Monthly Archives: January 2013

Experts Discuss Southern California Housing Markets in 2013

Sold sign

According to several leading experts, after more than a few disappointing years, we may be looking at a more normal housing market in 2013.  The response of housing supply to rising home prices will be crucial.  Higher home prices will free up homes that were underwater and could also spark more building.

Los Angeles Time correspondent Alejandro Lazo hosted a Google LA times Hangout to discuss the Southern California housing market with DataQuick analyst Andrew LePage, Zillow.com chief economist Stan Humphries and USC’s Richard Green, director of the Lusk Center for Real Estate.

Stan Humphries: “understanding what is going to happen with negative equity is pretty important because I think it is negative equity that is constraining a lot of for-sale inventory. So with these types of price gains…half of that increase in median sales price is just a mix-shift…enormously robust home price appreciation…is going to free a lot of people from negative equity which is then going to change the supply dynamics and will lead to some moderation in home value moderation. What’s happening with new construction is going to be a big factor.”

Andrew LePage: “less of what’s selling today ….is foreclosured properties and a lot more is the mid to high end property in the move up market in the coastal markets…we’ve had higher demand meet very  restricted inventory for sale…”

Richard Green  “…the fundamentals are pretty strong here for the housing market for the next year at least.”

Watch the whole discussion here.

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Don’t Abandon the Children

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Our leaders …can start by recognizing that childhood poverty is just as important to our state’s economic growth as creating new jobs,…”

Ann O’Leary challenges California to face up to the problem of childhood poverty in a  Sacramento Bee opinion piece, We can’t abandon the next generation.  She marshals sobering statistics about the Great Recession’s legacy of impoverishment and suggests some approaches to deal with it.

The Great Recession led to record setting levels and rates of poverty in California;

  • According to the Census Bureau’s official estimates, “more Californians are living in poverty – 6.3 million – more than at any point since the U.S. census started tracking state poverty”
  • If that weren’t bad enough, the Census Bureau’s new Supplementary Poverty Measure (see description and county poverty rates below) “puts the number of Californians in poverty at 8.7 million” which means that California has “the highest poverty rate in the country.”
  • Almost half of all California children live in or very nearly in poverty.
  • “more than twice as many California children live in poverty as seniors”, 21 percent of children versus 8.5 percent of seniors.

Not surprisingly, childhood poverty is greatest in areas of high unemployment, low rates of medical insurance coverage, high percentages of single-parent households, and low educational attainment rates.  According to Prosperity Threatened: Perspectives on Childhood Poverty in California, by The Center for the Next Generation childhood poverty in by the Supplemental measure in 2011 was highest in Lake County at 37.9 percent, followed by Merced County, 36.0 percent, and Fresno County at 35.0 percent.

To address this, O’Leary recommends increasing school funding in high child poverty areas and making it easier for poor families to access healthcare and to the existing range of income security programs.

Note: according to the Governor’s 2013-14 Budget Proposal: “School districts serving those students who have the greatest challenges will receive more generous increases so that all students in California have the opportunity to succeed.”

County Poverty

Source: Prosperity Threatened: Perspectives on Childhood Poverty in California

Supplementary Poverty Measure

According to the Census Bureau’s Supplementary Poverty Measure, the poverty rate in California is the highest in the nation, 23.5 percent.  Only Hawaii and the District of Columbia come close.

The Supplemental Poverty Measure differs from the official measure in that it (1) accounts for government benefits and taxes, work expenses (including childcare), and medical expenses on households’ standards of living and (2) uses a more accurate measure of the poverty line.  The official poverty measure’s poverty lines are based on surveys of family expenditures from the 1950s, whereas the supplemental measure’s poverty lines are based on actual expenditures on food, clothing, shelter, and utilities. Also, the Supplemental poverty line takes into geographic differences in housing prices.

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California Economic Update, January 2013

Job Gains

The Department of Finance released its January 2013 Finance Bulletin which includes the following review of the latest economic indicators for California.

California’s labor markets continued to improve in October with accelerating job growth and a drop in the unemployment rate. There was also improvement in real estate conditions.

Labor Market Conditions

  • California nonfarm payrolls grew by 45,800 jobs in October, and September’s initially reported gain of 8,500 jobs was revised up substantially—to 32,000. This was the sixth consecutive month-over-month job gain.
  • California’s private sector added 54,400 jobs in October—the highest monthly job growth in this sector since October 2004. This increase more than offset the loss of 8,600 government jobs.
  • Industry job gains in October were led by trade, transportation and utilities (24,700), followed by educational and health services (11,400), professional and business services (9,000), construction (4,100), leisure and hospitality (3,600), and manufacturing (1,400).
  • Four industry sectors lost jobs in October, led by government employment which fell by 8,600. Information employment dropped 1,700; financial activities, 1.600; and mining and logging, 500.
  • Total nonfarm payroll employment rose by 295,300, or 2.1 percent, from October 2011 to October 2012.
  • On a year-over-year basis, employment rose 86,000 in professional and business services; 65,200 in leisure and hospitality; 64,900 in educational and health services; 61,500 in trade, transportation, and utilities; 27,700 in construction; 23,100 in information; and 17,700 in financial activities.
  • Over the year, employment fell by 37,800 in government; 9,500 in manufacturing; 3,200 in other services; and 300 in mining and logging.
  • During the first 10 months of 2012, California gained 244,300 nonfarm jobs, or an average of 24,400 jobs per month, which was the strongest pace of job growth since 2005. This acceleration was broad-based—six of eleven major industry sectors have grown faster in 2012 than in 2011. The acceleration was led by leisure and hospitality and by professional and business services.
  • The unemployment rate improved in October, falling 0.1 percentage point to 10.1 percent, which is 1.4 percentage points lower than a year earlier. The number of unemployed Californians fell 29,000 in October while the number employed rose 56,000. Most importantly, this drop was achieved amid a strong increase in the labor force and an uptick in the labor force participation rate.

Real Estate

  • After slowing in the preceding two months, home sales rebounded in October. Sales of existing, single-family detached homes totaled 544,380 units at a seasonally adjusted annualized rate, which was up over 10 percent from October 2011.
  • Even though home prices slipped in October, they were still up substantially from a year earlier. The median price of existing, single-family homes sold in October was $341,370, up 23 percent from 12 months earlier.
  • The California Association of Realtors’ unsold inventory index fell to 3.1 months in October, which was the lowest inventory reading since August 2005.

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