the real estate market by the recession, 81 percent of adults still believe buying a home is the best long-term investment a person can make. The results were revealed in a national survey conducted by the Pew Research Center.

“The housing market could turn around pretty fast,” Nickelsburg said.

Agreeing, Schniepp said a correction in the real estate market will occur this year, and he predicts housing will grow in the third quarter, and the housing market as a whole will rebound.

Both Nickelsburg and Schniepp emphasized California is not keeping up with population growth, and that could result in a housing shortage if builders don’t start building soon.

“We must continue to work for improvement in the housing sector,” said Holly Schroeder, CEO of the Building Industry Association of Southern California. “The best way to do that is to work with local government to reduce fees that increase the cost of housing.”

More homes built in Valencia’s neighborhoods and construction of Newhall Ranch — a planned community west of Interstate 5 — will bring lots of opportunities for housing, jobs and new services, said Marlee Lauffer, senior vice president of marketing and communications for Newhall Land Development Inc.

“Obviously, we are very bullish on the Santa Clarita Valley and are pleased to see that job growth is now occurring, and industrial vacancies are on the downturn,” Lauffer said.

“We know housing will return as a significant part of our valley’s vitality as the economy strengthens and employers expand here.”

Industry
Manufacturing in California is really bouncing back, and goods moved on California highways are growing at a faster rate than the rest of the U.S., Nickelsburg said.

Exports, a large segment of California’s economy, are growing, and the 2011 forecasts for growth in the gross domestic product is projected to be up 3 percent, he said.

“It’s not a barn-burning rate, but it’s healthy,” said Nickelsburg. Recovery is evidenced by a growth rate of 5 percent to 7 percent.

Export levels at the ports are back to prerecessionary levels, and exports-by-air have grown beyond their levels prior to 2007.

While tourism has been weaker, it is recovering, and the state is attracting more international travelers. Many tourists arriving in California aren’t counted as local tourists, because they enter the U.S. on airlines that first fly into out-of-state airports.

Local forecast
While much has been made lately of the Texas job market, much of its growth is in sectors that involve lower-cost labor and cheap land, Nickelsburg said.

California exceeds Texas in the very sophisticated technology sector, its workforce is highly skilled, the state is a high producer of goods, it has a huge wine industry and it is home to Hollywood, the entertainment capital of the nation if not the world.

As for the Santa Clarita Valley, the area has advantages over other markets.

High quality of life, the knowledge and skill set of people in the community, a business-friendly environment and low to nonexistent business taxes are key factors in the SCV’s ability to attract new industry, companies and job growth.

“The Santa Clarita Valley is a true bright spot in California’s economy,” said Jonas Peterson, president and CEO of the Santa Clarita Valley Economic Development Corp. “The outlook event helped us showcase key areas of our economy that are expected to outperform the rest of the state.”

Act now
Schniepp’s call to action to conference attendees was simple: “Act now.”

All the indicators of recovery are in place, and many point to near-future growth expansion.

If businesses, consumers and homebuilders wait too long to act, they could face steeper leasing fees, higher home prices, and even a shortage of homes when the pent-up demand for new homes is released.

“The economy is proving to be resilient despite national and state budget problems, a catastrophe in Japan, Europe’s debt problems and the Middle East turmoil,” said Schniepp.

Too often, the Santa Clarita Valley gets lumped in with Southern California when it comes to the economy, Peterson said, but the area has some distinct advantages over its neighbors. The conference offered the opportunity for the SCV to highlight key areas where it’s expected to out-perform the rest of state.

“We expect the valley’s economy to continue growing in 2011,” he said, “and for it to finally feel like we are out of the recession.”

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