John Husing, Ph.D. Economics & Politics, Inc. Chief Economist, IEEP At Last, Inland Empire Economic Growth . . . Will it Take Off? John Husing, Ph.D. Economics & Politics, Inc. Chief Economist, IEEP

After Losing 8.74 Million Jobs … U.S. Job Creation Is Crawling Back

Pattern of Likely Recovery x x  V U

Congressional Madness

Sequester Debt Limit U.S. Economy???

California Wage & Salary Employment Back to Mid-1999 Level Every Wage & Salary Job Created In California In This Decade Has been Lost: Not A State Priority

Worst National Unemployment Rate Unadjusted Rates: U.S. 7.4% CA 9.6%

There is Some Good News Locally

IE Up 16,106 Jobs in 2012 thru November 16,300 was Husing Forecast for 2012 -146,400 -11.4%

Sectors Creating/Losing Jobs   Lower Paying Modest Paying White Collar Blue Collar Good Paying Exhibit 8.-Inland Empire Growing & Declining Sectors Average January-November 2011-2012 5,164 3,055 (518) (2,609) Admin. Support Health Care Financial Activities K-12 Education 4,691 1,127 (464) Distribution & Transportation Manufacturing Construction Employment Agcy 3,782 Eating & Drinking 1,545 1,100 (673) Mgmt & Professions Local Government Federal & State (1,473) Accommodation 1,000 Social Assistance 855 Amusement 609 Agriculture 155 Utilities 64 Mining 9 Higher Education (9) Publish, telecomm, Other (55) Other Services (473) Retail Trade (773) Source: California Employment Development Department

The Great Challenge

Construction Share of Lost Jobs Inland Empire, 2006-2012 130,200 57.3% 74,600 Total Job Decline 2006-2012 Construction Job Decline Construction Share of Lost Jobs Source: CA Employment Development Department

500,000 People In SB County Underwater homes

Existing Home Prices Slight Upward Move $437,200 Exhibit 5.-Price Trends, New & Existing Homes Inland Empire, 1988-2012, Quarterly $450,000 $295,442 $420,000 $390,000 New Existing 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 $360,000 $330,000 $300,000 $107,617 36.4% $389,924 $270,000 $240,000 -51.8% $210,000 $180,000 $150,000 $120,000 $90,000 $187,825 $60,000 $155,319 $30,000 $0 2012 Source: Dataquick & Economics & Politics, Inc.

Inland Empire’s Long Term Price Competitive Advantage Still Exists Exhibit 20.-Home Price Advantage, Inland Empire & So. California Median Priced New & Existing Home, 3rd Quarter 2012 Median All Home Price Inland Empire Advantage $521,000 $384,000 $352,000 $155,000 $187,000 $324,000 $197,000 Inland Empire Los Angeles San Diego Orange Source: Dataquick

Gap To Coastal Markets Getting Larger Exhibit 27.-Gap Between Coastal & Inland County Prices Existing & New Homes, 1988-2012 $350,000 $350,000 $325,000 Los Angeles Orange San Diego $325,000 $300,000 $300,000 $275,000 $275,000 $250,000 $250,000 $225,000 $225,000 $200,000 $200,000 $175,000 $175,000 $150,000 $150,000 $125,000 $125,000 $100,000 $100,000 $75,000 $75,000 $50,000 $50,000 $25,000 $25,000 $0 $0 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 YTD Source: Dataquick

Record Inland Housing Affordability Should Be Stimulating Demand

But Consumers Are Again Skeptical About The Near Term Future 100.0 = Normal

Home Sales Volume Down Slightly

Investor Pre-Market Buying Exhibit 10.-Direct Investor Purchase of Foreclosure Sales Inland Empire, 2007-2012 50% 50% 45% 45% 40% 40% 35% 35% 30% 30% 25% 25% 20% 20% 15% 15% 10% 10% 5% 5% 0% 0% 2007 2008 2009 2010 2011 2012 Source: Foreclosureradar.com

Investor Purchases By SB Co. Area Exhibit 11.-Home Purchases By Absentee Owners San Bernardino County, Second Quarter 2007 v. 2012 46.4% 44.7% 37.8% 31.5% 31.2% 23.4% 2007 2012 30.6% 14.7% 13.1% 13.1% 11.9% 9.3% San Bdno Co. Unincorp. Morongo Basin Victor Valley SB County East Valley Westend Source: Dataquick

Single Family Rentals & Police Calls

How This Ends: A Housing Shortage During 2008 thru 2012 California Population Grew by 993,624 106,230 9.35 per new person

When Underwater Homes Solved Sep-13 1.7% Mar-14 5.1% Mar-15 12.7% Apr-17 35.7% Apr-18 50.0% Jan-19 60.0% Jul-20 78.8% Nov-21 89.9% Feb-23 95.2% Mar-24 97.9% Mar-25 98.9%

Assessed Valuation Finally Growing

Assessed Valuation, Slow Rise -8.1%

Construction Permits At An Historic Low !

Construction Jobs: At the Bottom

Gold Mine Theory Secondary Tier Primary Tier Construction: Blue Collar Health Care: White Collar Logistics: Blue Collar Manufacturing: Blue Collar

Adult Educational Levels 31.4% Rest of So. CA

Health Care Jobs 100 3,000 200

Inland Empire Underserved by Health Care Workers 34.4% More People Per Health Care Worker Exhibit 10.-Number of People Per Health Care Worker Inland Empire & California, 1990-2012 47.5 45.9 46.5 45.7 Inland Empire California 44.7 42.7 41.8 41.1 41.7 41.4 40.3 40.1 39.6 40.0 39.9 40.4 40.5 40.4 39.1 39.4 40.3 39.2 38.5 36.2 35.1 34.7 34.8 34.5 34.1 33.8 33.6 33.4 33.7 33.3 32.7 32.5 32.4 31.8 31.1 31.0 29.6 29.2 28.6 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Source: CA Employment Development Department

Who Will Health Care Workers Serve?

Inland Empire is Under-Officed Office Space Per Capita & Per Local Job Southern California Areas, 2010 19.0 41.7 45.4 51.7 Per Person Per Job 5.0 16.0 18.2 23.4 Inland Empire L.A. County San Diego Co. Sources: Grubb & Ellis, CA Employment Development Dept., CA Dept. of Finance

Office Occupations: Strong Growth Has Stopped

Logistics Flow of Goods

Imported Container Volume Returning +19.2% -25.4%

Record Export Container Volume All Time Record

Inland Empire Logistics Jobs

Manufacturing Activity: Slowing

Manufacturing Jobs In Neutral

Gold Mine Theory Secondary Tier Primary Tier

Inland Empire’s In-migration From Coastal Counties Has Stopped -15,538 Not Bringing Skills, Wealth, Income & Spending

Retail Sales, San Bernardino County -$3.7 Billion -6.0%

Retail Jobs Have Faltered

California Grabbing Money From Local Government … School Funding Cut Jerry Brown’s Hand

Government Jobs

2012 Better than 2011 Foreclosures A Continuing Issue Complete Recovery 2016-2018?? 2012 Jobs Growing As Expected 2013 Better Than 2012 IF Federal Issues Solved

www.johnhusing.com