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Local economy may be at a turning point

Posted: November 9, 2011 1:55 a.m.
Updated: November 9, 2011 1:55 a.m.
 

The economic climate in the Santa Clarita Valley improved in the third quarter and may be at a turning point, according to the Santa Clarita Valley Economic Development Corporation in a report released Saturday.

Citing rising home prices and consistent residential real estate sales, along with an improved employment picture, the SCVEDC said in its third quarter 2011 Economic Snapshot report that home builders are gaining confidence and starting more new homes in anticipation of future demand.

“The Santa Clarita Valley continues to outperform other areas of Los Angeles County,” Jonas Peterson, president and CEO of the SCVEDC, said.

“Our industrial vacancy rate and unemployment rate are both well below county averages,” he said.

While office vacancy rates are at an all time high of 23.8 percent in the SCV, industrial vacancy rates have fallen to an all-time low of 2.2 percent.

And the lease rates per square foot on industrial spaces are climbing, said  Ken Wiseman, SCVEDC board member and CEO and managing partner with AMS Fulfillment of Valencia.

Locally, contractors expressed concern this past summer that in the weak market, they could not afford to build in the face of extremely low lease rates. The rates were not enough to offset the cost of construction.

Employment

Continued job growth should assure the recovery of the local economy, and that is the most positive sign this quarter, the SCVEDC report stated.

Estimated employment demonstrated some positive growth over the last three months, following nine consecutive months of losses.

An estimated total of 420 jobs were created in August and September. Through the first two quarters of 2011, despite a slight drop in employment numbers during that period, payroll income increased 4.2 percent.

 

Residential Real Estate

Since reaching a low in March, home prices have been rising slightly.

While median home values are far below what they were at their overinflated prerecessionary peaks, home sales are far above the levels recorded in 2007.

Yet, home sales in 2011 lag behind the highs set in 2010, when buyer tax credits were available. Sales for the first nine months of 2011 are down 11 percent from the same period in 2010.

New home sales in the SCV are at record lows, down 48 percent during the first seven months of 2011 versus the same period in 2010.

But there has been an increase in new home building even though the level of activity remains extremely low.

Through September, there has been $34 million of total nonresidential building in the city of Santa Clarita, slightly less than in 2010 when$35 million of activity had been permitted through the first nine months of the year.

However, there are now more homes in the preconstruction phrase than at any time since the third quarter of 2007.

This is a positive sign the SCVEDC said for the housing market. More builders are starting projects that had been postponed.

Outlook

Consumer confidence took a nose-dive in October, Mark Schniepp, executive director or California Economic Forecast, said in a forward to the report.

Consumers have grown pessimistic about the economy and the near-term prospects for employment opportunities and the growth of their incomes, Schniepp said.

The decline, however, is inconsistent with other signs of an improving economy.

Although the economy has grown this year, at frustratingly slow rates, surveys of consumer confidence are generally finding increased pessimism about the future.

Unemployment remains persistently high, there are slow gains in wages for those who remain employed, homeowners are struggling with underwater mortgages and debt burdens remain high Schniepp said.

Consumer gloom has impacted household spending — on goods, services, homes and automobiles, he said.

Despite the reasons for consumer doubt, Schniepp points to the sharp rise in the stock market last month, lowered gas prices, debt levels continuing to drop and credit gradually becoming more available as signs that optimism is warranted.

Also, layoffs have pretty much ceased and there are clear signs of hiring in technology, the visitor-serving industry and many professional services.

Consumer spending through September also shows no sign of pulling back. Last week, many retailers began reporting increases in sales over last year.

Inflation-adjusted spending on retail goods is working its way back to the pre-recession peak, Schniepp said.

“I tend to agree with Dr. Schniepp, that consumers are unreasonably pessimistic,” Peterson said. “The likelihood of another recession is decreasing and key indicators, such as the stock market and personal consumption are trending up.”

 

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