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Conference predicts slow recovery

Posted: February 25, 2012 2:00 a.m.
Updated: February 25, 2012 2:00 a.m.

Bill Watkins, executive director of the Center for Economic Research & Forecasting, presents the economic forecast at the 2012 Economic & Real Estate Outlook at the Hyatt Regency Valencia on Thursday.

 

On the local, state and national levels, the economy is in recovery — but it’ll be a slow one.

That was the message from all three speakers at the 2012 Economic & Real Estate Outlook conference, held Thursday at the Hyatt Regency Valencia. It was one of the more positive messages in recent memory for the conference, hosted each year by the Santa Clarita Valley Economic Development Corp. and the College of the Canyons.

“2012 is significantly better,” said Mark Schneipp, director of the Santa Barbara-based California Economic Forecast, which prepares economic analysis for public and private entities. 

The speakers provided evidence of growth in the economy and real-estate market, although most positive projections came with some caveats.

Initial unemployment claims nationwide are down to prerecession levels, Schneipp said, but jobs are not being added at a pace that reflects the record-high number of high school and college graduates entering the workforce. And while median salaries in the Santa Clarita Valley have increased, the region still has 11,500 jobs to make up from the recession.

The housing market has hit its bottom and will start to crawl back up from here, said Wayne Yamano, director of research for the Irvine-based John Burns Real Estate Consulting. Multifamily housing permits have increased by 170 percent nationwide since 2009, and apartment occupancy is at 95 percent on average, Yamano said.

However, single-family home development has stayed flat and will recover slower in California than the rest of the country.

And housing is more affordable than it has ever been, as the median-priced house is cheaper than the median apartment rent in Los Angeles County. But adults in their 20s and 30s are holding off purchasing homes, when in previous generations they would be the demographic to start buying.

In this economy, 26 percent of adult children live with their parents, Yamano said. But as a whole, the economy and housing market will only go up from here, although gradually.

The computer manufacturing, technology, export and tourism industries in California are doing the best and will most likely lead the state in the direction of recovery, Schneipp said. The Port of Los Angeles shipped a record 2.1 million cargo containers with U.S. goods export in 2011. And Disneyland had record attendance this past year.

“Those are currently the engines of growth,” he said.

Unemployment rates are projected to be back to 2006 or 2007 levels in the next 24 months, said Bill Watkins, executive director for the Center for Economic Research & Forecasting at California Lutheran University. But California’s job growth will be at a slower rate, hovering above 10 percent for the next two years.

Santa Clarita in particular saw “chaotic” job growth — attributed to the Japanese earthquake and unrest in the Middle East —  that ended in a net loss of jobs in 2011, Schneipp said. But in the fourth quarter of 2012, the valley should see an uptick of office jobs, which should help decrease the office-space vacancy rate in Santa Clarita, which is higher than in Ventura and San Diego counties.

Median housing prices will also recover slower in the state and in Santa Clarita in particular, Yamano said. Housing prices in the valley are projected to increase at 1.7 percent annually, as opposed to the predicted 3.5 percent increase nationwide.

But the development plateau could be broken by 2016, when the population of Santa Clarita increases by a projected 30,000 people.

“We’re going to need housing production,” Schneipp said, calling 2012 a “transition year” before local housing market starts to recover.

The speakers shared with the 300 audience members what they considered to be the main factors in encouraging growth in the economy and housing market. Watkins said that increasing legal immigration into the U.S. would improve the economy and housing markets, as immigrants are more likely to buy houses and start new businesses than natives.

A common theme was the strict lending climate, which is making it harder for small businesses to start and for families to get loans to buy properties.

The speakers also touched on improving the very low consumer confidence, which particularly affects the housing market and creates such a huge inventory, which drives down prices.

 “That’s going to have to improve before we see any improvement in housing,” Yamato said.  

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